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need some support
Old 01-07-2006, 09:26 PM   #1
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need some support

We have been maxing out the 457 plan for the last few years, and are up to 80K. The funds are in S&P500 index, small cap index and an international index fund. We have had some home improvement needs and have a equity loan that covered a roof repair, high efficiency furnace and new flooring. I had to skip a few 457 payments to get us back out of cc debt, we will be clear again next month. But then should I pay off the $30K home equity at 6.75% or max the 457? I am almost ready to focus on paying off the equity and the mortgage to get a little security, work sux and if I didn't have the mortgage/home equity debt service to pay I could work part time and cover our frugal living expenses.

I have been off of the ER forum for a while (hello everyone) but the good news is the plan has been on autopilot, other than the roof repair. I think I know the answer (continue maxing the 457) but sometimes have a gnawing feeling that I should be picking stocks or doing something for better return.

So in other words, I am kind of searching for the right path, stay the course with the 457, pay off the house, or start learning to invest in the stock market. Vital statistics: 44 years, US$80K in the 457, maybe total 120K total assets with home equity. Maybe $8k additional in emergency and savings.


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Re: need some support
Old 01-08-2006, 09:52 AM   #2
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Re: need some support

You have a 457, I assume that you are a state or local worker so you probably have a pension plan? What will that be when you retire?
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Re: need some support
Old 01-08-2006, 10:30 AM   #3
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Re: need some support

Quote:
Originally Posted by Skylark
But then should I pay off the $30K home equity at 6.75% or max the 457?

I think I know the answer (continue maxing the 457) but sometimes have a gnawing feeling that I should be picking stocks or doing something for better return.
Statistically speaking you are better off picking your asset allocation (as you are doing now in 457) and not individual stocks.

Quote:
So in other words, I am kind of searching for the right path, stay the course with the 457, pay off the house, or start learning to invest in the stock market. Vital statistics: 44 years, US$80K in the 457, maybe total 120K total assets with home equity. Maybe $8k additional in emergency and savings.
Well - you are already investing in the stock market.
As far as paying off the house vs. maxing 457 - it depends - this question was discussed several times in the past and you might want to search the forum.
I probably would continue to max 457 and try to see if I can find some "spare" money in the budget to pay heloc little faster.

sailor

PS: If I remember correctly we are aiming to retire about the same time - in about 12 years, but for DW a Tanzer 28 would be to small of a boat for a liveaboard. We are thinking about a medium size older catamaran, like EndeavourCat 30 or Gemini 3000/3200/3400 (depending on the size of the family at the time of FIRE).
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Re: need some support
Old 01-08-2006, 11:00 AM   #4
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Re: need some support

Quote:
Originally Posted by maddythebeagle
You have a 457, I assume that you are a state or local worker so you probably have a pension plan? What will that be when you retire?
Yes, I also have a pension plan, at age 60:about 2% per year of service payoff on the last 5 years average annual income. I have 10 years in. My better half has earned a German gummint pension as well, it will not kick in until age 65 or older, they are changing the rules on us.

The 457 is to be able to break free early, as a bridge until the pension kicks in and as a supplement to the pension later on.

The pensions are why I am not doing bonds, I figure I already have the security funds taken care of.
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Re: need some support
Old 01-08-2006, 11:07 AM   #5
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Re: need some support

Quote:
Originally Posted by sailor

PS: If I remember correctly we are aiming to retire about the same time - in about 12 years, but for DW a Tanzer 28 would be to small of a boat for a liveaboard. We are thinking about a medium size older catamaran, like EndeavourCat 30 or Gemini 3000/3200/3400 (depending on the size of the family at the time of FIRE).
My wife is not a happy sailor due to knee and balance problems so the Tanzer is my toy. I am setting it up to liveaboard but it will be more of a summer trip thing than a permanent journey. Its been a long winter, I can't wait to get it back in the water! Counting down the days. A cat would be nice but it wouldn't fit into a slip around here. The T28 is a good great lake boat or coastal sailor. I dream but I'm not sure I would take it out to Bermuda-Azores-Mediterranean.
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Re: need some support
Old 01-09-2006, 04:38 PM   #6
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Re: need some support

I assume a 457 is like a 401k? If so you are better off putting money there than in your mortgage (assuming you actually get the deduction). You are also very unlikely to beat the tax savings by investing in your own stocks. This assumes your 457 has reasonable expenses, etc. You could also consider putting some money in a Roth.

However, it always makes me nervous when someone has all their savings / investment in tax-deferred plans. I like tax deferral as much as the next guy, but it seems to me that you want the flexibility of having some money in regular taxable accounts.
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