New job, how hard can I save for retirement?

Submitted by charbroil95 t3_10om1fs in personalfinance

This week I'm starting my first big girl job with benefits after years of making maybe 25k doing seasonal work. Current financial situation: I'm 27F, rent a house with my partner, own my car, no debt, unmarried with no kids and a spoiled dog. I have money from my grandparents: close to 100k in an index fund, plus cash gifts the last two years, 25k which is in a CD at my credit union earning 3.75% annual interest and 32k that just landed in my savings account alongside my 6k emergency fund.

At the new job my pre-tax salary is 60k and my employer offers 4% 401(k) contribution matching. Given my other assets, does aggressively saving for retirement for a couple of years while I'm young and don't have other big financial responsibilities make sense? If I save 32% pre-tax I'll be in a lower tax bracket and could then contribute maybe up to 5% to a Roth IRA at the lower tax rate (right up to the total annual contribution limit), with a remaining 38k (pre-tax) coming to me.

I have minimal expenses right now (<2k a month) and think I can manage fine on ~38k for a year or two but would like to buy a house in the next few years and have kids eventually. Also would like to replace my car which is 27 years old, worth less than 5k, runs well but typically needs $500-1000 in maintenance/repairs a year.

Can/should I save hard for retirement this year and also buy a car (<$30k) using the gift money from my grandparents? How about using the CD when it matures and part or all of the index fund to put a down payment on a house in a year or two? Or should I be saving more of my income as cash rather than planning on depleting my nest egg?

Last random question, when banks look at my income history for a home loan, will it look like I only earn 38k if 40% of my salary is going to retirement accounts?

3

Comments

You must log in or register to comment.

Tree09man t1_j6fhkmb wrote

401k and save 10-30% of all you make. Live on a fraction of your earnings. So if you make 50k, learn to live on 20k a year.

2

KReddit934 t1_j6fivs4 wrote

Sounds like you have a plan. Saving aggressively now,will really help. Way to go!

5

Upset-North-2211 t1_j6fmhg6 wrote

Save 4% in 401k to get the match, then 11% into a Roth account. If you invest like this in retirement accounts until your are 65, you will have millions. You don’t need to save harder for retirement.

Put any additional savings into your taxable brokerage account invest in an S&P500 index fund. This account can be for buying a house, a new car, vacations, etc.

You are in great shape. Save like above, but also live your life while you are young.

3

cautiousredhead t1_j6fp2j4 wrote

Save as much as you can for a few years so you don't have to worry about it later. Also I'd recommend reading the subreddits financial independence, coastfire, and maybe even fire if you're interested in early retirement.

1

Pretty_Swordfish t1_j6hvhck wrote

Save as much as you can. Look at the wiki for Order of how to do that.

For a home loan, they look at gross income, not net. You'll be fine there. Same for a car loan.

2