Reply to Advice needed: order of priority

Forum Index » Money and Finances

Reply to "Advice needed: order of priority"

Subject:

Emoticons





More smilies

Text Color: Font: Close Marks

[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]
We have 2 kids (3, 5) and are 37 yo, both work full-time. We have a combined income of about $350K. 2 W-2s and 1 1099. 
We do not have any debt except for our mortgage. [b]Our home is worth about 575K and the unpaid balance is around 200K, 15 Year interest rate 3.0%[/b].  
[/quote]

Do you have a 15 year mortgage, or 15 years left on your mortgage?  It seems like the house may be well on the way to being paid off by the time your oldest gets to college anyway.  If you've got 15 years left you can run the numbers to find out how much you should prepay this year to only have 12 years left.  I'm guessing it's much less than $48K this year.

My advice is see what it would take to get the mortgage on track to be paid off in 12 years, and put the rest in taxable accounts.  I'm assuming you already contribute a set amount to the 529s, based on their current value.  Keep that steady.[/quote]

Op here.

We have 11 years on the mortgage left. We refi'ed in 2012 and put more down then.

So you're saying don't put extra in every month to apply to principal? Sometimes I feel like we'll get more return on paying our mortgage down than putting it in more index funds.

Also, would it make more sense to put more money into the 529s because the growth is at least tax-deferred, and withdrawals are tax-free for qualified educational expenses? We could try to grow each one to a certain amount - I don't know maybe $120K each ( assuming public state college is $30K per year?). We'd be saving tax money here instead of putting it more into the brokerage...[/quote].

If your dream scenario is to have the house paid off in 12 years when the first gets to college, and your current payment schedule has it paid off in 11 years, you're on the right track.  You might not get great returns from investments this year, but if your strategy is long-term then this is the time to get in. The market is on sale.  Buy it now.  For the allocation between 529s and taxable accounts, I'd fund the 529s up to the point you feel like you've got it covered for each kid.  My earlier post assumed you're already contributing there, since you've got $85K, but if that money is coming out of the $4K/month then I'd do maybe a thousand for each kid and invest the rest.  That way you get tax advantages but all of your savings isn't tied up in dedicated accounts.

Long story short: this is a great conundrum to have!  You guys are so on track in so many areas that there's not really a "wrong" choice to make (although I'd strongly advise against prepaying an historically-low mortgage because the market is shaky).[/quote]

Op here. So I think that's a good plan. However, what if the kids don't want to go to college? Or what if they want to do college abroad, where its cheaper? Or what if they get a full-ride ? Not sure if any of these things will happen, but you never know.  [/quote]

Options

	Disable HTML in this message
	Disable BB Code in this message
	Disable smilies in this message

Review message

Search Recent Topics Hottest Topics