We are maxing out our retirement accounts, and are wondering what to do with the extra cash we have. We are not all that excited about putting our extra cash in the market right now, as it may be overvalued, and we have some low interest debt that we would like to pay off. Here's the low down:
1. Maxing out 401k plus Roth IRA for wife and I.- 100% Total Stock Market Index Funds (we are in mid 30s).
2. Throwing $2k/year into 529 Plan for the kiddos to take advantage of state income tax deduction ($2k limit)
3. Have over a year's worth of living expenses saved in ordinary savings for emergency fund (ultra conservative due to work situation)
4. Have a mortgage at $320k at 3.25% for 30 years
5. Car Loan for about $10k at 1% interest- about 3-4 year repayment period left (financed before finding the wisdom of MMM)
6. Student Loan at about $30k at 2.5% interest- about 15 year repayment period left
We haven't paid down the debt because it is low interest and we needed to save money for needed home renovations. That money is now saved in an ordinary savings account and reserved for needed home renovations to occur within the next year. This is on top of the emergency fund noted above. We could always put more money into the house for what we could classify as "bonus" renovations.
My question is what to do now that we are coming into extra funds. There will be about another $40k or so extra to spend this year (and likely going forward), and we can throw some of it into the 529, throw it into a taxable investment account, or pay down the debt. I don't want to buy more stocks just to pay taxes and/or lose money in the short term because the stock market is too high now. I don't want to overfund the 529 accounts (my kids are 3 y/o and 5 months and who knows what will happen in 18 years).
I could front load the 529 to take advantage of the growth and tax savings, but this is assuming that my market timing for such a front load is ideal. Likely, it is not, and I will lose money for a few years.
I'm thinking about just throwing the extra money at the car and student loans, as we could just get rid of them now. The interest rates are super low, however, and the student loan gives us a tax deduction. My wife wants to save the money in a savings account for future "bonus" renovations to the house. The bonus renovations would be nice, but they are not a "necessity."
Just wondering what you guys would do if you were in my situation. Thanks.