Financial Checkup (Age 29)

[sergio]

Hey all!

I'm 29 years old and have been working full time for almost 1.5 years. I've fumbled around a bit with getting all my financial stuff worked out, but now think I have a clearer path. I graduated with a STEM PhD (hence the late start) and gross $93,000/yr in product R&D in the private sector in a good COL area. I don't expect this to go up much in the next few years (a guy with 13 years experience in my group makes around $110k/yr), unless I start moving up into management (ughh) or go to silicon valley (BARF). A horizontal move might get me a 6-8% raise.

My goal is to reach $1.2 million in today's dollars and then switch to being an adjunct college instructor. With my calculation (assuming no salary growth and 4% real growth) I should get there in 14-15 years. I'd also consider doing a year or two of English teaching abroad. STEM PhD adjuncts at the university I attended were paid $10k/course, so grossing $30-40k/yr is what I'd expect for 15-20 hours/week + summers off. Another idea I have is to very slowly get into landlording over time (maybe starting with a duplex in the next few years?) for future cash flow - this would require A LOT more research however.

I max out my 401k, HSA, Roth IRA, and try to put $20-30k/yr into my brokerage account each year. Employer match is about $5k/yr on the $18k/yr I put in. I think I'm on the right path, but it's a bit demoralizing to see people making $300k/yr at my age and very comfortably retiring in their mid or late 30s.

Some other things: My only asset is a car worth about $13,500 (fully paid for) and I am not married.

Any advice and criticisms would be much appreciated. Thanks!!

Investments + Cash: $84,000

• 
  Savings : $7,000
  • 
    $2,000 in HSA Money Market + $5,000 in Checking Account

• 
  401k : $27,000
  • 
    100% AALTX - American Funds Target Date 2050 (ER 0.76%)

• 
  Roth IRA : $16,600
  • 
    ROTH IRA: TRRMX - 100% T Rowe Price 2050 Fund (ER 0.75%)

• 
  HSA Investments : $5,200
  • 
    30% PAMCX - T Rowe Mid Cap Growth (ER 1.03%)
    35% TAMVX - T Rowe Mid Cap Value (ER 1.04%)
    25% PRNHX - T Rowe New Horizons (ER 0.79%)
    10% PTTDX - PIMCO Total Return (ER 0.75%)

• 
  Brokerage : $28,000
  • 
    65% VTSAX - Vanguard Total Stock Market (ER 0.05%)
    35% VTIAX - Vanguard Total Int'l Market (ER 0.12%)

Major Expenses: $1,500/month

• 
  Rent: $800/month

• 
  Auto Insurance: $55/month

• Health Insurance: $250/month

• 
  Food and Fun: $400-500/month

 

[Souschef]

Good Job!

I will not comment on any of your financial data, other than to praise you for being so aware, and having a plan.

 

[growerVon]

Good progress! All those TRowe Price funds have high-ish expense ratios.

You should consider moving your Roth IRA to Vanguard to enjoy a 0.16 expense ratio on the target date fund.

Similarly, the funds you're holding in the HSA have high ERs, but you'll be limited by what funds the administrator allows. See if it has a simple S&P 500 index fund and move to that. You can then use the Roth at Vanguard to fill in those sector specific & bond funds. Read the HSA fund prospectuses closely, too, because you may be also paying front-end loads on those. I know the HSA admin I'm with thru my work has tons of predatory funds with class A 5.xx% loads on them.

Finally, see if your 401k has a lower expense ratio alternative to that target date fund. Being a target date 2050 it is likely mostly equities, so worth seeing if you can piece that together via other in-plan funds that have lower expense ratios.

Love the total us & intl index funds in your brokerage account. Setting aside expense ratios, your fund holdings are in the right tax-advantaged accounts. Keep on keepin on and spend some time trying to min/max you're expenses.

 

[cooch96]

It is frustrating to see peers triple your income, but since the idea of living in Silicon Valley makes you sick, I think you've made the correct decision.

Congratulations! It sounds like you have a solid plan for the rest of your professional life. You can, and should, optimize your accounts into low cost alternatives, but otherwise stay the course. Once your allocations are settled, just keep adding and don't fiddle with them.

And knowledge is power, so research into your local real estate market is a great idea before plunging in. Bravo.

