Ages: 40 and 39. I am a fed, covered by a FERS pension. One child, almost 7 years old. Do not plan for more.
Emergency funds: ~$130k in Vanguard Money Market fund. Yes, it’s too much, but we’re unfortunately going to owe about $100k of that due to an unfortunate, unforeseen expense.
Debt: Mortgage $129k, 20 year fixed rate 3.25%. Refi’d in May 2020. Willl be paid off in about 2037. Home purchased 2018 for $294,000. Do not plan on moving.
Tax Filing Status: MFJ
Tax Rate: 22% Federal, 6% State
State of Residence: MO
Income: $215k, (Will soon be $250k) MCOL Midwestern city
Desired Asset allocation: 80% stocks / 20% bonds
Current yearly expenses: ~65,000/year
Retirement Portfolio Worth:
Retirement: ~$1.704MM (includes $331k in taxable brokerage, which we’ll use in retirement and/or to supplement child’s college costs)
Current retirement assets
Her 401k (37% of retirement portfolio):
3 index fund (50% S&P500, 28% Intl stock, 22% bond index fund)
6% company match
His TSP (23% of retirement portfolio):
48% C/S funds, 25% I Fund, 27% G Fund
5% company match
Her Roth IRA at Vanguard (10% of retirement portfolio):
53/47 split VTSAX and VTIAX (Vanguard Total Stock and Vanguard Total International Stock)
His Roth IRA at Vanguard (8% of retirement portfolio):
53/47 split VTSAX and VTIAX (Vanguard Total Stock and Vanguard Total International Stock)
His Rollover IRA at Vanguard (2% of retirement portfolio):
100% VTBAX (Vanguard International Bond Index)
Taxable Brokerage (19% of retirement portfolio):
77% VTSAX
23% VTIAX
TOTAL COMBINED RETIREMENT ASSET ALLOCATION:
54% US Stock
29% International Stock
15% US Bond
2% International Bond
Annual Contributions
$23,500 his TSP + 5% match
$23,500 her 401k + 6% match
$6,500 his Roth IRA
$6,500 her Roth IRA
$1,200 taxable
Total annual retirement contributions: ~$62,000 per year (excluding employer matching)
529: $52,000 balance, contribute $1200-$2500 per year. Puts us on track to save 50% expected costs per Vanguard’s college cost calculator
Questions:
1. We hope to retire at 55 (her) and 57 (me), which will be my minimum retirement age. We will both be covered by FEHB healthcare in retirement. Assuming we can make this happen, at what point should we start thinking about Roth conversions?
2. I mentioned above that we are going to incur an unforeseen $100k expense. The reason is not really important to this conversation, but it was a stupid oversight I made that will cost us a hefty sum. Fortunately, we can cover it out of our emergency fund, which we’ve been stacking cash in for home renovations and vehicle purchases (that we put into overdrive when this expense became likely). All that said, should we think about a HELOC or car loans if we do make those purchases, or should we consider just tapping in to some of the taxable brokerage investments? I guess I kind of struggle with thinking about taking on debt, but I understand the consequences of taking money out of an investment…just looking for opinions/thoughts.
2a. Any tips on how to get past this mistake? If I am being honest it has been a source of serious anxiety over the last two years and I have not dealt well with it.
3. Anything we could be doing better or that we’re not thinking of/are missing?
