Author Topic: Investing order vs paying off mortgage.  (Read 538 times)

zoochadookdook

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Investing order vs paying off mortgage.
« on: May 13, 2019, 02:56:41 PM »
Hey all. Around 60k liquid right now
27k in roth ira vanguard 2060 target date (3200 to max 2019)
Have a mortgage at 116k/4.25%
Student loans at 11k/4.1%

Income: 22/hr (45k annual, no 401/no healthcare currently unless they hire me salary in 4 months). Around 2800/month after taxes. Around 1200 a month to allocate after all living expenses. This job may change.

Excess income (working side jobs-500-800/month expected self employed llc)

I'm wondering what the best options as follows are:

1) Healthcare. I have to find a plan by next month. Looking into HSA accounts but it's like the wild west.

2)How to allocate current assets. Plan on keeping 25k in ally HYSA for emergency/business capital. That leaves 35k to allocate. I believe taxable accounts would be the best as I'm currently maxing my Roth yearly. Once again-those seem to be the wild west. Looking at just putting it all in VITSAX?

3) Keep a Roth or move to a traditional. I expect to make more in the future whether it be self-employed/under others employment.


Any advice? Really just looking for the smartest moves to make. I don't have hours every day to buy and sell funds but hate leaving money sitting around doing nothing.

Thanks



wageslave23

  • Bristles
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Re: Investing order vs paying off mortgage.
« Reply #1 on: May 13, 2019, 03:10:22 PM »
Yep, just put it in an index fund.  That way you can always pull it out if you need it for a business venture.  Keep maxing the Roth until you are earning more and have access to a 401k. 

wageslave23

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Re: Investing order vs paying off mortgage.
« Reply #2 on: May 13, 2019, 03:13:22 PM »
also $25k is a lot to have sitting in an emergency/capital account.   At 5% potential ROI, its costing you $100/mo to have those funds just sitting around.  Invest all but $5k and you can always pull it out later when you need it.

Telecaster

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Re: Investing order vs paying off mortgage.
« Reply #3 on: May 13, 2019, 03:21:00 PM »
Hey all. Around 60k liquid right now
27k in roth ira vanguard 2060 target date (3200 to max 2019)
Have a mortgage at 116k/4.25%
Student loans at 11k/4.1%

Income: 22/hr (45k annual, no 401/no healthcare currently unless they hire me salary in 4 months). Around 2800/month after taxes. Around 1200 a month to allocate after all living expenses. This job may change.

Excess income (working side jobs-500-800/month expected self employed llc)

I'm wondering what the best options as follows are:

1) Healthcare. I have to find a plan by next month. Looking into HSA accounts but it's like the wild west.

2)How to allocate current assets. Plan on keeping 25k in ally HYSA for emergency/business capital. That leaves 35k to allocate. I believe taxable accounts would be the best as I'm currently maxing my Roth yearly. Once again-those seem to be the wild west. Looking at just putting it all in VITSAX?

3) Keep a Roth or move to a traditional. I expect to make more in the future whether it be self-employed/under others employment.


Any advice? Really just looking for the smartest moves to make. I don't have hours every day to buy and sell funds but hate leaving money sitting around doing nothing.

Thanks

Rule of thumb is is max the tax advantaged space.   I'm not really sure if the traditional or Roth is better in your situation.   I think Roth because...

...you are in luck!  Because you have a side gig and an LLC (LLC is not strictly necessary, but it helps) you can have a self-employed 401(k).   And, you can contribute 100% of your side gig income up to $19,000.  Which is probably more side gig income than you will have this year.   AND because you are employing yourself you can also contribute 25% of your income as the employer side--up to $62,000 total!    AND the employer contribution is tax deductible.  I imagine your taxable income will be knocked down quite nicely.   Which probably means the Roth is the best option.  Plus the favorable tax withdrawals of the Roth might come in handy down the road.   

So depending on the side gig, you should be able to jam quite a bit of that money into the SE 401(k).  The part that you can't do in tax advantaged accounts this year, you can place in taxable accounts and shuffle it into the SE 401K in future years.   

zoochadookdook

  • Bristles
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  • Age: 27
Re: Investing order vs paying off mortgage.
« Reply #4 on: May 14, 2019, 07:52:48 AM »
Hey all. Around 60k liquid right now
27k in roth ira vanguard 2060 target date (3200 to max 2019)
Have a mortgage at 116k/4.25%
Student loans at 11k/4.1%

Income: 22/hr (45k annual, no 401/no healthcare currently unless they hire me salary in 4 months). Around 2800/month after taxes. Around 1200 a month to allocate after all living expenses. This job may change.

Excess income (working side jobs-500-800/month expected self employed llc)

I'm wondering what the best options as follows are:

1) Healthcare. I have to find a plan by next month. Looking into HSA accounts but it's like the wild west.

2)How to allocate current assets. Plan on keeping 25k in ally HYSA for emergency/business capital. That leaves 35k to allocate. I believe taxable accounts would be the best as I'm currently maxing my Roth yearly. Once again-those seem to be the wild west. Looking at just putting it all in VITSAX?

3) Keep a Roth or move to a traditional. I expect to make more in the future whether it be self-employed/under others employment.


Any advice? Really just looking for the smartest moves to make. I don't have hours every day to buy and sell funds but hate leaving money sitting around doing nothing.

Thanks

Rule of thumb is is max the tax advantaged space.   I'm not really sure if the traditional or Roth is better in your situation.   I think Roth because...

...you are in luck!  Because you have a side gig and an LLC (LLC is not strictly necessary, but it helps) you can have a self-employed 401(k).   And, you can contribute 100% of your side gig income up to $19,000.  Which is probably more side gig income than you will have this year.   AND because you are employing yourself you can also contribute 25% of your income as the employer side--up to $62,000 total!    AND the employer contribution is tax deductible.  I imagine your taxable income will be knocked down quite nicely.   Which probably means the Roth is the best option.  Plus the favorable tax withdrawals of the Roth might come in handy down the road.   

So depending on the side gig, you should be able to jam quite a bit of that money into the SE 401(k).  The part that you can't do in tax advantaged accounts this year, you can place in taxable accounts and shuffle it into the SE 401K in future years.

So I've been self-employed for the last 4 years (through college) and am kicking myself for not maxing a sep401k (always just took the write-offs and reported the slight profits). I think 2018 i was around 22k after write offs (generally 35k/year self-employed when I didn't have this 45/hr week job). I've always done 1040ez and just realized profits from the business as income prior; i'm assuming I'd have to W2 if I were to make enough to  max as a employee and more on top as an employer? I doubt i'll even be able to do 19k in the spare time but it'd be nice. Or do you mean I can contribute 25% of my income from my current job? Because that would tack on another 10k or so a year which would be sweet if I can make it work-and that's written off the taxable income?

By shuffle in do you mean report income on the SE side and shuffle in income from my other employment? I could play catch up that way and it's literally all cash transactions. Not sure on the legality of that though; but I have stockpiled cash for years and paid on positive income tax prior years SE when I would have just thrown it into a SE 401 and operated at a loss through school.


zoochadookdook

  • Bristles
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  • Posts: 369
  • Age: 27
Re: Investing order vs paying off mortgage.
« Reply #5 on: May 14, 2019, 08:36:12 AM »
also $25k is a lot to have sitting in an emergency/capital account.   At 5% potential ROI, its costing you $100/mo to have those funds just sitting around.  Invest all but $5k and you can always pull it out later when you need it.

so just throw it all in VTSAX? I figured 6 month living expenses base alone is 7500/anything rotation for inventory for the side work (sometimes computers tie up 1000-1200 apiece and I carry around 2-3/month)