 

[pb4uski]

Plot out your plan on Quicken Lifetime Planner. You can also then use Quicken to monitor your progress. Also, as mentioned, explore if there are lower cost fund options in your 401k or HSA and move to those and move your Roth to lower expense funds (or move it to Vanguard). Over time be aware of tax efficient placement. You're off to a good start.

 

[aaronc879]

I think I'm on the right path, but it's a bit demoralizing to see people making $300k/yr at my age and very comfortably retiring in their mid or late 30s.

Just think about all the people your age(large majority) who make less than half what you make and will not retire until 60's or later. You're doing quite well.

 

[sergio]

Good progress! All those TRowe Price funds have high-ish expense ratios.

You should consider moving your Roth IRA to Vanguard to enjoy a 0.16 expense ratio on the target date fund.

Similarly, the funds you're holding in the HSA have high ERs, but you'll be limited by what funds the administrator allows. See if it has a simple S&P 500 index fund and move to that. You can then use the Roth at Vanguard to fill in those sector specific & bond funds. Read the HSA fund prospectuses closely, too, because you may be also paying front-end loads on those. I know the HSA admin I'm with thru my work has tons of predatory funds with class A 5.xx% loads on them.

Finally, see if your 401k has a lower expense ratio alternative to that target date fund. Being a target date 2050 it is likely mostly equities, so worth seeing if you can piece that together via other in-plan funds that have lower expense ratios.

Love the total us & intl index funds in your brokerage account. Setting aside expense ratios, your fund holdings are in the right tax-advantaged accounts. Keep on keepin on and spend some time trying to min/max you're expenses.

Thanks for the reply. The SP500 fund in our 401k/HSA has an ER of 0.55%, so I figured I'd just simplify things with the Target Date fund,. There is no load on the funds in either the HSA or 401k.

Regarding the three TRowe HSA funds, these have historically been excellent performing funds and have been closed to new investors for some time now. I also picked them so that I'm not so heavily weighted towards large caps.

Thanks again, this has been very helpful!

Plot out your plan on Quicken Lifetime Planner. You can also then use Quicken to monitor your progress. Also, as mentioned, explore if there are lower cost fund options in your 401k or HSA and move to those and move your Roth to lower expense funds (or move it to Vanguard). Over time be aware of tax efficient placement. You're off to a good start.

Thanks, I'll consider this.

 

[rodi]

Welcome to the forum, Sergio.
You're on the right path - no debt, saving a good percentage of your income.

As for Silicon Valley - the cost of living there is pretty extreme... often more than the salary increase. Had a friend move to a senior position at Google from Qualcomm. Sold his pricey 4Ksf Carmel Valley home for over $1M, only to find that "fixer" homes in Palo Alto were double... finally settled on a <2Ksf home that needed work for $1.8M. The salary differential didn't cover the difference in mortgage. His wife was not thrilled. Fortunately, he loves his job. So your instincts about Silly valley may be correct... Big salary doesn't necessarily translate to more discretionary income.

 

[sergio]

It is frustrating to see peers triple your income, but since the idea of living in Silicon Valley makes you sick, I think you've made the correct decision.

Congratulations! It sounds like you have a solid plan for the rest of your professional life. You can, and should, optimize your accounts into low cost alternatives, but otherwise stay the course. Once your allocations are settled, just keep adding and don't fiddle with them.

And knowledge is power, so research into your local real estate market is a great idea before plunging in. Bravo.

Ha! Maybe I was a bit dramatic, but I don't see a ton of appeal in moving out to Silicon Valley. After the COL adjustment, I'd probably see a non-trivial bump in pay, but I'd never be able to buy any real estate out there, and I'd be essentially starting over on the other side of the country. I can get a decent starter home for $130-200k in my area.

What I plan to do is to start putting less money in my brokerage account and more money in my savings account to start building up a down-payment fund, while spending the next year or so studying real-estate. I wouldn't be ready to purchase until mid-late 2017.

Thanks!

Just think about all the people your age(large majority) who make less than half what you make and will not retire until 60's or later. You're doing quite well.

Great way to keep things in perspective.

 

[sergio]

Welcome to the forum, Sergio.
You're on the right path - no debt, saving a good percentage of your income.

