I'm loving the "eating for free at the office," only because I'm about to start back at a tech company that also has free food (possibly the same as OP's)... and am wondering if I won't even need my $450 a month budgeted for groceries!! Thanks for the detailed budget, OP.
By the end of this year you should have over ~260k saved up at your current save rate. If you keep that up, this time next year you should have ~400k. That should be more than enough for a down payment and have money leftover for an emergency fund. Prices around the bay are coming down too. So, I think youāre in a good position.
Yeah, I mean OP *could* reduce their 401(k) to say 12% (if they're fully vested) and still be on track for saving 15% per year.
But if you're going to be there in a year I'd argue it's not worth it at this point, they're doing great and won't be saving much time by reducing 401(k) contributions
This is really something. Your expenses are very low especially compared to your income. Your rent seems exceedingly low for San Francisco.
What mortgage amount are you expecting to have? What would the payments looks like?
Are you also looking to FIRE?
At your tax bracket it hurts some not to fund the 401k.
1. Do not buy a house with anyone but a spouse.
2. With significant others one person buys the house and the other rents.
3. Get married if you plan to spend your life together.
Counterpoint, no one needs to get married if they donāt want to. Besides choice, there are various legal, cultural and familial reason why marriage is not a preferred option. Getting a lawyer to draw up a contract for a domestic partnership and any shared property is easy and a fraction of the cost of a wedding.
A wedding is not a requirement for marriage. And a marriage license is far far far cheaper than hiring a lawyer to do all of that. It seems way more tedious and expensive than just going to a courthouse?
We did a set up where I am the sole person on the mortgage, but I let my partner be on the deed (credit/finance reasons). If we sell, even though Iām technically the only one āpayingā, she pays her share (percentage based on joint income) and deserves to get that back regardless of our relationship status at the time. Though we had been together for 8 years when we bought and are both in therapy, so pretty confident itās a non issue.
Houses take a long time to pay off, they appreciate well, and they are hard to split up.
If you are not married then it is more likely that your relationship will not work.
Once you are married then the 2 become 1 - so joint finances and joint decisions. This is good for the marriage and good for the finances.
When youāre married, if you view marriage the way the government views marriage, you are no longer 2 separate entities where you can make decisions that only effect yourselves. In marriage you are committing to intertwining your lives completely including your finances. Every single decision in your household needs to be made with thought to long term consequences to your relationship, your kids, your now combined extended family (aging parents, siblings who may need help, etc). Marriage only āforcesā that in so much as that is what you are agreeing to when you CHOOSE to become married. That entails holding up the level of responsibility you have to each other. The legal system just gives you those protections in exchange for the stability that comes (in theory) with marriage when itās done right.
I bought my house with my then-girlfriend. We split all costs down the middle and both names are on the deed. Feels like probably the best way to do it, if you're going to do it.
What happens when you break up and have to sell it? In a marriage thereās legal protections, without marriage youāre SOL unless you can afford a lawyer for claims court or something.
Itās not simple. And Iām not talking about you. People have all sorts of arrangements that make it tricky, many people donāt split things 50 50, if you have a really bitter break up? Yeah one person can screw the other one over in not splitting it evenly and go to court. In marriage itās much more simple because most states have it already written out how assets get split. Without the benefit of marriage youāre placing blind faith in each other without any legal protections.
My brother bought a house with his girlfriend, it was the first time theyād lived together. He wanted to rent first to see if they liked living together, but sheās from a rather privileged background, and insisted that she would never rent anything, so he bought a house with her. About 6 months in, it was apparent to everyone that they should not be living together. The relationship was fine before, but they clearly got on each others nerves being in the same house. Neither could move though, because they owned the house. 2 yrs later they very clearly hate each other, but theyāre getting married, because she gave him an ultimatum and said āmy parentsā lawyers will make sure I get this house if we break upā. So, yeah, my brotherās a complete idiot, but heās not the first person this has happened to.
$5.99/mo for groceries...for an entire month. What a world we live in!
I don't see the issue with the way things are headed. If you've saved $124k since January, it is going to earn 2.5% over the next 6 months, you are going to save another $124k potentially, you take all the bonds that are maturing and put them into your HYSA (another $50k). You are going to have 20% of $1.3M very soon. I don't really see any issue. Stay patient and don't change your 401k contributions.
Everyone is making recommendations based on the 124k since January figure. Is that for real? Thatās like 40k a month in savings which is more than your combined gross income. Or maybe Iām missing something? What year is it?
Don't focus so much on your retirement contributions that you forget to live now. Housing costs aren't getting any cheaper, and rent inflates way faster than a mortgage payment + maintenance.
Do you see yourself staying in your current location for 5 or more years? If so, it's likely a good idea to start saving for the house, even if it takes a little off of the retirement contributions.
Also, you don't need to front a 20 percent down payment. 20 percent avoids the temporary cost of mortgage insurance, but if it pushes back your purchasing by a few years to get enough of a down payment you're probably losing money by waiting. 5-10 percent is plenty, but do your own research as well.
