Hi everyone,
I don't post much but I read quite often. I started a thread about 3 years ago and received some great advice about my wife and I's financial situation. (link to previous thread if interested: viewtopic.php?p=6107014#p6107014
Now we are both 34 years old and are expecting our second child this month, so I wanted to make another thread here to update our situation and see if the folks here think we are on track. I just want some reassurance that we are doing what we should be doing, and any suggested improvements are absolutely encouraged!
Since the last time I posted, we have done well. I got promoted at my job, we've realized what a well-timed home purchase we made back in 2020 at all-time low interest rates, and we have continued to max out all of our tax-advantaged space by maxing out 2 401Ks, 2 ROTH IRAs, and 1 HSA while still having some money left over to invest in our daughter's 529 plan and our taxable brokerage account.
Once the new baby is born and we have 2 kids in daycare, we will have to make some compromises somewhere, so my goal is to figure out what changes I'll need to make since we may not be able to max out everything we've grown accustomed to maxing out, at least until the first child goes to kindergarten in a few years.
I'll provide some background and details below:
-His age 34, her age 34
-His salary: $175k, plus a 20% annual bonus, plus 10% annual company stock grant (i.e. $227k)
-Her salary: $63k
RETIREMENT ASSETS:
-His Traditional 401K - balance is $290k
-Her Traditional 401K - balance is $154k
-His ROTH IRA - balance is $72k
-Her ROTH IRA - balance is $63k
-His HSA - $21k
-Taxable brokerage account: $75k. Within this account is $20k in money market that I consider to be our "emergency fund". I am an accountant and my wife is a teacher, so we have two incomes and both are in stable fields, so I sleep fine at night with only $20k in emergency fund, knowing I could always pull from other accounts if I truly needed to.
-Company stock: $39k. These are restricted shares that I sell immediately upon vesting and invest in S&P 500 in my taxable brokerage account.
Total "Retirement" type assets in the aforementioned accounts is $714k. We have been maxing all the above tax-advantaged accounts every year and putting whatever is left over into taxable brokerage.
OTHER ASSETS:
-House- home value is $620k, with a mortgage of $326k outstanding, so about $294k of home equity currently. Not in any hurry whatsoever to pay this mortgage down because the interest rate is 2.75%.
-529 plan: $10k
LIABILITIES:
-His car - loan of $9k outstanding with an interest rate around 4.5%. 2023 Toyota RAV4 with 25,000 miles
-Her car - PAID OFF. 2015 Honda Fit with about 110,000 miles
-His student loans - PAID OFF
-Her student loans - PAID OFF! Successfully had PSLF forgiveness kick in to forgive the entire $75k balance a couple months ago after my wife reached the 10-year mark in teaching career.
Total Net Worth including home equity is $1,009,000 so we are excited to have just crossed the magical $1 million threshold.
Biggest questions/thoughts at this point are as follows:
1) Wife staying home? When we have another daycare bill come in for $1,850/month soon, we have basically three options:
Option 1 is to essentially keep everything else the same and divert my wife's 401k (which has no company match) fully to daycare. Continue to max out my 401K, both backdoor Roth IRAs, and my HSA. I can swallow not contributing to my wife's 401k for just a couple years because she will also qualify for a pension if she stays in teaching for her whole career, so we are still making progress towards "her piece" of the retirement pie even if she isn't actively contributing to the 401k.
Option 2 is to really cut some fat and try to decrease spending to where we can maintain same savings levels even with the baby. But I feel we have a good mix already between saving and spending and honestly I'm not sure this is feasible.
Option 3 is for my wife to consider staying home with the kids for a couple years. Her general thought is that she finds purpose in being a teacher and doesn't want to stay home. This obviously could change once the next baby comes. Financially we would not be much worse off if we forfeited my wife's salary but paid nothing in daycare. And obviously there is non-monetary value in having her stay home (more bonding time between wife & kids, simpler lifestyle at home instead of both of us trying to knock out house chores in addition to working, etc.)
Anyone been in a similar situation where they've debated keeping one spouse home? Are we in a place financially where it makes sense to do that?
2) Life insurance. Right now I have a $1,000,000 policy on me and a $500,000 policy on my wife. I feel like that's still sufficient and the need for life insurance will only decrease over time as our retirement portfolio continues to build, but just wanted to run that by you guys to see if having a 2nd child made you reassess and get more life insurance than you had with just 1 child.
Thanks in advance for any help or suggestions!