As for Silicon Valley - the cost of living there is pretty extreme... often more than the salary increase. Had a friend move to a senior position at Google from Qualcomm. Sold his pricey 4Ksf Carmel Valley home for over $1M, only to find that "fixer" homes in Palo Alto were double... finally settled on a <2Ksf home that needed work for $1.8M. The salary differential didn't cover the difference in mortgage. His wife was not thrilled. Fortunately, he loves his job. So your instincts about Silly valley may be correct... Big salary doesn't necessarily translate to more discretionary income.

Thanks rodi. I have two friends at Google, and neither can even come close to affording a single-family home in or near SV. One of them told me his best best would be a small townhouse or condo 45mins-1hr away, and even that would run 350-500k for something very basic. I can get a decent single-family starter home for $150k (a major metro area, but not a "sexy" one), and a fixer-upper for $100-110k. This is why I'm looking at getting into real-estate and land-lording slowly over time.

I think that SV is great if you're single and are willing to indefinitely rent a studio or 1 BR apartment, or even better, are willing to rent with roommates. I wouldn't even think about moving out there with a family unless the financial incentive was absolutely insane.

 

[NgineER]

Congratulations to figuring out a long term plan!

I am also a STEM Ph.D, graduated from Silicon Valley, but decided to leave for a lower stress area even though I loved the bay area.

My mega chemical started me out at a similar salary in '07.

Annual salary increases

2008 8% raise after six months to keep my salary in the bracket.
2009 3%
2010 10% due to promotion and bonus doubled to 10% of salary.
2011 3%
2012 3%
2013 12% new job at different mega in different area same COL
2014 1% at top of my bracket and not yet proven in new job
2015 3.5%

My advice-change companies to get good salary jumps. Promotions help too, but rarely happen more frequently than every 3-5 years.

Max out tax deferred, investigate if you can do after tax 401k, great Roth building vehicle.

Save lots, keep expenses down and find ways to increase your salary, promotions or new companies.

If thinking about land lording, go owner occupied route, get a duplex and rent one unit out. That way you can usually do all repair work yourself without being licensed. If you have studied to get a Ph.D, you can study up on how to do work on a building easily and then practice makes perfect. Other benefits of going owner occupied is that you ease into land lording, you will know your property well and you have access to residential home owner rates and terms.

You will find that as you save, things will accumulate fast. Stay focused and delay (some) gratification.

 

[sergio]

Congratulations to figuring out a long term plan!

I am also a STEM Ph.D, graduated from Silicon Valley, but decided to leave for a lower stress area even though I loved the bay area.

My mega chemical started me out at a similar salary in '07.

Annual salary increases

2008 8% raise after six months to keep my salary in the bracket.
2009 3%
2010 10% due to promotion and bonus doubled to 10% of salary.
2011 3%
2012 3%
2013 12% new job at different mega in different area same COL
2014 1% at top of my bracket and not yet proven in new job
2015 3.5%

My advice-change companies to get good salary jumps. Promotions help too, but rarely happen more frequently than every 3-5 years.

Max out tax deferred, investigate if you can do after tax 401k, great Roth building vehicle.

Save lots, keep expenses down and find ways to increase your salary, promotions or new companies.

If thinking about land lording, go owner occupied route, get a duplex and rent one unit out. That way you can usually do all repair work yourself without being licensed. If you have studied to get a Ph.D, you can study up on how to do work on a building easily and then practice makes perfect. Other benefits of going owner occupied is that you ease into land lording, you will know your property well and you have access to residential home owner rates and terms.

You will find that as you save, things will accumulate fast. Stay focused and delay (some) gratification.

Thanks molof. I'll probably end up having to switch jobs in the next year or two, unless my currently employer bumps up my pay significantly (unlikely.)

And the owner-occupied duplex route is definitely what I am leaning towards. I still need to save for the down payment, as my #1 goal in the past 1.5 years was to accumulate $100k in investments to get the compounding started ASAP. I should hit that goal by July this year.

While I save for the down payment I can spend more time reading up on real estate and all the stuff that goes along with it.

Thanks again!

 

[dallas27]

Hey all!

I'm 29 years old and have been working full time for almost 1.5 years. I've fumbled around a bit with getting all my financial stuff worked out, but now think I have a clearer path. I graduated with a STEM PhD (hence the late start) and gross $93,000/yr in product R&D in the private sector in a good COL area. I don't expect this to go up much in the next few years (a guy with 13 years experience in my group makes around $110k/yr), unless I start moving up into management (ughh) or go to silicon valley (BARF). A horizontal move might get me a 6-8% raise.