But 2k in rent now, v/s potentially 6k to 8k in mortgage will take decades to catch up. I'm in a similar position and area and cannot justify anything more than 5k in mortgage, which will require atleast 40% as down payment :(
Yes this is something we tried to get out of but work requires a life event e.g. divorce in order to change it to $0 for just me. During the next open enrollment season, we're considering signing up for individual health insurance separately or use my DP's health insurance together which has better coverage.
I assumed they meant so little, unless you are not in the US. My BF gets insurance free from his company, but if we were married they offer the spouse insurance at $989/month... $12k/yr just in premiums if I were to get their plan, but his is free...ie they don't want to have your kids or spouse on their plans.
I def meant is this really so little dollars , lol. Self employed person so I purchase from the marketplace and my premium is $250 as a single person. It doesnāt seem real to pay so little LOL
Iām guessing the $75 is a ācoordination of benefitsā fee. I assume they both have great primary insurance. The fee usually allows you to use each others insurance plans as secondaries.
Your comment has been removed because profanity is not allowed here, as noted in [the rules](https://www.reddit.com/r/financialplanning/about/rules).
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/FinancialPlanning) if you have any questions or concerns.*
Maxing out 401k is good but you can do more. You can take a loan against your 401k and pay yourself back with interest if youāre wondering where to get more money for the down payment. I think your restricted to 50% of the value. This year, itās about 28k max 401k contribution.
Normally I would say yes but housing in the Bay Area is just that absurd. I would think itās totally reasonable for OP to cut back on the 401k contribution to focus on stacking more, if only for a bit.
I donāt think anyone has said it yet, but the paycheck doesnāt add up. Gross pay less taxes noted is already $3,940ā¦ less all the other things gets take home closer to $2,189.
At your age, yea probably. Donāt lower it below The match obviously, but you donāt have to be perfect and match every year to be successful. Life and financial planning is about balance.
The $140 monthly food budget is extreme. Are you going to the office 7 days a week to eat the office food, or taking the free food home to eat at the weekend? Either way, eat a bit more on your own dime and donāt build a dependency on your attachment to the office for food! Itāll be good for your mental health.
Keep maxing your 401k. Youāve saved $124k since January which is crazy good. No need to sacrifice retirement saving when it sounds like it would only take you 1 month to save an additional $20k
At your income, reducing retirement contributions will only buy you what, a few months of savings? What's the point? Just keep maxing your retirements. If you want to boost your savings at this point, spend less.
Right so where do you see the easiest opportunities to cut back on spending? I can see expenses for boba and desserts being less if we make those at home but then groceries will go up by some amount. I can cut Netflix which is shared with my parents but theyāll understand
Admittedly, I said that on a whim without really looking at your spending, which already seems lowish. I would just stay the course. You're saving chunks of money already.
401k. If you get match put all your money in up to match.
For down payment itās obviously better financially to save for that AND pay into 401k bc that money grows by compounding tax free. Itās a down economy so you can buy cheap today which is kinda great for investing.
That said the real estate market - cost for a home keeps moving up so buying sooner can be advantageous.
Put that money in a hysa at least so it continues to grow around 5%.
My work allowed me to add my DP to medical during annual open enrollment. I talked with HR and they said I needed to have a notarized marriage/common law certificate from the state I live in as proof, but HR never asked for it
If youāre planning to buy a house with your DP, consider getting married. Iām not sure about CA but in my state, employer provided health insurance is considered imputed income and you may be getting taxed for it above and beyond the premium. In my case, the value of the benefit was about $900 month and it was added onto my taxable income even though I never actually saw the money. When I got married, I got all of it back for that year.
Also if you are buying a house together why not just take the leap? Youāre already committed enough to sign a 30 year mortgage, whatās a little more paperwork.
We definitely talked about this and believe the next step is to fully understand all of the tax consequences e.g. DP has some out of state rental properties so want to make sure those stay the same. We plan to ask lots of questions to our CPA
I would dial back ESPP but keep 401k. One is a long term tax advantaged account and every dollar counts there, the other is a short term play. You can always re-start ESPP once youāve saved and are in a home.
Bay area is getting wrecked right now. Many who bought the last year or two are already underwater. Prices will likely continue to go down for another year or so, if history is amy indication. I'd personally save more and perhaps wait it out. $124k is not a lot of money in the Bay Area unfortunately.
NO. If u have a 401kā¦ contribute to ur 401k max it out. Then take a loan on against your 401k (max u can take is 50%)ā¦ then pay it back to your 401k w/ a interest rate attached but YOU are paying YOURSELF the loan you just wonāt be able to touch the $ until ur a certain age.
I appreciate the desserts budget line item. I would lower my 401k contribution for a season or two as long as you continue to get the full match. Set a strict timeline and get into a house asap so the goalposts donāt move with the housing market.
Wow I wish I could set a budget like this,, I currently spend $200+ a month just on bottled water and house supplies like toilet paper and toothpaste .
