Case Study - Throw extra money on house or RE Fund?

[RetirementDreaming]

My first attempt at a case study (actually twice, server unresponsive) .  Apologizes for the lack of formatting and bond.  It won't turn off!.  I haven't figured it out yet.


Life Situation:                                    
Married Filing Jointly, Me (43), Husband (54), 2 kids (9 years, 7 years)                                    
Live in CA (HCOL Area)                                    
Husband is the anti-mustachian.  I'm willing to make changes to gain freedom.                                    
                                    
Gross Salary/Wages:                                    
Me   90K                                 
Husband   120K                                 
                                    
Pre-tax deductions:                                    
401k   41,000                                 
HeSA   6,650                                 
                                    
Other Ordinary Income:  None                                    
                                    
Adjusted Gross Income:                                    
Me   3,968   Monthly net pay after taxes, SPP, insurance, 401k.etc                        
Husband   4,144   Monthly net pay after taxes, SPP, insurance, 401k and allowance (800 month off the top to his account)   
   8,112                                 

Taxes:                                    
Me   1,420   Monthly taxes withheld (Fed,CA-State, Disability, etc)                        
Husband   1,626   Monthly taxes withheld (Fed,CA-State, Disability, etc)                        
We usually get a $300 federal refund and owe the State of CA the same amount                                    
                                    
Current expenses:                                    
House Expense                                    
House P&I   1,795                                 
HOA   115                                 
HELCO    250   181 interest payment due                              
Prop Insurance   734                                 
Insurance   271   includes car and personal property (camera equipment)                        
Life Insur   236                                 
Misc   30                                 
Electric/Gas   260                                 
Cell Phone   100                                 
Cable/Internet   210   Husband will not go with about cable.  Internet is $50.  I work from home at a lot.   
Water   100                                 
Pest   40                                 
Gardener   70   Yeah, I know.  I tried and could not keep up                              
Gas   85                                 
Kids Activities   110                                 
Food   400                                 
Eating Out   100                                 
House Repayment   300   1st or HELCO?  Just starting this                           
IRA (Trad) Me   250                                 
K stock purchase   50   Going to stop it, just haven't yet                           
Taxable Acct   500                                 
To Savings   2,128                                 
                                    
Total Expenses   5,206                                 
Total with Savings   8,134                                 
                                    
Expect ER expenses                                    
House Expense                                    
House P&I   0   Assuming a paid off house.  Husband very unlikely to move.                  
HOA   115                                 
HELCO    250                                 
Prop Insurance   734                                 
Insurance   271                                 
Life Insur   0                                 
Misc    30                                 
Electric/Gas   260                                 
Cell Phone   100                                 
Cable/Internet   210                                 
Water   100                                 
Haircut - H   50                                 
Lesson - H   110                                 
Gas   85                                 
Kids Activities   110                                 
Food   400                                 
Eating Out   100                                 
Kids/Entertainment   300                                 
Health Insurance   1,000                                 
House Maint   200                                 
   4,425   Assumes we stay in current house                              
   3,660   Different house, with no HELCO, less taxes and no payment                              
Assets:                                     
Cash & Savings   6,000                                 
Roth IRA -Me   6,283                                 
401k- Me   381,899                                 
401k - Husband   388,975                                 
Trad IRA -Me   3,592                                 
Taxable   5,014                                 
Stock   19,416   Most employer SPP, we are waiting 2 years to sell due to tax hit                     
HeSA   9,632                                 
House   560,000   I want move when it worth what we paid, 660K                              
Total   1,380,812                                 
                                    
Liabilities:                                    
House Mortgage   372,000   paid 660,000 in 2006, 4% interest, 30 years, 29 years left, refinanced Jan-15               
HELCO   98,000   100K line of credit, 2.25%, payment is interest only @181 month                              
                                    
Total   470,000                                 
                                    
                                    
Assumptions:                                    
1) We retire in current house.  I don't want to.  I think it's too expense but my husband is unlikely to move.  Let's assume we stay.                                     
2) Health expense in retirement will not exceed $1,000 month in premium and deductibles                                    
3) Kids will pay for their college.  We will help but no expectation.                                    
4) My husband takes SS at 62 ~1900/month                                    
5) Husband gets no allowance in retirement                                    
                                    
Questions:                                    
His plan:                                    
Husband retires 1/1/2020.  I keep working until the house is paid off                                    
Save until we have 20K in an emergency fund.  Throw the rest at house.  Any bonus money goes to the house.                                    
                                    
My plan:                                    
When we hit 1.65K we retire and sell the house.  Use the proceeds to purchase a new one in a cheaper area                                     
                                    
                                    
1) What to do about the house?  I think we could it off in 2025 (1st mortgage) if we really work at it.  Kids and husband can't imagine moving.                                     
2) I think 1.65K is enough to retire but it seems low.  I want to minimize our lifestyle in retirement but stay married to a spender.                                    
3) We have about 3200 month for investment, debt pay down.  How should I allocate it after we have 20K EF?                                    
                                    

[Calvawt]

I think your plans are far apart!  Keep talking to your husband so you can come up with some sort of in between. 

I would keep plugging the excess into taxable accounts.  Don't pay extra on the mortgage, but have enough cash to clear that home equity loan.


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[nereo]

Welcome RetirementDreaming!