My goal is to reach $1.2 million in today's dollars and then switch to being an adjunct college instructor. With my calculation (assuming no salary growth and 4% real growth) I should get there in 14-15 years. I'd also consider doing a year or two of English teaching abroad. STEM PhD adjuncts at the university I attended were paid $10k/course, so grossing $30-40k/yr is what I'd expect for 15-20 hours/week + summers off. Another idea I have is to very slowly get into landlording over time (maybe starting with a duplex in the next few years?) for future cash flow - this would require A LOT more research however.

I max out my 401k, HSA, Roth IRA, and try to put $20-30k/yr into my brokerage account each year. Employer match is about $5k/yr on the $18k/yr I put in. I think I'm on the right path, but it's a bit demoralizing to see people making $300k/yr at my age and very comfortably retiring in their mid or late 30s.

Some other things: My only asset is a car worth about $13,500 (fully paid for) and I am not married.

Any advice and criticisms would be much appreciated. Thanks!!

Investments + Cash: $84,000

• 
  Savings : $7,000
  • 
    $2,000 in HSA Money Market + $5,000 in Checking Account

• 
  401k : $27,000
  • 
    100% AALTX - American Funds Target Date 2050 (ER 0.76%)

• 
  Roth IRA : $16,600
  • 
    ROTH IRA: TRRMX - 100% T Rowe Price 2050 Fund (ER 0.75%)

• 
  HSA Investments : $5,200
  • 
    30% PAMCX - T Rowe Mid Cap Growth (ER 1.03%)
    35% TAMVX - T Rowe Mid Cap Value (ER 1.04%)
    25% PRNHX - T Rowe New Horizons (ER 0.79%)
    10% PTTDX - PIMCO Total Return (ER 0.75%)

• 
  Brokerage : $28,000
  • 
    65% VTSAX - Vanguard Total Stock Market (ER 0.05%)
    35% VTIAX - Vanguard Total Int'l Market (ER 0.12%)

Major Expenses: $1,500/month

• 
  Rent: $800/month

• 
  Auto Insurance: $55/month

• Health Insurance: $250/month

• 
  Food and Fun: $400-500/month

If guys are topping at 110k, you need to figure out if it is because he is a d-bag or if that is the market. If thats the market, you need to add a specialty or complementary skill and start planning to bust that ceiling.


Sent from my iPhone using Early Retirement Forum

 

[EvrClrx311]

I think I'm on the right path, but it's a bit demoralizing to see people making $300k/yr at my age and very comfortably retiring in their mid or late 30s.

Absolutely, you're on the right path. As for those people making $300K a year, I doubt many of them are saving even close to what you are... also, even if they were, they are used to spending (living on) likely of a quarter million a year. They will need FAR more than $1,200,000 to reach a goal of happiness that you've laid out.

Everything in perspectives. I think you may be envisioning what you'd do with that amount of disposable income... when the reality is you're actually way ahead of those people because you have a feasible plan to support your desired living and FIRE.

Take it from someone who knows. My salary is within that range, and although divorce is an expensive process, it opened my eyes to this kind of thing. I had quite a bit saved in retirement (she got half, which stung)... but what I really look back on is the fact that we were spending WAY too much to live a lifestyle that wasn't necessarily making me happy. Lucky for me, I'm now in full control of my finances and have roped that down to a much simpler lifestyle where my yearly spending is about a third what it was before (all those house parties, an excessive mortgage, cars, etc... gone from my life)... replaced with things I love. Like travel and photography.

Looking back at my life 5 years ago... sure I looked wealth on the outside and had a lot of disposable income, but I was absolutely not on any kind of path towards FIRE... now I am.

 

[ivinsfan]

You are young and bright and full of energy don't wish away your 30's by plotting out your entire future. Keep saving, but stop and think about what makes you happy. On your housing costs, think about buying a home and looking for a compatible roommate.Put a little vacation and travel money in your budget if you enjoy those things.

Look over your health and car insurance for any way to cut costs, such as raising deductibles and cutting some coverage on your car..collision is pretty pricey..