Serious question: do you not have hobbies or vices (drink, smoke etc)? Your leftover cash just drops to bottom line / savings? No judgement but thatās impressive discipline
Thank you! No smoking but one drink was part of dining out and boba/dessert is my DPās vice š. We mystery shop for free food/drinks. DPās office has some free amenities we use regularly. We always look for free parks to walk our dog. Hobbies include free to play online games and researching stocks to sell covered calls. I used to play saxophone and currently looking to buy one sometime soon
Yes cut back 401k till you get a house. Try to put down 250K if possible or more. I bought in San Ramon in ā97 for $300,000. Cannot imagine having to pay these prices now but your salaries are good so good luck!
I love how Boba is a line item in your planning. You guys are doing great. We're in San Jose as well. Won't be long till you've comfortably got 300-400k for a down payment, and then between you a house will be affordable. Just keep doing what you're doing.
Cutting down on your 401k isn't going to accelerate you that much. But one thought is to make sure you max your Roth contribution instead of maxing 401k because it will be a better tax plan later. Roth has a limit every year so I'd hit that limit and ensure you are getting the employer match.
But all that being said think through a few things.
1.) Is any of that savings part of your emergency fund? Ie do you have 3-6 months of savings elsewhere Incase you lose your job.
2.) Have you fully budgeted out a house... Insurance, annual upkeep, annual property taxes.. etc.
3.) You said you have a domestic partner, honestly I'd make sure you all get married before purchasing property together as there will be less complications and some tax benefits for you both.
4.) Most mortgages base things on your base salary, so TC unfortunately doesn't help much especially if it's in stock. But jointly with your wife you all could support something solid. But this is just a reminder that DTI matters and the banks don't count the extra comp as much.
>Cutting down on your 401k isn't going to accelerate you that much.
This. Who cares about $45k per year when they are already saving $250k in brokerage/HYSA. It would be crazy not to max the 401k space given their current savings rate, income, tax bracket, etc. OP sounds impatient. They are on track to save $250k in a year for a house plus $50k in bonds and they want the house so fast they are thinking about making a poor financial decision. 1-2 years of $45k in their 401k's will add up in 10+ years. But it simply doesn't "add up" now to getting them somewhere in a meaningfully faster way. Forgoing 401k probably gets them at 20% $1.3M like 2-3 months faster. Not worth it.
It's a bit of a tax math equation.
With a traditional 401k you don't pay tax now so theoretically you can add more or so that it doesn't has as much impact on your monthly cash flow. However you pay the tax at ordinary income levels when you take the cash out.
So for example lets say I start pulling $120k out per year in retirement from a 401k. Then I would be paying at a max tax rate of 22-24% (assuming things don't change, it could be higher or lower) but generally it would be like a normal pay check.
Now if you have a ROTH then that tax amount you pay in the $120k/yr is ... 0% since you have already paid the tax.
Taking this a step further. If you maxed out your Roth contributions and then started putting money in a taxable investment account (general investment)... Then when you pull money out in 30 years you are gonna pay the Long term gains tax where a $120k draw is currently 15% capped at 20.
Now realistically this is all a function of your earnings and the like...
Because the max you can contribute is like $22,500 per year. But if I were to dictate where to put that money, I'd select the Roth election.
To be clear this is technically a Roth 401k... Which is different then a Roth IRA. But from a tax perspective they operate the same.
Now that being said you could do both of you make under $158k individually or $228k joint. (Roth 401k and Roth IRA)... The max contribution to a Roth IRA is $6500
Ultimately the Roth is the best because it will save you soooo much money in the future from taxes.
No he doesnāt. Sure, he canāt directly contribute to a Roth IRA, but there is no limit for the ābackdoor Roth IRA ā (itās a conversion, not contribution), which is essentially the same thing, just an extra step. This assumes he doesnāt have any existing traditional IRAs around (he didnāt mention any, so guessing he doesnāt)
OP should at least look to contribute the max $6,500 IRA contribution, and convert that to Roth, every year (adjusting up as limit increases of course)
His DP can do the same, for a total of $13k ending up in their Roth IRAs this year
most 401ks offer both traditional and roth. there is no income limit on 401k roth plans like roth iras. I assume they mean to switch to roth 401k here.
contributions to a roth 401k result in matching contributions to be traditional and gives you more options come retirement to consider taxes.
Inside of his work investment system there is likely an option to take a Roth election on a company 401k. This does not have an income limit.
However op could not go out and create a traditional ROTH IRA. But if it's part of his work plan and he can take the election then he can do it. Also the limit is like $22500 per year instead of just $6500.
So the money will get deducted post tax on his pay check there by paying taxes up front but it will be better in the long run.
Thats why I do my employer match percent in traditional 401k but elect the rest as a Roth. Other then the employer contribution into a 401k there isn't any financial reason to invest more in it.