First, a few posts you may find relevant to your post:
http://www.mrmoneymustache.com/2012/03/22/selling-the-dream-how-to-make-your-spouse-love-frugality/
http://www.mrmoneymustache.com/2012/03/27/selling-the-dream-of-financial-independence-part-2/
http://www.mrmoneymustache.com/2014/07/17/is-mr-money-mustache-ruining-your-marriage/

As you you might have guessed, I think your #1 challenge right now is getting your husband to accept that the two of you can gain financial independence and increase your happiness if he is willing to make a few lifestyle changes.  It won't be an overnight change, since his views on the world and what he wants have been shaped over the past five decades.

In the meantime, you are earning a combined $200k+ gross, but you aren't even taking full advantage of your tax-advantaged accounts.  That should be a no-brainer. Already you have enough in assets for both of you to quit now and never work again if you were willing to make some lifestyle changes (which granted your husband probably won't want to do right away). A few years of aggressive saving and a housing change and you could easily spend more every year than the earnings of the median US family.

A few things that jump out:
You have a LOT of insurance - the life insurance is INSANE for two people with over $800k in savings.
IRA - why aren't BOTH of you maxing this out??
Gardener - with more free time and a lower-maintenance garden this is will be a no-brainer
House - Forget what you paid for it.  That's called price-anchoring.  The only question going forward should be "is this the best home for me and my family right now."
Internet/Cable - even if your husband won't compromise (hulu + Netflix isn't enough??) $210/month is very high.  Negotiate down below $150.
Pest - huh?

[NoWorries]

Welcome RetirementDreaming!

First, a few posts you may find relevant to your post:
http://www.mrmoneymustache.com/2012/03/22/selling-the-dream-how-to-make-your-spouse-love-frugality/
http://www.mrmoneymustache.com/2012/03/27/selling-the-dream-of-financial-independence-part-2/
http://www.mrmoneymustache.com/2014/07/17/is-mr-money-mustache-ruining-your-marriage/

As you you might have guessed, I think your #1 challenge right now is getting your husband to accept that the two of you can gain financial independence and increase your happiness if he is willing to make a few lifestyle changes.  It won't be an overnight change, since his views on the world and what he wants have been shaped over the past five decades.

In the meantime, you are earning a combined $200k+ gross, but you aren't even taking full advantage of your tax-advantaged accounts.  That should be a no-brainer. Already you have enough in assets for both of you to quit now and never work again if you were willing to make some lifestyle changes (which granted your husband probably won't want to do right away). A few years of aggressive saving and a housing change and you could easily spend more every year than the earnings of the median US family.

A few things that jump out:
You have a LOT of insurance - the life insurance is INSANE for two people with over $800k in savings.
IRA - why aren't BOTH of you maxing this out??
Gardener - with more free time and a lower-maintenance garden this is will be a no-brainer
House - Forget what you paid for it.  That's called price-anchoring.  The only question going forward should be "is this the best home for me and my family right now."
Internet/Cable - even if your husband won't compromise (hulu + Netflix isn't enough??) $210/month is very high.  Negotiate down below $150.
Pest - huh?

All of the above is excellent advice. What really struck me is the $800 monthly that your husband spends for an allowance. Seriously? That's A LOT! Almost 10 grand annually on.... Wow.

Other than that, I really think that a talk about getting common goals is in order. Good luck to you!

[RetirementDreaming]

Thanks for the replies.  Husband as come a long way but clearly there is more to go.   I'll keep adding to the taxable and tax-advantage accounts. 

Cable - His big reason for the cable is sports.  He says he can't get sports anyway else.  No idea if that is true.  I'll look into getting this down at least by $50.  I can probably call and get a short-term deal.

Allowance - Yeah, it's crazy.  It incudes his guitar lessons ($110), haircut ($50), gas ($75) and any lunches out.  My tendency is to say "No" to all purchases.  It really created a parent/child relationship.  I was always saying no and he was always asking for stuff.  This was our compromise.  It has grown over the years.  I'll see about reducing it by $200.

Pest - This is pest control service.  The house next to us was vacate for 4 years. They had mice next door which resulted in rattlesnakes in our yard.  I hate snakes, mice and spiders. 

I guess I need to work on getting the husband on same page or at least the same book!  Thanks.

[nereo]

Good luck. 
Perhaps I didn't emphasize it before, but between the two of you, you have over $750k in your 401(k) accounts*, plus ~$200k in home equity.  That's not bad at all.  On this forum it would be more than enough for many couples to retire comfortably right now.  With your income levels, you could stash away a lot of money very quickly and BOTH you and your husband could retire well before 2020 with only moderate adjustments to your current spending - the largest being a housing change.

Perhaps a starting point might be to suggest to your husband that retirement for you both could be just 3-5 years away.  Suggest how great it would be for you both to spend more time with your children before they become teenagers. Tell him you'd like to spend more time with him when he's retired. See what he's comfortable with and adjust from there.

The $800/mo "allowance" is slightly less absurd because it includes a hair cut and gas for him (which brings your monthly gas total up to $165).  Still, it shows that there's a big gap between your spending/saving goals.


*yes, you can access money from your 401(k) account before age 59.5

[Bettis]

I'll chime in on the TV sports because I LOVE SPORTS and he is partially right that you can't get it anywhere else... BUT....

If he likes the local teams, they're all on the radio.  Go outside, cook some burgers and dogs and have the game on in the background.

Baseball - better on radio anyway but MLB.com has a streaming service for $100-$120 a season that lets you get pretty much every "non local team's" game (includes radio for all games)

Football - Multiple free over the air games each Sunday or find a friend with the Red Zone channel and see if they will let you use the login on your PC, Tablet, or Phone

Basketball and Hockey - The toughest but there are weekly games on free TV and they likely have streaming services on their websites(they would have a cost but still cheaper than cable).