financial life planning help needed

[AJ520]

Hi,
Thank you all for your advice in advance.
I have a couple of questions related to future planning...
I am now living my boyfriend of 4 years in the Bay Area(CA) and he had just finished his master degree and about to start working in the Tech field with about $116k salary before tax.
We have worked out a budget per month with only spending my monthly income and save his for other stuff...

Girlfriend profile:
Age :25
full time job-Salary before tax: 45K, take home pay after paying for commute and 401k is about $2600 per month.
Rental income after expenses(mortgage, property tax, fixes): $1900 per month

Mortgages add up to be: $330k(interest rate of 4-5%), property values added up to be: $700k
Student loan: $8k(interest rate of 3%)

401K: 11k (putting in $400 a month plus $180 employee contribution)
Roth IRA: $0(just opened the account)


Boyfriend profile
Age: 25

Student loan: $30k
Roth IRA: $17k

We are planning on paying off all loans ASAP but also start investing in our retirement…but I am not sure what the ratio should be with paying off loan and investments...

We also have some big ticket purchases that we are hoping to accomplish in the next 3 years….our wedding, buying a home ….

We are hoping to retired in 20 years, which puts us at around age 45. We want to have about $6k to spend on traveling and being active (I like to farm and he loves tennis) after retirement from full time jobs, while keep maintaining real estate rental investments

Specific Q's
1. How much should we put into 401k per month and how much in Roth IRA or if we should have IRA?
2. What should we look out for?

We very much appreciate any life advice and tools that you can suggest/offer us.

 

[NgineER]

Welcome to the forum!

Nice plan, glad you are thinking about RE at such an early age.

I'd make sure I'd capture any free money, so contribute to your 401k to get the match. Actually, I'd max it out if you can.
Make sure you have an emergency fund that can tie you over for at least three months.
Make sure you have enough money set aside to cover vacancies of your rental property too.
I'd contribute to a Roth IRA as well for both of you.
I'd also set aside money for your wedding etc, and I know it sounds boring, but don't waste a fortune on your wedding. Weddings and babies are hyped by the industry to encourage you to spend money.

 

[donheff]

If you spend all of your income (ex 401K) and save all of his make sure a subatantial portion of his savings are in your name or save it in a joint account. You may stay together and retire in 20 years or not.

Welcome to the forum by the way.

 

[pb4uski]

......Specific Q's
1. How much should we put into 401k per month and how much in Roth IRA or if we should have IRA?
2. What should we look out for?

We very much appreciate any life advice and tools that you can suggest/offer us.

Welcome and congratulations on thinking ahead. At your age, I found it easiest to put my retirement savings on autopilot (Pay yourself first) and then feel free to spend anything that was leftover. I would not be in a hurry to pay down low interest rate loans (4% or lower) as over the long run you can earn more on your investments than you pay on loans and use leverage to improve your financial position.

Common advice is to focus on Roth and other after-tax savings when your marginal tax rate is the same or lower than your expected marginal tax rate in retirement (I assumed 15%) and on tax-deferred savings when your marginal tax rate exceeds your expected marginal tax rate in retirement. So for example, when I was in the 25% tax bracket I focused on tax-deferred savings and am now withdrawing those savings and only paying abut 10% so I have saved a lot by doing that.

I found Quicken Lifetime Planner to be a useful tool in planning my financial future and seeing how much I needed to save to become FI and RE.

 

[RE2Boys]

If you spend all of your income (ex 401K) and save all of his make sure a subatantial portion of his savings are in your name or save it in a joint account. You may stay together and retire in 20 years or not.

Welcome to the forum by the way.

To protect yourself, I can't overemphasize the above. Otherwise, from a legal standpoint, you are very much being taken advantage of.

That said, the smartest thing my wife and I did after marriage but before kids was to live off her salary and put mine in the bank. We figured that once kids arrive (we both wanted children and were mid 40s and mid 30s) one of us would not be working so wanted to establish our lifestyle at a modest level that we could sustain once kids came into the picture. She did quit work and we found we could easily live on my income alone at the lifestyle we had agreed upon and still save for retirement.

In hindsight, it was a very wise move. We were able to purchase a home w/o a mortgage due the money I had earned & saved before kids. And when an opportunity came to retire early (company was downsizing), without a mortgage payment hanging over our heads, I retired and joined her at home and my then 3 and 1 year old sons. That decision enabled a whole different family life than would have been possible otherwise. I still do some work on a seasonal basis, and so does my wife, but it's what we want to do, not must do.
All this was 20 years ago and it'll be 15 years since my retirement in two days (Feb 3)