What is next for us?
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- Posts: 106
- Joined: Fri Dec 02, 2016 12:08 pm
What is next for us?
Hi Everyone,
I like to touch base with this community everyone once in awhile to make sure we're on track. I'm wondering what's next for my wife and I in terms of saving, retirement, etc. Here is a snapshot of where we are today:
Ages: 37/37
Children: 1 (2.5 years old)
Gross HH Income: $175,000
529 Plan: Contributing $250 per month ($16,600 balance currently)
HSA: $11,200 balance (contribute $2200 per year currently and employer dumps in $1200 per year)
Mortgage: $328,000 left (29 years left on 30 yr. @ 2.875% - recently refinanced)
Cash: $75,000 (Represents 16 months of HH expenses)
Retirement:
-401K (me): $153,000 (contributing 15% and getting 5% match)
-401K (her): $45,000 (contributing 10% and getting 3% match)
-Roth IRA: Balances: $55,000/$20,000 both maxing ($500 each per month)
No other debt besides mortgage
We typically have $2,500 left over each month, which we had been putting towards paying off our 2020 Honda Pilot. Now that it's paid off, where do we redirect this money? To me, the options are:
- Work towards maxing 401K contributions? I think this would reduce combined take-home pay by approx. $1000 a month
- Add more to HSA?
- Add more to 529?
- Pay additional on mortgage?
What do you all think? Thanks!
I like to touch base with this community everyone once in awhile to make sure we're on track. I'm wondering what's next for my wife and I in terms of saving, retirement, etc. Here is a snapshot of where we are today:
Ages: 37/37
Children: 1 (2.5 years old)
Gross HH Income: $175,000
529 Plan: Contributing $250 per month ($16,600 balance currently)
HSA: $11,200 balance (contribute $2200 per year currently and employer dumps in $1200 per year)
Mortgage: $328,000 left (29 years left on 30 yr. @ 2.875% - recently refinanced)
Cash: $75,000 (Represents 16 months of HH expenses)
Retirement:
-401K (me): $153,000 (contributing 15% and getting 5% match)
-401K (her): $45,000 (contributing 10% and getting 3% match)
-Roth IRA: Balances: $55,000/$20,000 both maxing ($500 each per month)
No other debt besides mortgage
We typically have $2,500 left over each month, which we had been putting towards paying off our 2020 Honda Pilot. Now that it's paid off, where do we redirect this money? To me, the options are:
- Work towards maxing 401K contributions? I think this would reduce combined take-home pay by approx. $1000 a month
- Add more to HSA?
- Add more to 529?
- Pay additional on mortgage?
What do you all think? Thanks!
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- Posts: 12277
- Joined: Wed Jan 11, 2017 7:05 pm
Re: What is next for us?
Definitely max 401k and HSA as top priorities. I believe you can still do 2020 contributions for HSA so get on it!
Once all retirement accounts are maxed, I would start doing taxable account. Unless you are extremely debt averse, long term returns will beat paying off the mortgage. Consider paying off the mortgage at a future point when your taxable account exceeds the mortgage balance plus any liquidity you need to feel comfortable.
Once all retirement accounts are maxed, I would start doing taxable account. Unless you are extremely debt averse, long term returns will beat paying off the mortgage. Consider paying off the mortgage at a future point when your taxable account exceeds the mortgage balance plus any liquidity you need to feel comfortable.
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- Posts: 106
- Joined: Fri Dec 02, 2016 12:08 pm
Re: What is next for us?
Thank you, Aristotelian!
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- Posts: 4284
- Joined: Thu Apr 23, 2020 12:44 pm
Re: What is next for us?
I agree...definitely max the HSA and 401ks.
Your cash holdings seem a little high. Does this also include planned short-term spending? If it's all just a cash reserve/emergency fund, I'd reduce to 12 months of expenses at most, so $60k.
If needed, you can use the extra cash to max the tax-advantaged accounts (if you don't have enough take home income to pay regular expenses after increasing contributions to HSA/401ks, you can live off the cash).
If you have money after maxing the HSA and 401ks, then maybe think about adding more to the 529 up to any the state tax benefit.
Your cash holdings seem a little high. Does this also include planned short-term spending? If it's all just a cash reserve/emergency fund, I'd reduce to 12 months of expenses at most, so $60k.
If needed, you can use the extra cash to max the tax-advantaged accounts (if you don't have enough take home income to pay regular expenses after increasing contributions to HSA/401ks, you can live off the cash).
If you have money after maxing the HSA and 401ks, then maybe think about adding more to the 529 up to any the state tax benefit.
Re: What is next for us?
+1aristotelian wrote: ↑Fri Feb 05, 2021 11:54 am Definitely max 401k and HSA as top priorities. I believe you can still do 2020 contributions for HSA so get on it!