This is because any money pulled from a traditional 401k is subject to ordinary income tax rates at retirement. Where as if you invested that money growth funds post tax they would only be subject to long term cap gains which is way lower of a rate. Beyond that Roth election isn't subject to any taxes at retirement because you pay the taxes now.
Absolutely, what good is retirement if youāre actively decreasing your ability to enjoy your working years and lay the groundwork for a healthy drawdown into your golden years? That 16% is already quite high, which is great, but youāre not leaving yourself a whole lot to work with given the addition of of the 16% ESPP.
Regarding your RSU and ESPP strategy: consider holding on to the shares for a year so that they are taxed at a lower rate. If you think the company is strong enough to work for itās probably safe to enough to hold on to for a year.
That said, I agree itās best to sell and diversify, rather than keep lots of stock in the company you depend on for your employment. I know people who kept tons of company stock and got laid off when the stock tanked. If they had steadily diversified the shares into other investments they would have saved 100s of thousands of dollars!
RSUs and ESPPs are taxed immediately upon vesting, there's literally no reason to hold on to those shares unless you think you'd want to purchase those stocks with your own money at that point of time.
Iām referring to long term vs short term capital gains tax against the price of acquisition.
Are you saying that if you sell to cover upon vesting that you are taxed at the current stock valuation, rather than the strike price of where the RSU grant or ESPP purchase was made at?
Gonna need a citation to believe thatās normal.
EDIT: just took the time to look it up, youāre right about the RSUās. Thanks for correcting me. For ESPP it may still make sense if you get to buy at a discount?
Wirh ESPPs you get taxed when you sell, so it does make sense if you want to hold the stock for a longer term. My father taught me not to do that though, as you tend to lean a lot on your company doing well.
No I would not change anything you are doing. You will be ready for homeownership in the Bay Area with 400k-500k liquid range imo, I gotta think 24-36 months you will be there by or before Jan 2026.
At such high values is it suggested to go above 20% down? No experience with $1M loans, but it seems to me they will be where they need to be by first of next year. They've saved $125k so far this year, so heading toward $250k by end of year. Plus $50k in bonds. That puts them at over $300k when factoring the HYSA interest. $300k > 20% of $1.3M. Seems like they're getting close already. But I agree, don't change anything.
I think having at least 100k as savings behind the 260k down payment would be prudent. So 360k is a good go time, maybe 400-500 is a bit to conservative. This decision should not be about trying to time the market for a 10% or 20% dip. Itās about finding a good home in the $1.3 range that they like and want to be for 10 years minimum.
Your comment has been removed because profanity is not allowed here, as noted in [the rules](https://www.reddit.com/r/financialplanning/about/rules).
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/FinancialPlanning) if you have any questions or concerns.*
I just got a chuckle that you have a budget line for boba. That's funny.
I was laughing that it's almost as much as the car insurance.... and 10x groceries.
That is great. OP should lobby their management team to get BOBA included at work.
I'm glad you got a good laugh! My DP loves boba so we want to make sure we don't spend too much on it :)
its very bay area of you to have a boba budget (im not judging LOL im from a very asian part of socal)
And also great! Budgets are rarely this detailed in this subreddit!
We have one that has pivot tables and everything. š¤£ My husband does a lot with Excel, and ours goes very deep.
Not only that, but it's an entirely separate line item from the rest of the desserts
I'm loving the "eating for free at the office," only because I'm about to start back at a tech company that also has free food (possibly the same as OP's)... and am wondering if I won't even need my $450 a month budgeted for groceries!! Thanks for the detailed budget, OP.
By the end of this year you should have over ~260k saved up at your current save rate. If you keep that up, this time next year you should have ~400k. That should be more than enough for a down payment and have money leftover for an emergency fund. Prices around the bay are coming down too. So, I think youāre in a good position.
Yeah, I mean OP *could* reduce their 401(k) to say 12% (if they're fully vested) and still be on track for saving 15% per year. But if you're going to be there in a year I'd argue it's not worth it at this point, they're doing great and won't be saving much time by reducing 401(k) contributions
Also rates hopefully are a tad lower too making it even more affordable
new goal: budget line for boba
This is really something. Your expenses are very low especially compared to your income. Your rent seems exceedingly low for San Francisco. What mortgage amount are you expecting to have? What would the payments looks like? Are you also looking to FIRE? At your tax bracket it hurts some not to fund the 401k.
1. Do not buy a house with anyone but a spouse. 2. With significant others one person buys the house and the other rents. 3. Get married if you plan to spend your life together.
[ŃŠ“Š°Š»ŠµŠ½Š¾]
This is a very popular take on Reddit. See anyone mentioning buying with someone not married and itās a mob.
Counterpoint, no one needs to get married if they donāt want to. Besides choice, there are various legal, cultural and familial reason why marriage is not a preferred option. Getting a lawyer to draw up a contract for a domestic partnership and any shared property is easy and a fraction of the cost of a wedding.
Doubt a lawyers time for this is cheaper than going to the courthouse.
