Author Topic: Reader Case Study- Help me with my Financial Plan!  (Read 6685 times)

JourneyToLaunch

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Reader Case Study- Help me with my Financial Plan!
« on: February 25, 2016, 12:47:22 PM »
Ok, here goes. Hopefully, I filled this out correctly. I am trying to plan our financial road map for retirement, investing & savings.


Husband and I are 33, with a 1 1/2 year old and a baby due in May (also planning on having 1 more in a couple years). Right now, I set our retirement date at 50 (17 years from now).  From the case study it definitely seems we can retire earlier than that but I am concerned about paying for my kids college expenses and loosing out on all of the pension benefits we would receive by retiring early.

A few more points:
-My husband is eligible for a full pension if he works until he is 55. The pension annual amount would be about $44,000 a year. He's a teacher and has a pretty flexible schedule and is very active so he may actually want to work up until that point.
- My job is not as flexible, so if anything, I would love to retire at least when my husband retires. If I can retire earlier than him and we can live well off of his income then that would be great too. I also am eligible for a pension once I retire, the earlier I retire, the less I would get. I would want to have our primary mortgage paid off before either one of us retires.
-We have $215k in retirement accounts ($116K in 401K accounts & $99K in personal retirement accounts through our jobs). This year we will stat to max his 457 Plan and Max my 401K Plan.
- We will start fully funding Back Door Roth's this year once I get my bonus in March
-We have an investment property that will pay off in 2039 if we make no extra payments. Once the mortgage is paid off, we think we would be able to have a annual net rental income of around $21,000. The equity on this property is currently around ~$368K.
-We have a primary mortgage that matures in 2044. I would like to start to make extra payments on it so that by the time our oldest gets to college, it will be paid off. The oldest would start college when we are 49. So paying the mortgage off by age 48/49 is our goal (note the extra mortgage payments are not in the case study below). The rate on this is 4.375%

So here are my questions:
- I have not started saving anything in 529 Accounts. I originally was going to fund up to $10,000 per year to get the maximum state deduction (I am in NYC) but I just listened to a Radical Personal Finance podcast about the disadvantages of investing in 529's and I am having second thoughts. I don't know that I want to tie up my money in those accounts. Should I invest the money somewhere else instead? If we have the mortgage paid off before college starts, we would be able to cash flow some of the expenses and possibly pull from the Roth's. I just would like to have enough to help my children pay for undergrad college so they graduate with no debt.
- Should we start to pay down the investment property loan? The current rate is 4.75%. If we were to have that paid off by the time the oldest went to school, we would have about an extra $21K a year in net rental income.
- Where should we invest the extra money we have? We are maxing out my husbands 457 plan this year (he also has access to a 403B plan that we didn't plan on contributing to).
-Should we do some Vanguard index investing to have access to money for the 5 years we have to wait until the Roth Ladders kick in? Still not clear on this concept yet either. 
- I also can contribute money after tax to my 401K and do the Mega Back Door Roth, I think. Not sure about in plan rollovers just yet. I still don't completely understand this concept.

Basically, I am looking for advice on; how to optimally plan for paying for 2-3 kids in college, retiring semi-early, and where to invest our current left over funds.


