What is the best allocation for our money?
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Anonymous
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Here is our basic information. DH and I are in our mid-30s and have 3 kids. We bought our house for about 850k and have about a 550k mortgage. 3 kids are in private school and we own 2 cars outright. Total college savings is approx. 78k (the kids are all between ages 4 and 7). We pay 600 per month in student loans and have saved approx. 320k in retirement. We have about 90k invested in a joint account and keep around 30k in the bank for bills, etc.
My question is: if we were to find ourselves with 5 or 10 extra thousand dollars, would we be better off putting it in our joint investment account? 529s? Putting toward the mortgage? (We already get the maximum tax deduction for the 529, so there wouldn't be any additional tax benefit to contributing more to that). Thanks for your thoughts! |
Anonymous
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Are you already maxing all tax-advantaged retirement accounts (401Ks and Roth IRAs)? Retirement should always come first. There are multiple ways to pay for college. There's only one way to pay for retirement: saving.
If you are already maxing those accounts, and assuming you have no consumer debt, then I would put it into your investment account (like an index mutual fund) so you can use it for a variety of needs, e.g., pay for your next car in cash, etc. Also, what are you giving to charity? Maybe take 10% and give that to charity. |
Anonymous
| Why wouldn't you put it toward the student loans? |
Anonymous
| An extra five grand or so really doesn't matter, given your numbers. Go shopping? |
Anonymous
| Thanks for the input. We might put it toward the loans, but are not as inclined to do that because the interest rate is really low - so our thinking is that maybe we would do better investing it (yielding a higher rate of return). I think we are going to do that - thanks again for the feedback. |
Anonymous
| If the $5k is a single lump sum, brokerage account. If it is accumulated over time, increase by a small amount monthly allocations for everything, say $100 more per month to brokerage, mortgage, savings and 529 |
Anonymous
| Pay off the student loans. No brainer. |
Anonymous
| PP - why is it a no-brainer if investing the money would make more money than the interest on the loans? |
Anonymous
| Debt is stupid. Pay it off. |
Anonymous
| In general, yes, it is advisable to get rid of debt. But if you pay 3 percent interest on a loan and would make more than that by investing the money, paying off the debt would be the stupid move. |
Anonymous
| student loans are not dischargeable in bankruptcy, they follow you no matter what, even if you die (in most cases). I'd pay off the loans or get extra life insurance for both partners so it could be paid off in the case of a death. |
Anonymous
| Joint investment account. |
Anonymous
Disagree. Pay off the debt. |
Anonymous
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a couple of questions that haven't been answered:
how stable are your jobs? what is your income? how much total is your student loan debt and what is your interest rate on it? For example, my current student loan debt is30k but it is only at 1.62% interest, so i'm only paying the minimum each month, because I can make more from the money in stocks or in 529s. Also if my job were unstable even remotely, I would have as much emergency cushion as possible. |