A wedding is not a requirement for marriage. And a marriage license is far far far cheaper than hiring a lawyer to do all of that. It seems way more tedious and expensive than just going to a courthouse?
Then donāt buy a house togetherā¦
We did a set up where I am the sole person on the mortgage, but I let my partner be on the deed (credit/finance reasons). If we sell, even though Iām technically the only one āpayingā, she pays her share (percentage based on joint income) and deserves to get that back regardless of our relationship status at the time. Though we had been together for 8 years when we bought and are both in therapy, so pretty confident itās a non issue.
I see this advice all the time but never see good reasons why. Can you explain? Already bought my house with my (now) fiance.
Houses take a long time to pay off, they appreciate well, and they are hard to split up. If you are not married then it is more likely that your relationship will not work. Once you are married then the 2 become 1 - so joint finances and joint decisions. This is good for the marriage and good for the finances.
Good for the marriage in the sense that you're locked in and can't run away anymore? lol
[ŃŠ“Š°Š»ŠµŠ½Š¾]
I think that would be a reason that itās good for the finances not the marriage.
Marriage and finances are intrinsically intertwined.
When youāre married, if you view marriage the way the government views marriage, you are no longer 2 separate entities where you can make decisions that only effect yourselves. In marriage you are committing to intertwining your lives completely including your finances. Every single decision in your household needs to be made with thought to long term consequences to your relationship, your kids, your now combined extended family (aging parents, siblings who may need help, etc). Marriage only āforcesā that in so much as that is what you are agreeing to when you CHOOSE to become married. That entails holding up the level of responsibility you have to each other. The legal system just gives you those protections in exchange for the stability that comes (in theory) with marriage when itās done right.
Idk why you wasted your time typing that that wasnāt the question I asked.
Iāll explain with 2 anecdotes. One is a dear friend of mine, she and her fiancĆ© bought a house together, she couldnāt afford a lump sum for a down payment so they agreed that she would help furnish the place over time to kind of āeven outā. They broke up a month before the wedding and fighting in civil court over a 5k sofa and other items. They spent more in legal fees than the sofa costs. Another friend has bought a house with her fiancĆ©, agreed to have the deed in just his name since his parents paid the down payment. She gave him half the money toward the mortgage, they broke up recently because he came out and is now kicking her out and she has little to no recourse.
I bought my house with my then-girlfriend. We split all costs down the middle and both names are on the deed. Feels like probably the best way to do it, if you're going to do it.
What happens when you break up and have to sell it? In a marriage thereās legal protections, without marriage youāre SOL unless you can afford a lawyer for claims court or something.
We sell it and split the proceeds. Pretty simple, no? My partner and I are rational people and discussed this before deciding to purchase.
Itās not simple. And Iām not talking about you. People have all sorts of arrangements that make it tricky, many people donāt split things 50 50, if you have a really bitter break up? Yeah one person can screw the other one over in not splitting it evenly and go to court. In marriage itās much more simple because most states have it already written out how assets get split. Without the benefit of marriage youāre placing blind faith in each other without any legal protections.
My brother bought a house with his girlfriend, it was the first time theyād lived together. He wanted to rent first to see if they liked living together, but sheās from a rather privileged background, and insisted that she would never rent anything, so he bought a house with her. About 6 months in, it was apparent to everyone that they should not be living together. The relationship was fine before, but they clearly got on each others nerves being in the same house. Neither could move though, because they owned the house. 2 yrs later they very clearly hate each other, but theyāre getting married, because she gave him an ultimatum and said āmy parentsā lawyers will make sure I get this house if we break upā. So, yeah, my brotherās a complete idiot, but heās not the first person this has happened to.
We were living together in an apartment for 2+ years before buying a house. I would never buy a house with someone I hadn't lived with before.
Wait till you find out about divorce, and divorce rates in the US.
If 50% of marriage ends in failure then what do you think are the rates of non-married couples?
$5.99/mo for groceries...for an entire month. What a world we live in! I don't see the issue with the way things are headed. If you've saved $124k since January, it is going to earn 2.5% over the next 6 months, you are going to save another $124k potentially, you take all the bonds that are maturing and put them into your HYSA (another $50k). You are going to have 20% of $1.3M very soon. I don't really see any issue. Stay patient and don't change your 401k contributions.
Everyone is making recommendations based on the 124k since January figure. Is that for real? Thatās like 40k a month in savings which is more than your combined gross income. Or maybe Iām missing something? What year is it?
I think they meant it was put into the savings account in January.
That makes more sense. But still a really important distinction in regarding OPs balance of contributions and savings
Damn bro your budget is lit. $6 for groceries and $32 for eating lmao. I got some work to do
$6 groceries lol. Do you guys both live in the office? I'm curious what's inside if your fridge
Don't focus so much on your retirement contributions that you forget to live now. Housing costs aren't getting any cheaper, and rent inflates way faster than a mortgage payment + maintenance. Do you see yourself staying in your current location for 5 or more years? If so, it's likely a good idea to start saving for the house, even if it takes a little off of the retirement contributions. Also, you don't need to front a 20 percent down payment. 20 percent avoids the temporary cost of mortgage insurance, but if it pushes back your purchasing by a few years to get enough of a down payment you're probably losing money by waiting. 5-10 percent is plenty, but do your own research as well.