I don't post much but I read quite often. I started a thread about 3 years ago and received some great advice about my wife and I's financial situation. (link to previous thread if interested: viewtopic.php?p=6107014#p6107014
Now we are both 34 years old and are expecting our second child this month, so I wanted to make another thread here to update our situation and see if the folks here think we are on track. I just want some reassurance that we are doing what we should be doing, and any suggested improvements are absolutely encouraged!
Since the last time I posted, we have done well. I got promoted at my job, we've realized what a well-timed home purchase we made back in 2020 at all-time low interest rates, and we have continued to max out all of our tax-advantaged space by maxing out 2 401Ks, 2 ROTH IRAs, and 1 HSA while still having some money left over to invest in our daughter's 529 plan and our taxable brokerage account.
Once the new baby is born and we have 2 kids in daycare, we will have to make some compromises somewhere, so my goal is to figure out what changes I'll need to make since we may not be able to max out everything we've grown accustomed to maxing out, at least until the first child goes to kindergarten in a few years.
I'll provide some background and details below:
-His age 34, her age 34
-His salary: $175k, plus a 20% annual bonus, plus 10% annual company stock grant (i.e. $227k)
-Her salary: $63k
RETIREMENT ASSETS:
-His Traditional 401K - balance is $290k
-Her Traditional 401K - balance is $154k
-His ROTH IRA - balance is $72k
-Her ROTH IRA - balance is $63k
-His HSA - $21k
-Taxable brokerage account: $75k. Within this account is $20k in money market that I consider to be our "emergency fund". I am an accountant and my wife is a teacher, so we have two incomes and both are in stable fields, so I sleep fine at night with only $20k in emergency fund, knowing I could always pull from other accounts if I truly needed to.
-Company stock: $39k. These are restricted shares that I sell immediately upon vesting and invest in S&P 500 in my taxable brokerage account.
Total "Retirement" type assets in the aforementioned accounts is $714k. We have been maxing all the above tax-advantaged accounts every year and putting whatever is left over into taxable brokerage.
OTHER ASSETS:
-House- home value is $620k, with a mortgage of $326k outstanding, so about $294k of home equity currently. Not in any hurry whatsoever to pay this mortgage down because the interest rate is 2.75%.
-529 plan: $10k
LIABILITIES:
-His car - loan of $9k outstanding with an interest rate around 4.5%. 2023 Toyota RAV4 with 25,000 miles
-Her car - PAID OFF. 2015 Honda Fit with about 110,000 miles
-His student loans - PAID OFF
-Her student loans - PAID OFF! Successfully had PSLF forgiveness kick in to forgive the entire $75k balance a couple months ago after my wife reached the 10-year mark in teaching career.
Total Net Worth including home equity is $1,009,000 so we are excited to have just crossed the magical $1 million threshold.
Biggest questions/thoughts at this point are as follows:
1) Wife staying home? When we have another daycare bill come in for $1,850/month soon, we have basically three options:
Option 1 is to essentially keep everything else the same and divert my wife's 401k (which has no company match) fully to daycare. Continue to max out my 401K, both backdoor Roth IRAs, and my HSA. I can swallow not contributing to my wife's 401k for just a couple years because she will also qualify for a pension if she stays in teaching for her whole career, so we are still making progress towards "her piece" of the retirement pie even if she isn't actively contributing to the 401k.
Option 2 is to really cut some fat and try to decrease spending to where we can maintain same savings levels even with the baby. But I feel we have a good mix already between saving and spending and honestly I'm not sure this is feasible.
Option 3 is for my wife to consider staying home with the kids for a couple years. Her general thought is that she finds purpose in being a teacher and doesn't want to stay home. This obviously could change once the next baby comes. Financially we would not be much worse off if we forfeited my wife's salary but paid nothing in daycare. And obviously there is non-monetary value in having her stay home (more bonding time between wife & kids, simpler lifestyle at home instead of both of us trying to knock out house chores in addition to working, etc.)
Anyone been in a similar situation where they've debated keeping one spouse home? Are we in a place financially where it makes sense to do that?
2) Life insurance. Right now I have a $1,000,000 policy on me and a $500,000 policy on my wife. I feel like that's still sufficient and the need for life insurance will only decrease over time as our retirement portfolio continues to build, but just wanted to run that by you guys to see if having a 2nd child made you reassess and get more life insurance than you had with just 1 child.
Thanks in advance for any help or suggestions!
Statistics: Posted by BogleCPA — Fri Oct 04, 2024 4:30 pm — Replies 4 — Views 405