Wanted to get y'all's opinions on the below if we are in the right range. Getting married soon and thinking through what will be our budget. Both 26 years old will be DINKs. No credit card or student loan debt, only debt will be 2 vehicle payments. All %s are in reference to our post-tax monthly take home income

Both contributing 401k to employer matches (total contributions, including employers' contributions, about 9%)
Maxing Roth IRA (about 12%)
Emergency fund 1%
Taxable brokerage account 1%
High yield savings for home down payment in ~18-24 months, market dependent, 20%
Monthly rent 23%

Rest of the budget is groceries, gas, vehicle payments, auto insurance, utilities, fun spending money, giving, etc

So a little over 40% of our monthly income to savings with a little over 20% being retirement savings. About 23% to rent.

Advice on these %s? In a good spot? Save more? Less? I have been maxing out my Roth for almost 4 years and contributing to 401k at employer match for the same time period. She has been contributing a little over 401k match for a little over 2 years.

Thanks!

What Buck said. Kids and a stay at home mom for a while can change things.

But y'all are so far ahead of the game already! Keep saving the way you are and do not save more. Before you have kids you and your wife do some travel or fun things together whatever that may be. Don't over focus on the numbers, percentages, and comparison games.

Enjoy life some along the way.

"Both 26 years old will be DINKs"

Just planning significant savings puts you ahead of most folks. I was in a similar situation 22 years ago.

• Save first and do so automatically (401k / direct deposit into a separate savings / brokerage account).
• Find a good book on investing - 'The Simple Path to Wealth' by JL Collins is a great one
• If you do plan to eventually have kids, buy a house you can still afford on one income in a few years. You'll likely trade up on house as you go and as your income grows - you don't need the perfect place immediately
• Keep 3-6 months in money market account - you'll sleep better and will be able to handle the inevitable unplanned expenses without stressing

It' amazing to watch the power of compound interest. Make your plan, save consistently (and enjoy life with what's left after all the automations). Try to avoid lifestyle inflation.

But really - you're doing a great job!

cannot overstate the value of the direct deposit to investment account strategy. figure out your budget: rent, food, cars, charity, fun, insurance, etc. Set your system up to send THAT amount to your checking, then the rest to investment account. then when you get a raise/bonus bump your fixed checking number, and keep the overflow to investments. at some point in life, sometime during the year, you'll be maxing your SS and 401k contributions, so your take home goes up - but with the overflow plan, it all goes to the investment account. thats not to say you cant/shouldnt spend the money that goes there if you need to splurge on something - but the extra effort to get at it might make you give it a second thought.

i preach this to all of my employees (and colleagues).

TxAger said:

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"Both 26 years old will be DINKs"

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Never fails.

OP: "I'm looking for a strategy that does not include bonds."

By the 3rd post: "Here is a strategy that totally relies on bonds."

If your both in your mid-20s, I think your specific %s are less important than the following:
- don't stop contributing, even if things get tight
- don't pull from your retirement accounts, even if things get tight
- don't let your lifestyle creep simply because your income goes up

Somebody with "non-ideal" allocations who starts contributing in their mid-20s and never stops is going to be so much further ahead than somebody starting in their mid-30s with the "perfect" % allocations.

That's why most of my advice is about letting it ride and never stopping your contributions.

40% savings rate will put you on track to retire in about 20 years maybe sooner. Even if you can't maintain that level it's great to front load your retirement like you guys are because those dollars will compound a lot and even if you have to take your foot off the gas in when you buy a house or something in the future those dollars will continue to snowball. Great work

Don't forget to enjoy your money along the way. I was in similar boat when I was 20. I saved 50% from 22-35 and now am at around 25%. I missed out on a lot of life experiences(not things, there is a huge difference) with friends and family because I put saving ahead of experiences. At 43 now, I am in the double comma club and will retire early, but I would 100% have done things a little different earlier on.

The biggest thing will be ensuring you both stay on the same page, especially starting out. You plan is reasonable, stick to it and you'll be in good shape.

When people say to make sure you still live a little, the biggest thing on that point would be to actually figure out what matters to you. Too many people just spend on things/experiences because that is what they're "supposed" to do for fun.

Think about what you legitimately would do day to day if you didn't have to work, not just bucket list retirement things. Sit down together and figure that part out together and it will help guide you on spending.