CategoryMonthly
Comments
Annual
Salary/Wages for earner #1$10,9828,417 without bonus $131,780
Salary/Wages for earner #2$8,3776,166 without summer school, extra coaching jobs etcc$100,528
Daycare FSA$417$5,000
FICA base salary/wages$18,942$227,308
401(k) / 403(b) / TSP / etc.$1,500Room to increase?$18,000
457 plans   $1,500Room to increase?$18,000
Employer Match$382$4,589
Income subject to IRS tax$15,942$191,308
Pension$152$1,825
Life/LTD Insurance$41$487
Paycheck income before tax$15,750$188,996
Rental income$2,660$31,920
Rental real expenses$2,150$25,800
Rental depreciation expense$1,074$12,888
Rental taxable income-$564-$6,768
Federal Total Income$15,378$184,540
Federal tax$2,2002015 rates, MFJ, item. ded., 4 exempt.$26,398
State/City tax$864Guess, using 6.65% * Fed. Taxable$10,370
Soc. Sec.$1,119Assumes 2 earners paying$13,425
Medicare$275$3,296
Total income taxes$4,457$53,489
Add Health + Daycare reimb.$417$5,000
Income before other expenses  $12,219$146,627
Monthly Average Expenses:
Mortgage$1,782$21,389
Property Tax$323$3,874
Home/Rent Insurance$233included is a $40 escrow amount$2,795
Cable TV$167$1,998
Car Insurance$200$2,400
Car Maintenance, Registration, etc.$150$1,800
Child activities $117$1,404
Childcare$833$9,996
Christmas/Holidays$125$1,500
Clothing/Shoes$167$2,004
Dining (Lunch/Dinner/Etc.)$300$3,600
Electricity$160$1,920
Fuel/Public Transport$455Long commute$5,460
Gas/Oil for heating$135$1,620
Groceries$500$6,000
Household; Maintenance$660maintenance, furniture sinking fund and misc household items+ baby items$7,920
Landscaping/Yard work$50$600
Miscellaneous$500Misc plus blow money$6,000
Phone (cell)$150$1,800
Travel/Vacation$400$4,800
Water/Sewer$71$852
Wine/Beer/Tobacco$50$600
Work/Professional fees$500New Car Fund$6,000
Non-mortgage total$6,245$74,943
Loans:
Other tax-advantaged investments:
Roth IRA$917Above IRS limit - backdoor ok?$11,000
Total Expense$8,944$107,333
Total to invest$3,275$39,294
Summary:
"Gross" income$19,869$238,428
Income taxes$4,457$53,489
After-tax income$15,412$184,939
IRA+401k/403b/TSP/457 (Savers' credit)$3,917$47,000
Living expenses$8,220$98,645
After-tax investable$3,275$39,294
Time to FIRE?:
Time to FIRE17years
Safe Withdrawal Rate4.00%percent
Real return on tax-deferred investments5.00%percent
Real, after tax, return on taxable investments4.25%percent
Current Savings
Tax-deferred (e.g. trad. IRA/401k)$214,882
Projected Savings at Retirement
Taxable$951,437
Tax-deferred (e.g. trad. IRA/401k)$1,541,360
Roth + HSA$284,245
Total projected stash$2,777,041
Projected Expenses in Retirement
Non-loan, non-work expenses$67,119
Annual non-tax retirement expense$67,119
Income taxes$5,166
Total$72,285
Total loan principal due at FI$191,943
Stash needed for retirement @4.0% SWR$1,999,061
Have $777,980 extra.


Filing Status21=S, 2=MFJ, 3=HOH
# Exempt.4
# Children <171
Earner #1Earner #2
Ages3333
# of earners2
Total Income$184,540
Std. Deduct.$12,600
Act. Deduct.$29,298
Exemption$16,000
AGI$184,540
MAGI$184,540
Taxable$139,242
1040 Tax$26,398
Saver's credit$0
Tax after n-r credit$26,398
Child Tax Cred.$0
EIC$0
Net Tax$26,398
Monthly$2,200
Mtg. Int. (approx.)$15,054
State tax$10,3706.65%
Prop tax$3,874
Item. Deduct.$29,298
VersionV7.09

Loans:Orig. Prin.Orig. LengthCurr. Prin.Yrs leftRate
Mortgage$357,00030$347,557284.375%

Gin1984

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Re: Reader Case Study- Help me with my Financial Plan!
« Reply #1 on: February 25, 2016, 12:55:58 PM »
Does your husband have access to a 403b as well as a 457?

JourneyToLaunch

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Re: Reader Case Study- Help me with my Financial Plan!
« Reply #2 on: February 25, 2016, 12:59:08 PM »
Does your husband have access to a 403b as well as a 457?

Yes, he can contribute to his TDA plan which is a 403B and a 457 plan. Right now we are only contributing to his 457Plan. Previously, we were contributing only to his 403B plan until I found out the better flexibility of a 457 Plan.


Gin1984

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Re: Reader Case Study- Help me with my Financial Plan!
« Reply #3 on: February 25, 2016, 01:52:42 PM »
Does your husband have access to a 403b as well as a 457?

Yes, he can contribute to his TDA plan which is a 403B and a 457 plan. Right now we are only contributing to his 457Plan. Previously, we were contributing only to his 403B plan until I found out the better flexibility of a 457 Plan.
Given your income level, I'd be maxing BOTH out.

JourneyToLaunch

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Re: Reader Case Study- Help me with my Financial Plan!
« Reply #4 on: February 25, 2016, 02:03:30 PM »
Does your husband have access to a 403b as well as a 457?

Yes, he can contribute to his TDA plan which is a 403B and a 457 plan. Right now we are only contributing to his 457Plan. Previously, we were contributing only to his 403B plan until I found out the better flexibility of a 457 Plan.
Given your income level, I'd be maxing BOTH out.