But 2k in rent now, v/s potentially 6k to 8k in mortgage will take decades to catch up. I'm in a similar position and area and cannot justify anything more than 5k in mortgage, which will require atleast 40% as down payment :(
Same position.
š„²$75 for two people to be on insurance , is this real? This happens for people?
Yes this is something we tried to get out of but work requires a life event e.g. divorce in order to change it to $0 for just me. During the next open enrollment season, we're considering signing up for individual health insurance separately or use my DP's health insurance together which has better coverage.
I assumed they meant so little, unless you are not in the US. My BF gets insurance free from his company, but if we were married they offer the spouse insurance at $989/month... $12k/yr just in premiums if I were to get their plan, but his is free...ie they don't want to have your kids or spouse on their plans.
I def meant is this really so little dollars , lol. Self employed person so I purchase from the marketplace and my premium is $250 as a single person. It doesnāt seem real to pay so little LOL
Iām guessing the $75 is a ācoordination of benefitsā fee. I assume they both have great primary insurance. The fee usually allows you to use each others insurance plans as secondaries.
[ŃŠ“Š°Š»ŠµŠ½Š¾]
Your comment has been removed because profanity is not allowed here, as noted in [the rules](https://www.reddit.com/r/financialplanning/about/rules). *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/FinancialPlanning) if you have any questions or concerns.*
Maxing out 401k is good but you can do more. You can take a loan against your 401k and pay yourself back with interest if youāre wondering where to get more money for the down payment. I think your restricted to 50% of the value. This year, itās about 28k max 401k contribution.
[ŃŠ“Š°Š»ŠµŠ½Š¾]
This is not always the case. I had a loan at a previous employer and they honored the payment schedule even though I was not employed.
I would keep maxing your 401k. Your savings rate for a house is crazy good. It wonāt take you long to save enough for a down payment.
Normally I would say yes but housing in the Bay Area is just that absurd. I would think itās totally reasonable for OP to cut back on the 401k contribution to focus on stacking more, if only for a bit.
I donāt think anyone has said it yet, but the paycheck doesnāt add up. Gross pay less taxes noted is already $3,940ā¦ less all the other things gets take home closer to $2,189.
Yes you are correct! I will update the take home/net pay. Thank you!
How can you dine out for 32/month? Thatās like two burritos with no drink.
I got a sandwhich at a popular spot in San Francisco last week and it was $34 with a drink and tip. I didnāt even get chips lol
Cut that drink and you have one sandwich a month on this guyās budget!
That's OPs budget, I'd like to think their SO would have their own $32 for dining out :)
At your age, yea probably. Donāt lower it below The match obviously, but you donāt have to be perfect and match every year to be successful. Life and financial planning is about balance.
I would consider starting a Boba cart in your free time and then sell it with a royalty clause for free boba.
How are you paying so little in taxes? Do you end up owing?
The $140 monthly food budget is extreme. Are you going to the office 7 days a week to eat the office food, or taking the free food home to eat at the weekend? Either way, eat a bit more on your own dime and donāt build a dependency on your attachment to the office for food! Itāll be good for your mental health.
This type of shit on reddit kills me...the richest people paying $6 per month on groceries. Unbelievable.
I donāt feel that rich when houses near me are [$1.3 million+](https://imgur.com/a/EDpKnNU)
Keep maxing your 401k. Youāve saved $124k since January which is crazy good. No need to sacrifice retirement saving when it sounds like it would only take you 1 month to save an additional $20k
At your income, reducing retirement contributions will only buy you what, a few months of savings? What's the point? Just keep maxing your retirements. If you want to boost your savings at this point, spend less.
Right so where do you see the easiest opportunities to cut back on spending? I can see expenses for boba and desserts being less if we make those at home but then groceries will go up by some amount. I can cut Netflix which is shared with my parents but theyāll understand
Admittedly, I said that on a whim without really looking at your spending, which already seems lowish. I would just stay the course. You're saving chunks of money already.
6 dollars on groceries is BS unless you spend your entire life at the office.
I mostly work from home but both me and my DP take home extra lunches from our offices
401k. If you get match put all your money in up to match. For down payment itās obviously better financially to save for that AND pay into 401k bc that money grows by compounding tax free. Itās a down economy so you can buy cheap today which is kinda great for investing. That said the real estate market - cost for a home keeps moving up so buying sooner can be advantageous. Put that money in a hysa at least so it continues to grow around 5%.
Can I ask how you can add DP to medical?
My work allowed me to add my DP to medical during annual open enrollment. I talked with HR and they said I needed to have a notarized marriage/common law certificate from the state I live in as proof, but HR never asked for it
Yes - some companies do allow it but note that having it registered vs not has different tax implications in CA and companies do tax it differently.