No one recommended investing all in WWR? (Don't do that)

I generally agree its a good idea to have a mix of account types (i.e. traditional, Roth and after tax). Its really not that hard to get to your traditional IRA early without penalty if you retire early. You can transfer a portion of your traditional IRA to a separate IRA and set up a 72(t) distribution plan.

i.e. if you are 50 years old and have 1 million in your 401k and want to retire using the 4% rule you can roll it to a traditional IRA then split it to two separate IRAs. For a 50 year this would look like setting up two IRAs, one with 665k and one with 335k. If you started 72(t) distribution on the larger account, that would require you to withdrawal about 40k a year (using single life amortization and 5% rate assumption) which you would still owe tax on, but no early withdrawal penalty. If you end up needing more a few years in retirement you can carve off another chunk of your smaller IRA and set up another 72(t) distribution. Lots of brokerages let you set up IRA's with automatic distributions so you can just set it to annual withdrawal the amount you are required to take out every year.

The reason a lot of advisors don't recommend it is because it does require you to stick with it for every year until you turn 59.5 or else everything you have withdrawn previously becomes subject to the early withdrawal penalty. You can easily set it up with broker that does the withdrawals automatically for you every year and just not touch it any you will be fine. I only bring it up because I often see people say they are waiting to 59.5 to retire because they can't get to their money without penalty but in reality its really not that hard.

gggmann said:

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I would add more to your taxable account. I think people underestimate the flexibility it gives them, especially if considering early retirement.

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Yep, i retired early so having taxable to draw from is a necessary bucket in the order of operations when it comes to what you withdrawal and from where.

I'm not a big fan of 72t due to the fact that you are locked in and lose flexibility. As you mentinoed, if you split accounts then you can control that to some degree.

Also, one additional benefit of having a sizeable taxable account is that it allows you to pay for Roth conversions outside of the conversion.

Depending on your goals and likely career path and future earnings, the 40% sounds great. That's on path for the option to retire early, or at least enjoy the benefits of financial independence.

A bit of advice I'd give my 26 year old self, keep your money invested. Don't build up too much in cash because you think the market is too high. Being overly conservative is as bad as being too aggressive, and possibly worse IMO.

permabull said:

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I generally agree its a good idea to have a mix of account types (i.e. traditional, Roth and after tax). Its really not that hard to get to your traditional IRA early without penalty if you retire early. You can transfer a portion of your traditional IRA to a separate IRA and set up a 72(t) distribution plan.

i.e. if you are 50 years old and have 1 million in your 401k and want to retire using the 4% rule you can roll it to a traditional IRA then split it to two separate IRAs. For a 50 year this would look like setting up two IRAs, one with 665k and one with 335k. If you started 72(t) distribution on the larger account, that would require you to withdrawal about 40k a year (using single life amortization and 5% rate assumption) which you would still owe tax on, but no early withdrawal penalty. If you end up needing more a few years in retirement you can carve off another chunk of your smaller IRA and set up another 72(t) distribution. Lots of brokerages let you set up IRA's with automatic distributions so you can just set it to annual withdrawal the amount you are required to take out every year.

The reason a lot of advisors don't recommend it is because it does require you to stick with it for every year until you turn 59.5 or else everything you have withdrawn previously becomes subject to the early withdrawal penalty. You can easily set it up with broker that does the withdrawals automatically for you every year and just not touch it any you will be fine. I only bring it up because I often see people say they are waiting to 59.5 to retire because they can't get to their money without penalty but in reality its really not that hard.

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don't know enough about this to understand what advantages it would have over just Roth laddering, assuming you had taxable funds avail to bridge the 5year gap

chris1515 said:

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Depending on your goals and likely career path and future earnings, the 40% sounds great. That's on path for the option to retire early, or at least enjoy the benefits of financial independence.

A bit of advice I'd give my 26 year old self, keep your money invested. Don't build up too much in cash because you think the market is too high. Being overly conservative is as bad as being too aggressive, and possibly worse IMO.

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Bingo. My net worth would be a lot higher today if I didnt keep so much in cash when I was younger. I was afraid to go all in. I see this same mistake a lot from a lot of younger investors who are new to investing.

We did 65%. At that rate, your savings and retirement accounts end up making more than you do after a few decades. Once we had kids, that set our retirement date. If we stayed DINKers, we could have retired in our 40's. Glad we did the kids though. That was/is totally awesome. On the other end, it's great when the kids grow up and you become DRINKers, double retirement income no kids…d8)

If I could do anything different in my early/mid 20s, I would have regularly put money in stocks. Instead I just had 401k.

In my mid 30s, I started buying stocks. AAPL, amzn, nflx, goog, cost, mutual funds, and many of these are 4/5/6x what it was when I first entered.. a few of them are 10X.

Had I done that a decade earlier, I'd be looking at 20x or more for many of them.

Even $100 a week can go a long way over a few decades. Just be sure to diversify. The key is regular contributions, don't worry about what the market is doing.

My advice:

You are already doing better than 95% of people out there, so pat yourself on the back.

