How am I doing?

[Elementary]

I would really appreciate the advice of this forum on my personal financial situation.

Am I on track in my amount of retirement savings at this stage?
Are my asset allocations appropriate for my age and time horizons?
Is there anything I should be doing that I'm not?

Me
30
Unmarried

Gross Income
$135k salary
$15k rental property

Savings
$35k emergency fund @ 0.85% (7-9 months living expenses)
$1k HSA

Investments
$55k 401k (annual contribution $16k + $4k employer match)
- 70% U.S. stock index @ ER 0.05%
- 20% international stock index @ ER 0.10%
- 10% U.S. bond index @ ER 0.23%
$42k Roth IRA (fully funded for 2015 by backdoor)
- 70% Fidelity Spartan Total Market Index (FSTVX) @ ER 0.07%
- 20% Fidelity Spartan Global ex U.S. Index Fund (FSGDX) @ ER 0.28%
- 10% Fidelity Spartan U.S. Bond Index (FSITX) @ ER 0.17%
$20k Taxable Investments (5-10 year horizon / secondary emergency fund)
- 50% Vanguard Total Stock Market Index (VTSAX) @ ER 0.05%
- 20% Vanguard Total International Stock Index (VGTSX) @ ER 0.22%
- 30% Vanguard Total Bond Market Index (VBMFX) @ ER 0.20%
$7k employer stock

Property
$500k value
$380k mortgage balance @ 3.5%

Debt
only mortgage

[bjl584]

I'd say that you are doing exceptionally well for being 30 years old. You have a high income and already have a nice amount in savings.

[Goldy]

Looks pretty textbook to me. I might recommend maxing your 401k by adding another 2k to it but that's about all I could come up with. Have you thought about maxing your HSA?

[Elementary]

Have you thought about maxing your HSA?

Thanks for your reply.

The HSA is new for me this year and I'm still not entirely sure I understand the benefits. Some people refer to it as a secondary Roth IRA, but others say it's only advantage is for medical expenses.

I'll do some more research look into increasing my contribution.

[Goldy]

It's more like a second 401k than a Roth. Pre tax money goes in and can be used for medical expenses or can be taken out at retirement with no fee.

[Elementary]

So I was even more confused than I thought.

Is it a smarter move to invest the funds (my HSA manager has a range of options with expense ratios at 0.50% and up) or leave it as a savings account (current interest rate 0.15%)?

[Goldy]

I have ours split 50/50 between a general savings account and a fairly conservative investment account by that manages about 6% returns. I believe that in order to use the HSA card you need some money in the savings account for charges to balance. I could be wrong on that.

We have about 4k in the savings account and ~6k invested.

[rennigade]

I stopped reading when I saw you were 30 and make $135k/year. All the rest is icing on the cake. Nice job.

[autoxer]

Am I on track in my amount of retirement savings at this stage?

What percentage of your income is going towards retirement savings and what age do you plan to retire? Keep in mind, that after you have maxed out your 401k, ira, hsa, you can also use a taxable account to save towards retirement.

What is the goal for the 5-10 year taxable investments?

Is the rental property included in the asset/debt #'s? The mortgage amount seems pretty large compared to your income, but if that also includes a rental property, then your home might be a lot more reasonable.

You did an excellent job selecting low fee funds! The allocations look very similar to mine, although I don't have any bonds in my taxable account because they aren't as tax efficient.

[Elementary]

I stopped reading when I saw you were 30 and make $135k/year. All the rest is icing on the cake. Nice job.

Unfortunately, I live in New York City, where the cost of living is about 70% higher than the national average (housing is 150% higher).

I'm by no means struggling, but I guess my point is that it's all relative.

[Elementary]

What percentage of your income is going towards retirement savings and what age do you plan to retire?

That's a good point. I contribute about 20% of my income to tax advantaged and taxable investments. When I look at retirement, I generally plan for (today's) accepted age of 65, and assume I will need about 30 years of income. If I could manage to shave a few years off my working life, I wouldn't mind.

What is the goal for the 5-10 year taxable investments?

This is either for my wedding down the road, or possibly a down payment on a second home. I plan to see which option materializes first.

Is the rental property included in the asset/debt #'s? The mortgage amount seems pretty large compared to your income, but if that also includes a rental property, then your home might be a lot more reasonable.

The mortgage is indeed a very large monthly expense for me. As I told another member, I live in NYC where housing is ridiculously expensive. I rent a portion of my property (separate entrance) so the rental income does offset that cost.

You did an excellent job selecting low fee funds! The allocations look very similar to mine, although I don't have any bonds in my taxable account because they aren't as tax efficient.

Thanks for this advice. I've actually reallocated recently to include more stocks since I realized I was investing too conservatively for my age, but since I want that taxable fund for a shorter horizon, I didn't want to take too much risk with it.

I appreciate the detailed comments.

[autoxer]

That's a good point. I contribute about 20% of my income to tax advantaged and taxable investments. When I look at retirement, I generally plan for (today's) accepted age of 65, and assume I will need about 30 years of income. If I could manage to shave a few years off my working life, I wouldn't mind.

Getting back to your first question, 'is the retirement savings on track?'. I'm going to make some broad assumptions about return and inflation, but it is just a starting point for projecting out how much you will have when you turn 65.

Assuming you are starting with $97k (just the 401k & ira), adding 20% of your current salary ($2,250.00 each month). If you managed to get a 5% return after inflation, then after 35 years, you would end up with a portfolio over $3M. This could theoretically provide $120k per year for a 30 year retirement assuming a 4% safe withdrawal rate. It looks like you are on track based on your current goal. I think you could make a much more aggressive goal.

[bigdaddybus]

I'd say that you are doing exceptionally well for being 30 years old. You have a high income and already have a nice amount in savings.

^^^My thoughts exactly, especially if you consider retiring in a lower cost of living area than NYC.

[LeanneRob]

You're doing great. I think you could probably advise a lot here to be honest!

[Elementary]

^^^My thoughts exactly, especially if you consider retiring in a lower cost of living area than NYC.

That's a good point and something I hadn't considered. I probably won't retire in the city, so maybe my assumptions about what % of pre-retirement income I'll need can be adjusted down.

Thanks for that insight.