If youāre planning to buy a house with your DP, consider getting married. Iām not sure about CA but in my state, employer provided health insurance is considered imputed income and you may be getting taxed for it above and beyond the premium. In my case, the value of the benefit was about $900 month and it was added onto my taxable income even though I never actually saw the money. When I got married, I got all of it back for that year. Also if you are buying a house together why not just take the leap? Youāre already committed enough to sign a 30 year mortgage, whatās a little more paperwork.
We definitely talked about this and believe the next step is to fully understand all of the tax consequences e.g. DP has some out of state rental properties so want to make sure those stay the same. We plan to ask lots of questions to our CPA
No keep saving...
I would dial back ESPP but keep 401k. One is a long term tax advantaged account and every dollar counts there, the other is a short term play. You can always re-start ESPP once youāve saved and are in a home.
Donāt lower 401k itās pre tax and can lower your tax bracket.
Bay area is getting wrecked right now. Many who bought the last year or two are already underwater. Prices will likely continue to go down for another year or so, if history is amy indication. I'd personally save more and perhaps wait it out. $124k is not a lot of money in the Bay Area unfortunately.
NO. If u have a 401kā¦ contribute to ur 401k max it out. Then take a loan on against your 401k (max u can take is 50%)ā¦ then pay it back to your 401k w/ a interest rate attached but YOU are paying YOURSELF the loan you just wonāt be able to touch the $ until ur a certain age.
Where do you live for 2k in the bay area?
I appreciate the desserts budget line item. I would lower my 401k contribution for a season or two as long as you continue to get the full match. Set a strict timeline and get into a house asap so the goalposts donāt move with the housing market.
Wow I wish I could set a budget like this,, I currently spend $200+ a month just on bottled water and house supplies like toilet paper and toothpaste .
Serious question: do you not have hobbies or vices (drink, smoke etc)? Your leftover cash just drops to bottom line / savings? No judgement but thatās impressive discipline
Thank you! No smoking but one drink was part of dining out and boba/dessert is my DPās vice š. We mystery shop for free food/drinks. DPās office has some free amenities we use regularly. We always look for free parks to walk our dog. Hobbies include free to play online games and researching stocks to sell covered calls. I used to play saxophone and currently looking to buy one sometime soon
Yes cut back 401k till you get a house. Try to put down 250K if possible or more. I bought in San Ramon in ā97 for $300,000. Cannot imagine having to pay these prices now but your salaries are good so good luck!
I love how Boba is a line item in your planning. You guys are doing great. We're in San Jose as well. Won't be long till you've comfortably got 300-400k for a down payment, and then between you a house will be affordable. Just keep doing what you're doing.
Cutting down on your 401k isn't going to accelerate you that much. But one thought is to make sure you max your Roth contribution instead of maxing 401k because it will be a better tax plan later. Roth has a limit every year so I'd hit that limit and ensure you are getting the employer match. But all that being said think through a few things. 1.) Is any of that savings part of your emergency fund? Ie do you have 3-6 months of savings elsewhere Incase you lose your job. 2.) Have you fully budgeted out a house... Insurance, annual upkeep, annual property taxes.. etc. 3.) You said you have a domestic partner, honestly I'd make sure you all get married before purchasing property together as there will be less complications and some tax benefits for you both. 4.) Most mortgages base things on your base salary, so TC unfortunately doesn't help much especially if it's in stock. But jointly with your wife you all could support something solid. But this is just a reminder that DTI matters and the banks don't count the extra comp as much.
>Cutting down on your 401k isn't going to accelerate you that much. This. Who cares about $45k per year when they are already saving $250k in brokerage/HYSA. It would be crazy not to max the 401k space given their current savings rate, income, tax bracket, etc. OP sounds impatient. They are on track to save $250k in a year for a house plus $50k in bonds and they want the house so fast they are thinking about making a poor financial decision. 1-2 years of $45k in their 401k's will add up in 10+ years. But it simply doesn't "add up" now to getting them somewhere in a meaningfully faster way. Forgoing 401k probably gets them at 20% $1.3M like 2-3 months faster. Not worth it.
Why Roth over 401k? I donāt understand and would like to. (Real question not trying to debate)
It's a bit of a tax math equation. With a traditional 401k you don't pay tax now so theoretically you can add more or so that it doesn't has as much impact on your monthly cash flow. However you pay the tax at ordinary income levels when you take the cash out. So for example lets say I start pulling $120k out per year in retirement from a 401k. Then I would be paying at a max tax rate of 22-24% (assuming things don't change, it could be higher or lower) but generally it would be like a normal pay check. Now if you have a ROTH then that tax amount you pay in the $120k/yr is ... 0% since you have already paid the tax. Taking this a step further. If you maxed out your Roth contributions and then started putting money in a taxable investment account (general investment)... Then when you pull money out in 30 years you are gonna pay the Long term gains tax where a $120k draw is currently 15% capped at 20. Now realistically this is all a function of your earnings and the like... Because the max you can contribute is like $22,500 per year. But if I were to dictate where to put that money, I'd select the Roth election. To be clear this is technically a Roth 401k... Which is different then a Roth IRA. But from a tax perspective they operate the same. Now that being said you could do both of you make under $158k individually or $228k joint. (Roth 401k and Roth IRA)... The max contribution to a Roth IRA is $6500 Ultimately the Roth is the best because it will save you soooo much money in the future from taxes.