Watch standard of living creep. As others stated kids and unseen challenges change things. Be okay with that, but try to mitigate spending creep as beat you can. The type of car ypu drive won't change your overall happiness. Doesn't mean you have to drive a beater or the cheapest car, but maybe the swcond cheapest or the middle of the road. Maybe a road trip to Branson or South Dakota works as well as a Disney vacation. Maybe ot doesn't, but dont feel obligated to spend tons of money.

Plan for bridge money. That's the money you'll use if you want to retire before retirement age. ROTHs can be that vehicle. If you have extra a taxable brokerage account is great for that.

Risk manage but diversify and think about timelines. How can you add real estate exposure and when is a good time to do that. Don't go all in on crypto coins, but maybe you want some exposure there. Dont bust playing earnings or 0 Dte options. It's okay to add a little leverage when it feels right but be mindful of allocation unless you are in etfs like qqq or large market funds. If you are starting to save now you'll be fine with normal returns.

Find a hobby you and your wife can share. Gardening or cooking or jogging, biking, swimming together. Just something you both enjoy and try to keep it up even if limited, after you have kids.

Buy your wife flowers at least 5 times per year when it's not Valentines day, her birthday, or your anniversary. Nothing huge, but a flower or small bouquet unexpected goes a long way.

AggieFrog said:

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The Silverback said:

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Most people don't want to talk about this, but those % don't mean much with out significant income. Prioritize increasing income over everything else.....If you keep your spending in control, income will be your best friend, not your 401k

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Define significant income. You can easily retire with $4M+ by age 60 and never make more than $200k/year (all in today's dollars). Higher income helps so long as you don't succumb to an inflated lifestyle (which far too many do).

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Its relative, but point is more geared towards people spending more time and energy worrying about increasing their income. A lot of people spend so much time and energy penny pinching when income is what gives you freedom, not saving all your life so you can retire on fixed income.

The Silverback said:

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AggieFrog said:

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The Silverback said:

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Most people don't want to talk about this, but those % don't mean much with out significant income. Prioritize increasing income over everything else.....If you keep your spending in control, income will be your best friend, not your 401k

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Define significant income. You can easily retire with $4M+ by age 60 and never make more than $200k/year (all in today's dollars). Higher income helps so long as you don't succumb to an inflated lifestyle (which far too many do).

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Its relative, but point is more geared towards people spending more time and energy worrying about increasing their income. A lot of people spend so much time and energy penny pinching when income is what gives you freedom, not saving all your life so you can retire on fixed income.

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But you can much more easily control your spending than you can your income. In fact, you are 100% in control of your spending.

If we could simply 'control' our income, we'd all be making millions of dollars.

Bob Knights Liver said:

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Maybe a road trip to Branson or South Dakota works as well as a Disney vacation. Maybe it doesn't, but dont feel obligated to spend tons of money.

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These are literally two road trips we took this year! What a coincidence.

Well, not really Branson, it was Kimberling City.. but table rock lake area. We go there every summer with 2 other families and always have a great time with the resorts that have the large home rentals.

lodell22 said:

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only debt will be 2 vehicle payments

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Obligatory

I never really understood the pay cash for cars thing. Let's say you are eyeing a car at the $25k price point.

If you buy the car in Jan 2025 and finance $25,000 @ say 6% for 5 years, you pay $483 a month. So at end of 60 months you've paid $28,980.

The average rate of inflation for vehicles from 2024 to 2025 was 2.17%. So after 5 years, that's 11.3%.
So that $25k car in 2025 would hypothetically be $27,825 in 2030, which means you'd need to have saved $463/mo for those 60 months to have the cash in 2030.

So instead of financing, you'll save $20/mo in exchange for waiting 5 years to buy the car. Change that interest rate to 5%, and that difference is about $8/mo.

Your breakeven is about 4.4%. So if you get less than that for financing, you're actually spending more money for the car if you save up cash.

I have 0% loan on my truck, so if I saved my monthly payment for 5 years and bought cash, I wouldn't have enough to get the same truck I have today. I'd have to settle for less.

Seems like stupid advice and only really makes sense if you're up the double digit % rate for financing.

10andBOUNCE said:

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I don't disagree with your math, however paying with cash will more than likely affect how much you ultimately decide to spend on vehicles. Of course in a vacuum if you would buy a $20k car no matter what method of payment, your way works just fine. But my guess is that the average American is fine spending $75k on a new F150 that is financed, even with a low rate. That same person would maybe only want to stomach spending $30k cash on a used truck. SO, I think that factor should be applied to your break even analysis.

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but a used truck that is 1/2 cost of new is ~5 years old, so it won't last as long as a new truck. So now you're buying two 5 year old used trucks in that 10-12 year span; whereas a new truck would last the entire time.

You can't say buying a 5 year old truck and a new truck has the same life span.

A 5 year old Tundra will easily last longer than a new F150