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Healthy savings rate or spend a little

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  • Healthy savings rate or spend a little

    Hi guys, I am curious if my target savings rate is healthy of overly aggressive and I should slow down and live a little.
    47, procedural specialist employed in NYC at a public safety net hospital, single income, married with two small kids (4, 8) in public school
    base salary is 324K, additional in house call adds 168K, additional at home call (rarely called in) adds 42K, variable 30-50K in bonus annually
    After taxes, health insurance through work, take home approximately 52% net
    Always max out 403B and have employer match of 10% of base (so 51K annually now)
    Retirement 403B is 1.3 million
    Taxable Stock accounts 2.07 million
    Home Equity is 569K downpayment (10/1 arm on 1.895 million home with 2.125% rate)
    Cash 358K

    Our annual expenses:
    Student Loan 6K($500 month--48k at 2.65 interest)
    Mortgage and Maintenance 45.6K ($3800 per month--interest only arm payment not paying down principal)
    Utilities 5K (electricity, cell phone, wifi)
    All other expenses 65K (vacation, groceries, summer camp, eating out, christmas presents, etc)
    Started 529 plan for kids last year with 5K in each annually.

    Large cost upcoming in 2 years
    Home renovation 500K

    After the past 2 years of working in the pandemic in NY, cancer diagnosis in family, I am feeling burnt out but feel pushed to continue to save around 200K/year to feel comfortable paying off mortgage when arm resets 2030 and paying for home renovation in the next 2-3 years. The in house calls (4 weeknights and 1 weekend 24hr) are getting pretty brutal, especially since I still do some clinical and administrative work the next day so a 28 hour workday once a week. It feels like I am on a hamster wheel and not enjoying time with family but feel anxious when I think of cutting back call or increasing expenses as that would decrease my annual savings. Coming from immigrant family, I would also like to leave behind some generational wealth for my kids but having a hard time feeling out a balance here.

  • #2
    Same age range, this is how we boiled it down
    Pick 2
    -Retire before 63
    -Lower Savings Rate and spend on lifestyle
    -Cut Back on call


    • #3
      What's your post retirement budget and plans for support to the kids throughout college/startup? those are the two main factors and you're already near FI with your current stated savings. No pension?

      IPS: Double check your math and budget goals.

      Burn out: risk is higher than not from your statement.

      Kids: The challenge of 40s and kids growing up with more dwell time demands if you want to be present. You get one shot with the younglings in that respect, so let that be your guide if kids are a priority.

      Family: 1st gen born always want to push it and represent the bridge generation of hard working parents. They sacrificed so we don't as much. Find that balance.

      -my take: good time to cut back to smell the roses with the family and lower the burnout risk. Find balance and rediscover enjoyment.


      • #4
        Thanks for the input.

        Post retirement hope to be mortage free, enjoying travel, etc. Since I will not need to save so much, will actually be able to enjoy the income. Probably need $100-$120k per year post retirement, without touching principal balance.

        I plan/need? to work until 65, so will have salary to pay for college expenses along with 529 with annual 5K per child contritbution and both kids have custodial brokerage account with 36K and 16K in it now that I top up every now and then.

        No pension.

        Mentally, I am pretty sure I need to cut back on call but as immigrant child, giving up income is very hard. I also know that the calls are not sustainable as I age--what I can withstand at 47 is not what I will be able to do at 55.

        Also the large home reno and mortgage are big drivers to maintain the status quo for now. We love living in NYC despite HCOL and my parents are here so geoarbitrage is not possible.


        • #5
          Why do you have an interest only ARM? This may end up not being a great idea.


          • #6
            At 2.125% it makes sense to leverage the money into the market and let it grow and either refinance in 10 yrs or payoff depending on rates then.