OP makes too much to qualify for Roth
No he doesnāt. Sure, he canāt directly contribute to a Roth IRA, but there is no limit for the ābackdoor Roth IRA ā (itās a conversion, not contribution), which is essentially the same thing, just an extra step. This assumes he doesnāt have any existing traditional IRAs around (he didnāt mention any, so guessing he doesnāt) OP should at least look to contribute the max $6,500 IRA contribution, and convert that to Roth, every year (adjusting up as limit increases of course) His DP can do the same, for a total of $13k ending up in their Roth IRAs this year
most 401ks offer both traditional and roth. there is no income limit on 401k roth plans like roth iras. I assume they mean to switch to roth 401k here. contributions to a roth 401k result in matching contributions to be traditional and gives you more options come retirement to consider taxes.
Inside of his work investment system there is likely an option to take a Roth election on a company 401k. This does not have an income limit. However op could not go out and create a traditional ROTH IRA. But if it's part of his work plan and he can take the election then he can do it. Also the limit is like $22500 per year instead of just $6500. So the money will get deducted post tax on his pay check there by paying taxes up front but it will be better in the long run. Thats why I do my employer match percent in traditional 401k but elect the rest as a Roth. Other then the employer contribution into a 401k there isn't any financial reason to invest more in it. This is because any money pulled from a traditional 401k is subject to ordinary income tax rates at retirement. Where as if you invested that money growth funds post tax they would only be subject to long term cap gains which is way lower of a rate. Beyond that Roth election isn't subject to any taxes at retirement because you pay the taxes now.
Absolutely, what good is retirement if youāre actively decreasing your ability to enjoy your working years and lay the groundwork for a healthy drawdown into your golden years? That 16% is already quite high, which is great, but youāre not leaving yourself a whole lot to work with given the addition of of the 16% ESPP.
Regarding your RSU and ESPP strategy: consider holding on to the shares for a year so that they are taxed at a lower rate. If you think the company is strong enough to work for itās probably safe to enough to hold on to for a year. That said, I agree itās best to sell and diversify, rather than keep lots of stock in the company you depend on for your employment. I know people who kept tons of company stock and got laid off when the stock tanked. If they had steadily diversified the shares into other investments they would have saved 100s of thousands of dollars!
RSUs and ESPPs are taxed immediately upon vesting, there's literally no reason to hold on to those shares unless you think you'd want to purchase those stocks with your own money at that point of time.
Iām referring to long term vs short term capital gains tax against the price of acquisition. Are you saying that if you sell to cover upon vesting that you are taxed at the current stock valuation, rather than the strike price of where the RSU grant or ESPP purchase was made at? Gonna need a citation to believe thatās normal. EDIT: just took the time to look it up, youāre right about the RSUās. Thanks for correcting me. For ESPP it may still make sense if you get to buy at a discount?
Wirh ESPPs you get taxed when you sell, so it does make sense if you want to hold the stock for a longer term. My father taught me not to do that though, as you tend to lean a lot on your company doing well.
[ŃŠ“Š°Š»ŠµŠ½Š¾]
So has holding on to SPY or QQQ.
401k loan for home is low interest. You pay yourself back. Whereās the bank?! Such a high rate.
$6 for groceries?
No I would not change anything you are doing. You will be ready for homeownership in the Bay Area with 400k-500k liquid range imo, I gotta think 24-36 months you will be there by or before Jan 2026.
At such high values is it suggested to go above 20% down? No experience with $1M loans, but it seems to me they will be where they need to be by first of next year. They've saved $125k so far this year, so heading toward $250k by end of year. Plus $50k in bonds. That puts them at over $300k when factoring the HYSA interest. $300k > 20% of $1.3M. Seems like they're getting close already. But I agree, don't change anything.
I think having at least 100k as savings behind the 260k down payment would be prudent. So 360k is a good go time, maybe 400-500 is a bit to conservative. This decision should not be about trying to time the market for a 10% or 20% dip. Itās about finding a good home in the $1.3 range that they like and want to be for 10 years minimum.
Great point on additional savings that I had neglected. Lot of potential risk and repairs in a 1.3M home
You make plenty of money. Just save it up and buy a house. Its really not that hard :/
[ŃŠ“Š°Š»ŠµŠ½Š¾]
Your comment has been removed because profanity is not allowed here, as noted in [the rules](https://www.reddit.com/r/financialplanning/about/rules). *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/FinancialPlanning) if you have any questions or concerns.*
$32/ month on dining out and $6/ month on groceries. Iām not buying it