Check my plan, please?

[WaxOnWaxOff]

Hello, Mustachians!

Long time reader, first time poster. Thanks to the great advice here, I'm able to downshift and take a lower stress, lower paying job to preserve what sanity I have left. The new job has a meh 401k plan (graduated vesting over 6 years, not the most competitive fees, but a decent match, etc.), so I was planning to do the following strategy:

1. Contribute to the 401K plan up to the match.
2. Max out on the Roth IRA
3. Throw any excess into the mortgage (I have $163,000 on the mortgage and no other debt)

Other items: I'm 42 years old and have over $1M in the 'stash, so that's why I decided to focus on mortgage paydown instead of additional investing at this stage. This job will a holding place for a few years as I lay the groundwork for the next stage of my life.

Does this sound like a good strategy? Anything else I should consider? Thank you for your help!

[mechanic baird]

If your rate on the mortgage is quite low like 4%, I would max out on 401K instead of throwing it at the mortgage. It's tax deferred money and you can save $17000 a year at least.

If you plan on retiring earlier than 591/2, move 401K to a rollover IRA and then claim 72t distribution. At that time, you don't have much income so you pay a much lower tax rate on withdraw and no penalty. To me, that's a much better plan.

[WaxOnWaxOff]

Good points! I'd normally do this in a heartbeat except for one thing: the 6-year 401k vesting period. I don't know if I'll stay at this job for 6 years because I may be able to retire outright before then and I'd hate to leave money on the table.

[Use it up, wear it out...]

Good points! I'd normally do this in a heartbeat except for one thing: the 6-year 401k vesting period. I don't know if I'll stay at this job for 6 years because I may be able to retire outright before then and I'd hate to leave money on the table.

A couple of things to check on...

In my experience, an 'x' year vest period is vesting for the company match, you get to keep your own money that you put in, so you're not losing that, and you still get the tax advantage.

Also, how is the vesting schedule? You may not vest 100% for 6 years, but you may get 50% of the company match after 3 years (or something similar).

[WaxOnWaxOff]

OK, someone punch me in the face now. I totally misunderstood how vesting works: I didn't realize that my own contributions are 100% vested the moment I put them in. D'oh! OK, that changes the whole strategy. The vesting plan is 20% in Year 1, 40% in Year 2, etc., but now that I understand it's only for the employer match, that makes my planning much easier. So, new plan will be:

1. Max out the 401K
2. Max out the Roth
3. THEN pay extra on the mortgage

Thanks to both of you for clarifying things!

[Use it up, wear it out...]

Good luck!