            • #7
              You need a financial plan or financial checkup, impo - not necessarily b/c you need to find out all of the things you are doing wrong, but for peace of mind about your path and future choices. However, I like the way Fullhouse11 boiled down their options.
              Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


              • #8
                overall you're doing very well, few odd things but you kind of know that.

                it's a bit tough to know exactly what your question is, you're making a ton of money but starting to feel burned out. at this point you are clearly trading call for future wealth.

                burnout definitely isn't going to improve w/ time, esp w/ in-house call + kids.

                potentially unpopular opinion but one that might help you a lot: you are probably pretty much already guaranteed to create some generational wealth.
                just think you've got $3M now. that's got 30 years to grow until you die. @7% (not a crazy assumption) that's $25M = $12M/kid.
                sure maybe the return will be much worse and it will be $5M/kid.

                what does Bernstein always say, when you've won the game quite playing?

                there is probably some balance here where you still make some extra money but don't hate life as much. given what you've said it sounds like dropping 1 call/mo sequentially until you feel better is the play. my guess is that if you got tired of the extra time they'd let you come back.


                • #9
                  Originally posted by savingdoc View Post
                  At 2.125% it makes sense to leverage the money into the market and let it grow and either refinance in 10 yrs or payoff depending on rates then.
                  For how long?
                  • Is that the initial fixed rate?
                  • What is the benchmark?
                  • What is the margin?
                  • When does it reset?
                  • How often does it reset?
                  • What is the reset cap?
                  • What is the lifetime cap?
                  The only thing worse than a interest only ARM is a negative amortization ARM. At least you are not doing that. I suggest you start paying some principal. This could blow up in your face.

                  Have you not been paying attention to the inflation surge or the Feds announcement that they will be raising interest rates this year. Economists are expecting 3 - 5 rate hikes this year and more in 2023. The Feds have been uncharacteristically slow to react. Powell really botched the response with his "inflation is transitory remarks. It is never good to behind the curve.


                  • #10
                    Originally posted by savingdoc View Post
                    At 2.125% it makes sense to leverage the money into the market and let it grow and either refinance in 10 yrs or payoff depending on rates then.
                    Understand the math. The potential is behavioral. Once you get that taxable up there, it really hurts to payoff a loan in big chunks. It will also lead to "need" to make more when you do decide to start paying it off. Finding a way to chip away at the principal in smaller bites is much easier. Consider once a year making a "compromise" and throwing some at the balance. Same "compromises" make the balance smaller in the future. Might say, cut the balance in half might work.
                    When you refinance, you will feel much better in ten years. That feeling could be very valuable.


                    • #11
                      My advice-

                      1. less call
                      2. more time with family
                      3. You’ve won life financially… just make sure you don’t regret winning 5, 10, 15 years from now. Who cares about your “arm in 2030”). Seriously.


                      • #12
                        You don't really need to keep contributing to retirement anymore so I'd max the 403b to save on taxes and call it good. Shovel everything else to the home reno fund this year and then cut out all the in house call. You don't need to pay off the house in 2030. You'll have a ton of equity by then and you can just refinance somewhere between now and then. You're totally fine financially. Jump off the hamster wheel in 2023.


                        • #13
                          at current age, kids in future may care more about the memories of spending time with you now than the additional million(s) you left them.
                          “. . . And the LORD spake, saying “First shalt thou take out the Holy 401k. Then shalt thou save to 20%, no more, no less. 20% shall be the number thou shalt save, and the number of the saving shall be 20%. 25% shalt thou not save, neither save thou 15%, excepting that thou then proceed to 20%. 30% is right out . . .””


                          • #14
                            home renovation seems like low hanging fruit - do you have to do that?


                            • #15
                              I think your house is a bit much for your salary. That's probably what's stressing you out. You have a lot of invested assets right now, but that would make me feel awful not seeing that mortgage principal change while only paying the interest. You've done well investing in the taxable account leveraging the 2.15% interest of your mortgage, but you have to consider if you would feel as good about your decision if there is a prolonged market downturn where your taxable account is down 10-40%. Those mortgage payments of $3800 per month/$45,600 per year aren't building your wealth/net worth and could easily be diverted to cutting back on taking call or working. If you want to go part time, I think that's the way to go, find ways to limit your required expenses so whatever income you have can cover your expenses while your investments continue to grow.