Life Situation: 39, newly single mom to a 10 year old
Tax Status: will file Single (I think, need to learn more about taxes) - will be claiming my daughter as a dependent every other year
Gross Salary/Wages: $6,539 per month
(paid bi-weekly, so 2 months have an extra paycheck -- seemed easier to present my case based on the 10 months when I'm paid 2 times)
Pre-tax deductions:
403b: $1384/month
HSA: not eligible
FSA: $185/month
Insurance - health, dental, vision, life: $188
Other Ordinary Income:
Child support - $400/month
Side hustles - $100/month
Qualified Dividends & Long Term Capital Gains: 0
Rental Income, Actual Expenses, and Depreciation: 0
Adjusted Gross Income: $5,282
Taxes:
Federal: $827
State: $244
FICA: $472
*2016 will be my first year filing as single, so I'm not sure what to expect on taxes
Current expenses:
Mortgage: $906
Charity: $100
Gas & Electric: $70
Water & Sewer: $30
HOA: $74 (includes garbage and lawn care)
Home Insurance: $45
Property Taxes: $125
Groceries, Household Items, Toiletries: $360
Restaurants: $120
Cell Phone: $75
Auto Gas: $120
Auto Insurance: $42
Internet: $40
Afterschool Care and Summer Care: $310
Hair: $50
Piano Lessons: $75
Kid Activities (clubs, sports): $50
Fun/Entertainment: $100
Clothing: $50
Vacation/Travel: $200
College Fund: $200
Gifts: $100
Home Repairs/Projects: $200 (just moved; lots of delayed maintenance to take care of; should drop in the next year)
Miscellaneous: $100 (random things that aren't recurring)
Extra: $197*
*The budget above is generous, so I often have more than $197 to put toward other goals each month. Additionally, 2 months per year include a 3rd paycheck and I have $2,400 in FSA reimbursements that I receive in several chunks through the year. I also have months when I make more than $100 from side hustles/freelancing.
Assets:
403b: $64,468
Trad IRA: $29,280
Roth IRA: $37,386
Cash: $12,606
Home Value: $238,000
Total: $381,740
Liabilities:
Mortgage, beginning March 2016
Original Amount: $235,000, 30 years, 2.31%
Monthly Payment: $906
Current Balance: $161,361*
Time Remaining: 18 years
*paid off 30% with proceeds from selling other home
Total: $161,361
Net Worth: $220,379*
*I'll also receive approximately $30k in ex's retirement funds from divorce decree. Also half of his pension, discussed below in the questions section.
Goal: Reach FIRE in 2030, when I'm 53. (Or before!)
Specific Questions:
1. **Main question** I need some help figuring out what to do about a pension my ex has that I will receive 50% of when our divorce is final. The pension is being terminated and everyone must choose between a lump sum payout or an annuity paid monthly beginning at age 65. The lump sum would be about $25,000. The monthly payment at 65 would be about $625. I'm leaning toward taking the lump sum to add to my stash now, but would like other opinions about that decision.
2. I already maxed out my Traditional IRA for 2016 in order to decrease my tax burden a bit, but I'm wondering if I should be contributing to my Roth IRA in order to have some funds accessible before retirement age. Advice?
3. What should I do with my extra money each month? Right now, I'm just saving up for divorce attorney costs, taxes next year, etc. Once things are more settled, my thinking is to save up for my IRA each year and then put any extra toward my mortgage. It's a family loan and I would like to pay it back as quickly as possible, plus my personality is such that having a mortgage during retirement would be really stressful for me.
4. If I retire at 53, I'll need to figure out where my living expenses are going to come from until I can access my retirement funds. It seems too overwhelming to think about now, but I'll welcome any advice offered on that.
5. Are there things I should be doing to decrease my tax burden? Taxes for single people are painful!
6. Other advice/suggestions?