Early 30's trying to get on track

[Jammertime]

Hello everyone

I'm new to this arena. I've been working to get finances in order this past year as it hasn't been something we've taken seriously until now. I'd love feedback on where we're at so far and if we're setting our selves up for ER.

Mid 30's
married, filing jointly, 1 year old child

15-22% tax bracket
Wife taking year off to stay home with child.
income for this year - 45k; though should double when she resumes work.

Current Savings rate 20%

ira/401k - 55k
- assets split between target date fund, blue chip growth fund, vanguard life strategy moderate growth.
Taxable - 5k - Vanguard Total Stock Market
3k - Vanguard prime money market

Emergency fund - 6 months (more including taxable account)

No house/rent payment
No credit cards

Debt - 25k Student Loan at fixed 1.5%

Not knowing much about the topic, I'm wondering if I should focus my attention to paying off the student loan, or continue contributing towards retirement in tax advantaged/taxable accounts.

I am an over thinker who often over estimates my risk capacity. I'm tinkering with the idea of moving all assets (taxable and tax advantaged) into Vanguard Life Strategy Moderate Growth. Or at the very least hold 60/40 across all accounts.

My concern is that I would be leaving returns on the table, however, If I am afraid to put additional savings into the market, an aggressive allocation hinders my goals.

Any helpful advice or places to look would be much appreciated.

 

[rodi]

The interest rate on the student loans is low enough I'd just keep paying that on it's schedule and put extra money into the market.

Having an asset allocation (AA) of 60/40 isn't a bad thing. Some would argue you should be more aggressive since you're young. But if it lets you sleep at night, that has value. You have plenty of time to ride out any dips/downturns.

You mentioned you don't have rent or mortgage payments. Will you in the future? Do you need to be saving towards a down payment? If so, I'd keep that in fairly conservative investments.

Have you started a saving plan for the kiddo. We allocated a fixed amount for our sons when they were toddlers - as they hit/are hitting college age now it is very nice having that 529 & extra savings set aside for those bills.

Oh...and welcome to the forum Jammertime.

 

[Jammertime]

Thankfully my grandfather left property to me for our house. We may need a remodel in the future.

We will look into education savings accounts.

 

[tmitchell]

You're doing great, esp once your wife starts earning. You'll be saving like mad if you keep your expenses low and don't inflate your lifestyle.

I second not paying off student loans. Even a moderate 60/40 portfolio should way outperform 1.5%.

Regarding asset mix, you're just getting started so you could take a bit more risk. I'm rather conservative as well, but I kept my allocation 75/25 while I was building up to my FI number. Once I got close I started moving towards 60/40 where I'll stay until maybe 70 yrs old (53 now)

One thing to think about is that whatever money you're investing for FI or retirement isn't going to be touched until you reach one or the other. That helped me deal with the feeling of risk quite well.

If you're planning to use funds before that time, that's another situation.

 

[mystang52]

"Current Savings rate 20%" Considering your current family situation, this is excellent. I think you're definitely on the right track. Student loan rate of 1.5% means my vote is you stay the course. Regardless of your ultimate decision, I think you're going to be fine.

 

[HI Bill]

Great start! I'd focus on maxing out the ROTH 401(k) or IRA this year, then when your wife resumes w$rking, max out the 401(k), then ROTH to minimize taxes.

Owning a target date fund with anything else doesn't make sense, as you pay more for a target date fund than owning separate ETFs or MFs, and you're 'disrupting' the AA in the target date fund. At your age, if I were you, I'd stick with VTI and VUG, and ditch the others. May want to throw in some internationals like VEA.

 

[JustVisitingThisPlanet]

If you can't swing maxing out 401K every year then at least meet the company matching if there is one. Would make that a high priority. Then max out 401K/IRAs when possible. Pay minimum on student debt as long as it's low. And paying off credit cards should be higher priority than savings. So far sounds like you're ahead of all of that. There will be hiccups in life but I'd still at least meet company matching in 401K. And living below your means allows the occasional splurge to be a treat, not a boring norm.