Once all retirement accounts are maxed, I would start doing taxable account. Unless you are extremely debt averse, long term returns will beat paying off the mortgage. Consider paying off the mortgage at a future point when your taxable account exceeds the mortgage balance plus any liquidity you need to feel comfortable.
Global stocks, US bonds, and time.
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- Joined: Wed Dec 18, 2019 8:17 pm
Re: What is next for us?
Max 401 (pre tax and after tax if you have it)cashisking500 wrote: ↑Fri Feb 05, 2021 11:52 am Hi Everyone,
I like to touch base with this community everyone once in awhile to make sure we're on track. I'm wondering what's next for my wife and I in terms of saving, retirement, etc. Here is a snapshot of where we are today:
Ages: 37/37
Children: 1 (2.5 years old)
Gross HH Income: $175,000
529 Plan: Contributing $250 per month ($16,600 balance currently)
HSA: $11,200 balance (contribute $2200 per year currently and employer dumps in $1200 per year)
Mortgage: $328,000 left (29 years left on 30 yr. @ 2.875% - recently refinanced)
Cash: $75,000 (Represents 16 months of HH expenses)
Retirement:
-401K (me): $153,000 (contributing 15% and getting 5% match)
-401K (her): $45,000 (contributing 10% and getting 3% match)
-Roth IRA: Balances: $55,000/$20,000 both maxing ($500 each per month)
No other debt besides mortgage
We typically have $2,500 left over each month, which we had been putting towards paying off our 2020 Honda Pilot. Now that it's paid off, where do we redirect this money? To me, the options are:
- Work towards maxing 401K contributions? I think this would reduce combined take-home pay by approx. $1000 a month
- Add more to HSA?
- Add more to 529?
- Pay additional on mortgage?
What do you all think? Thanks!
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- Posts: 1712
- Joined: Wed Nov 05, 2014 2:23 pm
Re: What is next for us?
I'd stop contribution to the 529 and max out your 401K for a couple reasons, the first two being speculation.cashisking500 wrote: ↑Fri Feb 05, 2021 11:52 am - Work towards maxing 401K contributions? I think this would reduce combined take-home pay by approx. $1000 a month
- Add more to HSA?
- Add more to 529?
- Pay additional on mortgage?
What do you all think? Thanks!
1) There is a major push for free college and forgiving student loans.
2) There is not a major push to lower the social security age or increase payout.
3) You save more in federal tax by increasing your 401K contribution.
Now knowing your $175K split and not factoring in any other deductions outside of the 401K contribution...
Person 1 salary: $87,500, 15% contribution of $13,125. Net $74,375.
Person 2 salary: $87,500, 10% contribution of $8,750. Net $78,750.
Combined Income: $153,125 - $25,100 standard deduction = $128,025 combined income.
Federal tax bill: $19,600
State tax bill (5.3%): $8,300
Contribution $3K to 529 saves about $150 in state tax.
Total tax: $27,750
Maxing out 401Ks....
Person 1 salary: $87,500, 15% contribution of $13,125 + the $3k 529 money. Net $71,375
Person 2 salary: $87,500, 10% contribution of $8,750. Net $78,750.
Combined Income: $150,125K - $25,100 standard deduction = $125,025 combined income.
Federal tax bill: $19,000
State tax bill (5.3%): $8,100
Total tax: $27,100
Just moving that 529 tax $$ saves you an additional $650 in tax each year.
If you both maxed out your 401K ($19.5K each), would drop to $23,200...another $4.5K in tax savings.
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- Posts: 2438
- Joined: Thu Feb 08, 2018 12:20 pm
Re: What is next for us?
Definitely max out your 401k's and HSA. My wife and I have been doing that the last several years, are 36 years old, and make about the same income as you and we now have about $800k combined in our 401ks, IRAs, HSA, and brokerage account. Granted, we did invest $80k in the stock market back in March 2020, so that helped a lot, but still a pretty close comparison point for you.
Re: What is next for us?
+2. This is what I would do, too.3funder wrote: ↑Fri Feb 05, 2021 12:23 pm+1aristotelian wrote: ↑Fri Feb 05, 2021 11:54 am Definitely max 401k and HSA as top priorities. I believe you can still do 2020 contributions for HSA so get on it!
Once all retirement accounts are maxed, I would start doing taxable account. Unless you are extremely debt averse, long term returns will beat paying off the mortgage. Consider paying off the mortgage at a future point when your taxable account exceeds the mortgage balance plus any liquidity you need to feel comfortable.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
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- Posts: 106
- Joined: Fri Dec 02, 2016 12:08 pm
Re: What is next for us?
Thanks all! I bumped my 401K up to max contribution for this year and will look to do the same for HSA