I'm brand new to the forums and would like to thank you in advance for reading this case study and providing your insight.
Between January and April I will have extra cash from 2014 savings yet to be invested and extra payments (bonus, tax return, extra paycheck, additional savings) totaling $14,300. We have a 457(b) (govt. job) at work and will likely be adding a 401a early in 2015. I will have a say in the type of account we add to complement the 457, so your thoughts on this are appreciated. The Agency pays $10,000 in deferred comp. each July. In 2014, it was deposited into the 457 and I maxed out the account with $7,500. In 2015, I can ask the agency to apply the $10k to the 457 or complementary account (I believe). Our retirement accounts are managed by Nationwide, which charges a fee between .7 and .9 percent on top of fees associated with the index or fund being purchased (currently in an S&P 500 Index). I also max out Roth IRAs for myself and my wife (SAHM). I plan to convert hers to a traditional IRA to reduce income taxes.
My primary question is should I use the cash I will be receiving to defer more of my income to the 457 and 401a (which I believe has a $52k annual max) or invest the money with Vanguard in my taxable account or Fidelity Roth/traditional IRAs (Roth for me and trad/roth for my spouse)? Perhaps a mix of all of the above?
Income and expense particulars - I appreciate your feedback.
Married with three kids – Ages 8, 4, 9 months
Gross Annual Salary - $123,600
Monthly net - $6232 (not including two extra paychecks of $3,116 each)
Monthly expenses:
Church Contribution $150
Mortgage+Taxes+Insurance $1,700
Water $115
Pre-k $120
Cable and Internet $75
Cellphones $95
Gas/Power $300
Gym $61
Insurance (vehicle+life) $120
Student Loans $520
Doctor Visits $40
Prescriptions $65
Auto (Gas & Maintenance) $200
Groceries $600
Entertainment (Movies, Etc.) $100
Toiletries/Haircare/Diapers $50
Clothes/Dry Cleaning $150
Eating out $75
Travel $100
Miscellaneous $150
Home Improvement/supplies $100
Gifts & Special Events $100
Total Expenditures $4,986
Additional info:
House - $166,000 15-year mortgage on a $250,000 home. 3.5% Interest Rate. 2,700 s.f. with really old HVAC. Plus a pool.
Student Loans - $85k at interest rates between 2.75 and 3%
Vehicles – One Honda minivan paid off. Other vehicle provided by employer. Live 4 miles from office.
Investments and cash - $256,000 saved in various retirement accounts (457s, Roth IRA, other) and Vanguard taxable. $27k emergency fund.