Trying to determine best use of $100k windfall.
Background:
- 36M, 33F in HCOL area
Income:
- $180k combined
Net worth:
- $631k total (including $100k windfall)
- $390k in retirement accounts (was over $400k until recent unpleasant events...)
- $140k Home Equity
- $100k windfall
-- $25k E-fund dedicated to new roof, etc.
- No debt except low interest mortgage and IBR student loan payment
Asset allocation:
- 100% Stocks (VTSAX or closest thing to it offered in retirement accounts)
Current spending:
~$75k-$80k per year
Long-Term Financial Goals: Honestly not sure, other than to not have financial stress and to have increasing freedom to make career/life decisions. Enjoy my career and not necessarily hoping to retire at 45 or anything. Wife might want to switch to lower-paying career at some point, but maybe not.
We are hoping to have a baby within the next 1-1.5 years and are wrestling with how to utilize the $100k windfall. Beyond the cold, hard calculation, I have a slight sentimental preference to put some of it in a 529 given the source of the windfall. Here are the options as I see them, but maybe there are others I'm not thinking of. Would love to know people's thoughts.
529: Put $50k into a 529 in my name that I could then transfer to Baby and $50k into taxable VTSAX. Based on various calculators, $50k invested for 20-ish years would come close to covering four years of in-state tuition. If necessary, we could make a few contributions over the course of that time to top it off. Upside here is the stress of saving for college would be over on day one. Downside is life happens, less flexibility, maybe we can't have children, etc.
Taxable: Put all $100k into taxable VTSAX today. This would double as a robust emergency fund as I'm convinced of the opportunity costs of traditional emergency funds. We would then fund 529 savings on an ongoing, annual basis. My fear is that the cost of child care in years 1-5 would make significant 529 savings a challenge, then we would be scrambling in years 6-18 to make up the difference.
Wait and See: Put $50k into taxable VTSAX today and the other $50k into Ally Savings Account. If Baby is born healthy, transfer $50k into 529 at that point. Downside here is missing out on a year of potential market growth.