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Where to put the money
Old 02-03-2018, 05:40 AM   #1
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Join Date: Jan 2018
Posts: 15
Where to put the money

I am having a hard time wrapping my brain around the best strategy for investing with an early retirement. Please help!

Me: 31; 180,000 in a Roth IRA
Husband: 41, 170,000 in Traditional IRA and $18,000 in 401k
Joint: 45,000 in stocks and 50,000 in cash (that needs to be invested)

We will be coming into about $300,000 in additional liquid assets in the next couple months. We also own a home thatís worth about 230,000 with 200,000 left on mortgage. I will have a pension of about $1500/mo that will kick in when Iím 62 and hubby will have a $400/mo that will kick in at age 65.

We have about $50,000-$60,000 per year that we can invest with potential to increase. We are in the 22% tax bracket as of Jan 1.

The plan is to buy a towable tiny house or trailer in about 3 years to move into while still working and then to ďextremeĒ early retire to traveling 2 years after that when Iím 36 and husband is 46 (if the numbers work). The strategy is obviously going to depend on keeping income low after retirement to take advantage of health care subsidies and low or no tax liability.

Our current investment strategy has been to fully fund husbands 401k and IRA each month since he will hit 60 sooner and then dump $200/mo in stocks and $50 in a 529 for the kids (ages 4 and 6). Now we need to figure out what to do with all the leftover we have each month. I donít get a company match on my 403b.

What would you do with theinvestable money?

Some other current points of discussion:
1) Sell or rent house when we move out (obviously a sale would help keep our monthly income lower when we retire but renting may help us bridge the gap between now and when hubby is 60) (interest rate is 3.5% and monthly mortgage is $1300 on 23 years remaining of a 30 year fixed)
2) Should we focus on funding my tax advantages accounts or put money into stocks since it will be quite a few years before we can use them(without getting creative) I should also be coming into quite a large inheritance (1-2 million) at some point in the next 10-20 years assuming no major catastrophe. We prefer not to make that a major part of what we count on since the egg hasnít hatched yet.

Other considerations? Iím trying to learn more about how to pay the least amount of taxes but that seems to be the area where I am more ignorant (suggestions on references would be helpful). Thanks!

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Old 02-03-2018, 06:02 AM   #2
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Finance Dave's Avatar
Join Date: Mar 2007
Posts: 1,213
Not sure I'm the best person to give you an overall answer...but one thing I recommend is getting as much in a Roth IRA as you can. This provides "tax diversification", meaning that if you begin in retirement to bump up against a higher tax bracket you can take some out from the Roth to avoid moving into that bracket.

Also, given your relatively short timeframe for some of this money (it appears you'll need it in 5 years or so, correct?), you'll want to ensure much of it is in a relatively "safe" place...not equities. Unfortunately I don't see a lot of high-return, "safe" investments today...but that is slowly changing as interest rates rise.

I don't know what the interest rate is on your mortgage, but one thing you might consider is paying it off. That gives you a "guaranteed" return of the rate on the loan. This would then free up money each month that you could save, and would avoid all the interest on the loan that you would otherwise be paying.

You should commend yourselves for starting young and having saved as much as you have so far. Planning is key and you're doing that as well.

Good luck!
"Live every day as if it were your last, and one day you'll be right" - unknown
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