And the primary reason for this is to save on taxes, correct? I get the concept, I just have to work on ways to explain it to my husband. I already just got him on board with contributing the max to his 457. So to also tell him we should continue to reduce his take home pay will be a stinger. Again, I know the benefits, but he is slowly learning all of these things.

Also, What would be the threshold of how much more to contribute pretax to the 403B in addition to maxing out the 457 plan and my 401K plan. Is it just to get our income down to a certain level? What level should we aim for?

Also, what about the concept of having all the money tied up in taxable accounts at retirement and in accounts we can't touch until we are 59? If we want to retire at 50/55, don't we need to do some post tax investing such as index funds too?


Gin1984

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Re: Reader Case Study- Help me with my Financial Plan!
« Reply #5 on: February 25, 2016, 02:20:51 PM »
Does your husband have access to a 403b as well as a 457?

Yes, he can contribute to his TDA plan which is a 403B and a 457 plan. Right now we are only contributing to his 457Plan. Previously, we were contributing only to his 403B plan until I found out the better flexibility of a 457 Plan.
Given your income level, I'd be maxing BOTH out.

And the primary reason for this is to save on taxes, correct? I get the concept, I just have to work on ways to explain it to my husband. I already just got him on board with contributing the max to his 457. So to also tell him we should continue to reduce his take home pay will be a stinger. Again, I know the benefits, but he is slowly learning all of these things.

Also, What would be the threshold of how much more to contribute pretax to the 403B in addition to maxing out the 457 plan and my 401K plan. Is it just to get our income down to a certain level? What level should we aim for?

Also, what about the concept of having all the money tied up in taxable accounts at retirement and in accounts we can't touch until we are 59? If we want to retire at 50/55, don't we need to do some post tax investing such as index funds too?
Well I don't pay any federal taxes, but that is because I have a low income (and max out one 403b).  My vote is to go down as low as you can go, tax wise.  But frankly at your income given the NYC and NYS, every cent in a 401k saves you almost 40%, that is a huge savings.  Now for your husband, a 457 can be accessed when he leaves his employer, not at 59.5.  And depending on your employer, the law does allow them to let you access your 401k/403b at 55.  And yes, you do want about 5 years of money in your Roths or taxables BUT again, you are not losing much my maxing out the 403b because of the tax savings so you'll still have over $2000/month to invest in taxable accounts.
That said, I would put some of that $2000 into a 529 because again, you pay a crazy amount in taxes and any bit that helps you there is a big deal.  If you put $10,000/year that leaves you with $14,500 (remember tax savings) to put in a taxable.  Assuming normal rates you will be close to your 5 year amount by 50, assuming your husband does not decide to continue working.  Also, once you have more kids you can cut the 529 savings to keep your taxable savings.

JourneyToLaunch

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Re: Reader Case Study- Help me with my Financial Plan!
« Reply #6 on: February 25, 2016, 07:36:47 PM »
Ok, thank you for the insight. I may have understated some expenses but yes I do think we should try to further reduce our tax liability. I need to play around with the numbers some more.

What are your thoughts on paying off both mortgage before the kids get into college at 49 or before retirement at 55?

MDM

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Re: Reader Case Study- Help me with my Financial Plan!
« Reply #7 on: February 25, 2016, 08:59:34 PM »
Ok, thank you for the insight. I may have understated some expenses but yes I do think we should try to further reduce our tax liability. I need to play around with the numbers some more.

What are your thoughts on paying off both mortgage before the kids get into college at 49 or before retirement at 55?

First, +1 to all Gin1984's suggestions.

Given your income and good saving practices, you aren't going to get need-based financial aid for college.  But merit-based remains possible, so don't go overboard on the 529s.  For what it's worth, having your kids take out some amount of loans is worth considering, primarily so they consider majoring in something that will facilitate repayment of those loans.

Other than the 529 caveat, putting every penny you can into tax-deferred accounts for the next ~10 years seems reasonable.  In 10 years, come up for air and look around at tax laws, your account balances, etc., and re-evaluate.  Meanwhile, enjoy life and your kids.

After you have all the possible pennies stuffed into the tax-deferred accounts, and if inflation stays low, paying the mortgage is probably slightly worse than investing taxably but not hugely worse.  Do what makes you happier there.  See the 'Investment Order' tab in the case study spreadsheet you used for posting.

