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Intro and couple questions
Old 10-17-2013, 08:47 PM   #1
Confused about dryer sheets
 
Join Date: Jun 2013
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Intro and couple questions

New here, been reading for a while, and had a few questions.

A little info about me first, I am 34, married with a 2yr old. DW stays at home, I make around 100k, and have just hit the 100k mark in my roth, 401k, and traditional rollover ira. Happy about that, but feel I am a little behind.

I have 80k of about 150k left on my house (not making any extra payments currently). I have been trying like mad to pay down all debt (school, cars, credit cards) I have about 20k left total.

My question, I am about to inherit about $40k, obv I am going to pay down the 20k in debt, then I want to put the rest in retirement. My question is after I am debt free, how many of you would pay extra on the house or do anything else differently? How much would/do you guys consider good savings % for retirement. I am thinking I'll do around 25%, but could maybe do more if I didn't pay extra on my house. What seems to be an average or standard savings %? I only currently do 15% as I have been focusing on paying debt.

Another question, do any of you young dreamers buy ind stock, or do you stick with 401k's, roths, mutual funds/index funds? Is that plenty for someone my age? Do I even need to worry about owning anything else. I have been lucky on my only 2 stock purchases of my life (Netflix when it went way down, and APPL in the 300's) I know I won't likely keep getting those returns, but I do enjoy the fun I get (kind of a gambler by nature )

thanks for any info, enjoy the site so far.
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Old 10-18-2013, 11:00 AM   #2
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Welcome! The "should I pay off the mortgage?" question had been debated here for years. There are good arguments pro and con. Use the search tab at the top of the page.

I'd be prone to using the money I used to spend on debt to increase retirement savings but that assumes the mortgage is at a current low rate. Others will be along shortly to offer their perspectives.
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Old 10-18-2013, 11:54 AM   #3
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I would only use the money to pay off your debts if the rate is higher than what you could reasonably get by investing the money. Same goes for your mortgage, especially since the interest is deductible. Here are a few ideas for the inheritance:

1) retain for a rainy day fund (if you don't have one)
2) fund Roth IRAs for you and spouse
3) fund 529 plan for college
4) fund HSA if you have a high deductible health plan
5) invest in non-retirement accounts

Generally, 15% is a good retirement savings target for someone who wants to retire at a "normal" retirement age. 25% or more is better if you want to FIRE younger. Of course, it all depends on your retirement spending target, so these are just rules of thumb that might be helpful.
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Old 10-18-2013, 08:42 PM   #4
Confused about dryer sheets
 
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Thanks for the info. Can my wife do a ROTH IRA without working, I thought she had to at least have some income? And if so, what is the minimum she has to make before I can max one out for her?
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Old 10-18-2013, 09:04 PM   #5
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Even if she doesn't work you can make spousal contributions to her Roth IRA, generally for the same amount you can contribute.

Quote:
Generally, individuals who are unemployed are not allowed to contribute to retirement accounts such as IRAs because they do not have eligible compensation. However, there is an exception for individuals with spouses that are employed and meet certain requirements. The employed spouse is allowed to make an IRA contribution on behalf of a non-working spouse or a spouse who has little income. These contributions are referred to as "spousal IRA contributions". Here we review the eligibility requirements for making spousal IRA contributions.

Eligibility Requirements

To make a spousal IRA contribution, you must meet the following requirements:
  • You must be married.
  • You must file a joint income-tax return.
  • You must have compensation or earned income of at least the amount you contribute to your IRAs.
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Old 10-18-2013, 09:06 PM   #6
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Sketch out your savings and retirement needs using Quicken Lifetime Planner (included in Quicken Deluxe and higher). That will give you insight as to whether you are saving enough.
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Old 10-18-2013, 10:10 PM   #7
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The Bogleheads wiki has a good discussion on paying down the mortgage vs. investing the money. When in doubt, you can always split the difference and pay off up to half your mortgage and invest the rest.

Paying down loans versus investing - Bogleheads

Our mortgage is 3.5% and I suspect as fixed income rate rise over time it would be better to not pay it off unless we sell the house.
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Old 10-18-2013, 10:27 PM   #8
Confused about dryer sheets
 
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Thanks for the info, good to know about the spousal contribution. Perfect for my situation, as most of my savings is in taxable accounts. I need to catch up with my Roths. Also I'll check out the links. Thanks again.
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