Where to put money?

[sirsavesalot]

Wife and I are 34 with two young kids. Wife stays home and I work. We got started late in life saving for retirement (last 5 years) and are now actively pursuing a very modest retirement at 50. Wife quit job 4 years ago to stay home. At the time I was making $48k and she was making $35k. Two job moves and a promotion and I'm now making around $105k, so the savings rate has increased a lot recently!

401k: $105,000
Roth IRA: $8000
HSA: $14,000
Pension: $18,000 (employer puts 12% in)
Checking and Savings: $20,000
Total: $165,000

Mortgage: Owe $95,000 15 year @ 2.875% (12 years left). House is worth ~$180,000.
No other debts.
Total with home principle: $250,000

Take home is about $5000/month after all deductions including health insurance. I'm currently maxing out my 401k and HSA. I plan on now maxing my Roth IRA as well. We started 529's for the kids last year and put $2000 in each. With the Roth IRA max, 529 and all other bills etc we have about $1500/month left over to save/invest. What I'm struggling with now is what to do with that money. My YTD return on my 401k is 2.7%. I'm ok with some risk but would prefer something a little more certain. I don't think the stock market is going to see a boost any time soon, maybe even a decline (who knows?!), so I've been contemplating putting the additional money on the mortgage to guarantee a 2.875% return. Talk some sense into me!

My wife does plan on going back to work in a few years when both kids are in school and doing something less stressful, maybe even part-time. I would guesstimate earning somewhere around $20-$25k/year. That would put us right around $70k/year savings plus ~$12k/year in my pension. Retirement at 50 doable? We sure hope so!

 

[cooch96]

Actually, if you're maxing out your IRA, your HSA, and your 401k, then paying off your mortgage sooner isn't crazy. But can you also find your wife's IRA? Do you have about 6 months of cash available for emergencies? I'd advise you cover those bases before tackling a sub-3% mortgage.

As far as what to put in your AA. Well, I see bonds as return free risk, but conventional wisdom seems to disagree with me on that one, so you should probably keep about 25-40% of your assets in bonds (but keep them in your tax sheltered accounts). I like REITs and Mid Cap Value funds, but that's just my preference. Sounds like you might prefer large cap dividend funds for the lesser volatility. Do some research and see how you want to weight your stock portfolio. Or, simply invest in a balanced fund, put your contributions on auto-pilot, check in once a year, and wait until you're rich. There's a chance we will all be so lucky.

The market does seem high right now, but most here are confident the bigger risk is trying to time when to get in.

Good luck!

 

[pb4uski]

I don't see paying down a sub-3% mortgage as a smart move. While stocks "seem" high, they have seemed high for some time. At your young age, equities is still the way to go since you have a long time horizon.

If you want to RE at 50, you need the return that stocks can give you so I would limit fixed income to 10% of your portfolio and then increase it beginning in your 40s.

Regarding your question as to whether 50 is doable.... have you tried out Quicken Lifetime Planner? That would be a good place to start.

 

[Rothman]

I don't see paying down a sub-3% mortgage as a smart move. While stocks "seem" high, they have seemed high for some time. At your young age, equities is still the way to go since you have a long time horizon.

If you want to RE at 50, you need the return that stocks can give you so I would limit fixed income to 10% of your portfolio and then increase it beginning in your 40s.

Regarding your question as to whether 50 is doable.... have you tried out Quicken Lifetime Planner? That would be a good place to start.

+1 at your age equities for sure needed to grow that fund

I'd grow emergency fund if one doesn't exist prior to mortgage payoff, if you have fund of 1 year expenses then grow after tax investments.




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