JourneyToLaunch

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Re: Reader Case Study- Help me with my Financial Plan!
« Reply #8 on: February 26, 2016, 06:59:46 AM »
Thank you MDM. I def. want the kids to be also invested in their college plans (should they go).

I will try and run some numbers of how much husband's take home would be if we also maxed out his 403B plan.

Also- can anyone walk me through a scenario of how we would access all the money in the 401K's and 403B plan if I retire early in my late  40's or at 50 but my husband continues to work? How would we access the extra money if we need it? We would probably be able to live on his income but may need some supplemental income as well.


Gin1984

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Re: Reader Case Study- Help me with my Financial Plan!
« Reply #9 on: February 26, 2016, 07:18:02 AM »
Thank you MDM. I def. want the kids to be also invested in their college plans (should they go).

I will try and run some numbers of how much husband's take home would be if we also maxed out his 403B plan.

Also- can anyone walk me through a scenario of how we would access all the money in the 401K's and 403B plan if I retire early in my late  40's or at 50 but my husband continues to work? How would we access the extra money if we need it? We would probably be able to live on his income but may need some supplemental income as well.
Well at that point you can draw down your taxable and/or lower his 403b/457 contributions.  It is not like you won't be saving in a taxable fund. Also, you won't need childcare when you retire I assume (though you may be using this for college) as well as a few other things that may go down if you retire.

JourneyToLaunch

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Re: Reader Case Study- Help me with my Financial Plan!
« Reply #10 on: February 26, 2016, 08:05:47 AM »
Ok, when you say taxable fund. Is that going to Vangauard.com and directly investing in an Index Fund? That money would be my taxable investments that I could draw down on at any time without penalty?

Do you consider the Roth IRA money a taxable fund too? From what I understand we could also draw down on the contributions amount within the Roth IRA without penalties before 59, correct? 

Gin1984

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Re: Reader Case Study- Help me with my Financial Plan!
« Reply #11 on: February 26, 2016, 08:11:50 AM »
Ok, when you say taxable fund. Is that going to Vangauard.com and directly investing in an Index Fund? That money would be my taxable investments that I could draw down on at any time without penalty?

Do you consider the Roth IRA money a taxable fund too? From what I understand we could also draw down on the contributions amount within the Roth IRA without penalties before 59, correct?
Before 59.5 yes.  But personally I'd rather draw down taxable over Roth because the Roth, to me, is also part EF because of no taxes.

JourneyToLaunch

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Re: Reader Case Study- Help me with my Financial Plan!
« Reply #12 on: February 26, 2016, 08:14:31 AM »
Ok, I see.

Thank you for all the help! It has been very eye opening. Now I just have to convince my husband of the benefits of saving more pre-tax dollars. We also need to come together to create a plan we both agree with.

MDM

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Re: Reader Case Study- Help me with my Financial Plan!
« Reply #13 on: February 26, 2016, 11:24:04 AM »
Also- can anyone walk me through a scenario of how we would access all the money in the 401K's and 403B plan if I retire early in my late  40's or at 50 but my husband continues to work? How would we access the extra money if we need it? We would probably be able to live on his income but may need some supplemental income as well.
See http://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/.  With any luck that will give you enough ideas...?

Gin1984

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Re: Reader Case Study- Help me with my Financial Plan!
« Reply #14 on: February 26, 2016, 11:29:10 AM »
Ok, I see.

Thank you for all the help! It has been very eye opening. Now I just have to convince my husband of the benefits of saving more pre-tax dollars. We also need to come together to create a plan we both agree with.
You can always do it over time.  Though maxing it out ASAP can be useful, doing it over time will help get used to it, especially if you time part of it during a raise.

JourneyToLaunch

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Re: Reader Case Study- Help me with my Financial Plan!
« Reply #15 on: February 29, 2016, 01:57:21 PM »
I'm happy to report that after a family/budget planning meeting we had on Friday, my husband has agreed to also max out his 403B Plan! So we are now maxing out my 401K, his 403B & his 457 Plan.

I also had my job performance review today which resulted in a promotion,  pay increase and a higher bonus (53% increase over my bonus last year). Needless to say, we need to be saving in all the pre-tax accounts that we can for this year.

It's amazing how my mindset has already changed. Instead of thinking how I can "spend" the influx of money from my job bonus and raise, I am thinking of more ways to save & invest.

For now we have decided to take the profit from the rental after maintenance reserves and throw it towards our current mortgage. I really would like to pay it down sooner rather than later since I can't see me being able to retire early with that payment.

Axecleaver

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Re: Reader Case Study- Help me with my Financial Plan!
« Reply #16 on: February 29, 2016, 02:58:18 PM »
Quote
I have not started saving anything in 529 Accounts. I originally was going to fund up to $10,000 per year to get the maximum state deduction (I am in NYC) but I just listened to a Radical Personal Finance podcast about the disadvantages of investing in 529's and I am having second thoughts. I don't know that I want to tie up my money in those accounts. Should I invest the money somewhere else instead?
Before you throw it into the mortgage...

NY's 529 plan is awesome, we get a deduction on our awful NY state taxes, and we get to invest our balances in Vanguard funds at Admiral rates. What's not to like?

If your kid ends up not using it for college, you can give it to a different kid instead, or they can use it for other qualified educational expenses (beauty skill, tradeschool, etc). Worst case, you can transfer it to an eventual grandkid (at which point it'll have grown so much, you'll have created a perpetual family educational trust fund...)

You should max out your other tax deferred retirement accounts first, but looks like you can do that AND start the 529. BTW, both you and your husband can put 5k a year state-tax deferred (each) into a 529 for each kid. So you could put up to 30k in there. It's also possible to just give it to the oldest kid, and "roll" the dollars down to the next in line as the oldest graduates.

MDM

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Re: Reader Case Study- Help me with my Financial Plan!
« Reply #17 on: February 29, 2016, 03:11:46 PM »
I'm happy to report....

Congratulations!

Dee18

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Re: Reader Case Study- Help me with my Financial Plan!
« Reply #18 on: February 29, 2016, 07:02:27 PM »
If your kid gets a scholarship, you can take that amount if money out of your 529 to use for anything, without paying the 10% penalty.  You just have to pay federal income tax on the earnings.  Or you can have it go to the college student and they can pay tax on the growth it as their income. State tax laws may differ if you initially got a tax break for the contribution.)

JourneyToLaunch

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Re: Reader Case Study- Help me with my Financial Plan!
« Reply #19 on: February 29, 2016, 08:44:05 PM »
Thanks MDM!

And to AxeCleaver and Dee18, I have been giving further thought to the 529 Plans. I think we will want to contribute no more than $10K per year between the two kids to get the NY state maximum deduction. Any additional money we have , will go into index investing in a taxable account and principal pay-down of the mortgage. I think the additional money towards those three goals will be a balancing act of sorts.

JourneyToLaunch

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Re: Reader Case Study- Help me with my Financial Plan!
« Reply #20 on: March 25, 2016, 07:50:04 AM »
Hey guys! I'm back with more updates and questions.

I have come up with a plan to FIRE in 7 years. This includes my husband my husband working until 55 (he has a more flexible job as a teacher and gets summers off in the year).

The plan is to maximize his 457 , 403B & my 401K account at $18K for the next 7 years. I also have a company retirement account that my company funds (no contribution from me) every year and we will max our Backdoor Roth IRA's. Any money left over will go to index investing, paying primary mortgage off and 529 accounts.

Using a 6% return, if we max these accounts out over the next 7 years, we will have a total balance of about $1.1M. At that point, I would quit my job and we would live off of my husband's income of about $74K base (will prob grow over the next 7 years) plus $15K additionally in extra jobs he gets. We would stop contributing to all retirement accounts at that point and let the $1.1M grow on autopilot over the next 15 years (using a 6% return, without any more contributions, I am getting a balance of $2.4M in 15 years). Does that sound right?

Additional things to consider are that:
- We currently spend about $80K a year in expenses. If I FIRE at 40 without a mortgage, I could get that to $55K a year. At full  retirement (age 55), I am assuming we will need between $60K and $80K a year to live really comfortably.
-At 56 our investment property will be paid off (the rent we get right now is $2,660 a month, so we assume that we will have $22Ka year after paying condo expenses & taxes)
 - At 55, my husband will be able to retire with a pension of about $44K a year
- If he retires at 55, he will be able to access his 457 Account (which will have grown to $457K by then)
- At 59, we will be able to access all other retirement accounts.

Running all the numbers, it seems like we will def have more than enough by the time we are 55, almost too much if you include his pension and the investment property income. 

This has me thinking, can I FIRE even sooner than the 7 year launch? The only thing holding me back is our primary mortgage. Right now , its about $2,339 a month. I would really like to have this paid off before I quit as we would be able to live much more comfortably on my husband's salary. Over the next 7 years, the plan is to aggressively pay down the mortgage as much as possible so that it can be paid off or close to paid off in 7 years. We have $347K left on the mortgage at a 4.375% rate.


The only thing is, if I push my FIRE date up, we would still have the primary mortgage. The only way to get rid of that would be to maybe do a cash out refinance on the investment property and use the cash to pay down the primary mortgage. Right now the investment property has a 4.75% 30 year mortgage set to pay off in 2039. Should we consider doing this to get rid of our primary mortgage and FIRE earlier than 7 years? What are the negative implications in doing this? I have no intentions to sell the investment property and it has probably over $250K in equity in it. The net cash flow we receive after paying the current mortgage and taxes is around $500 a month. Right now, we are using that $500 a month to extra on our primary mortgage.


-So how does our over all 7 year Launch to FIRE plan look?
-Should we consider doing a cash out refinance or equity lines on investment property to pay of primary mortgage so I can FIRE earlier?

Axecleaver

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Re: Reader Case Study- Help me with my Financial Plan!
« Reply #21 on: March 25, 2016, 09:08:28 AM »
Great update. Looks like you have things figured out. Maxing out all the tax-deferred options is a great choice. Along with the pension, you're set.

If you're planning to hold the investment property for the full term of 30 years, you may want to consider a cash-out refi now, because the interest rates we have today are not likely to be seen again in our lifetime. This would also help to solve your cashflow concerns around holding a mortgage on your primary home after retirement. Your big decision point seems to be on whether you should keep working to pay off the mortgage on your home, or retire earlier and use your taxable investments to fund that until you get to 55. There's no wrong choice here. Congrats, good plan!

JourneyToLaunch

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Re: Reader Case Study- Help me with my Financial Plan!
« Reply #22 on: March 25, 2016, 09:22:36 AM »
Thanks Axe!

I guess I need to figure out the maximum we will be able to cash out on the investment property while keeping its total mortgage payment and taxes to $2,600 or less. Ideally, I would love to still have it pay off when we are 56, so maybe refinancing to a 15 year and doing a cash out is feasible too? Not sure. I have some more research to do.

Also, I'm content with working for at least 2-3 more years. By then , hopefully I will be coming off another 6 month maternity leave with our 3rd child, collect my last bonus check, work a few more months and chuck the deuces to my employer. Kids will be 5, 3 and  (1 if we have another) by then.

Maybe, I will want to keep working after that? I don't know , I just want the option to walk away vs feeling locked in for a definite amount of time.
 

Gin1984

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Re: Reader Case Study- Help me with my Financial Plan!
« Reply #23 on: March 25, 2016, 09:33:31 AM »
Few things, check with both his employer and yours, many allow access to your retirement accounts at 55, not 59.5.  You can't roll them into an IRA and pull at 55 but you can, if you employer allows, pull from a 401k/403b. 
Secondly, have you looked into refinancing your primary home?  A fifteen year refi at my credit union is 3.08% which is $2376.  $1782 is a little less than $600 more than your minimum payment but if you are already paying a least $500 a month, why not lower the rate too?  That may make it easier to pay down the mortgage in seven years as long as the closing costs are not too bad.  That said, you can always pull from the taxable account/Roth to pay down the debt in seven years, you will have a harder time retiring IF the debt is not paid off and you don't have the extra money.  Focus on your pre-tax/529s/Roth/taxable then if you can kill the mortgage. 
But overall I think your plan is great.  You may be more risk adverse than me and would rather pay off the mortgage than invest but that is ok as long as it helps you sleep at night.

JourneyToLaunch

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Re: Reader Case Study- Help me with my Financial Plan!
« Reply #24 on: March 25, 2016, 12:06:35 PM »
Thanks Gin

I quickly called a lender. They said I could go to up to $417K 30 year new loan amount (anything over would bring it to non-conforming and rates would increase)

- a $417K loan amount is about a $2,020 payment ($10K-$13K in closing costs)
- a $392K loan amount is a $1,899 payment ($8K-$11K in closing costs)

both would carry a rate of 4.125%.

I am leaning towards the lower loan amount since I still want the rent of $2,660 to cover payments, common charges and taxes. This would give me about $100K in cash including closing costs. I would then put that $100K to the primary mortgage and continue to pay down aggressively over the next few years.

Does that sound like it would be worth it to do? This would extend the loan maturity from maturity from 2039 (we'd be 56) to 2046 (we'd be 63)

I intend to call around other places and to call Chase who has the current mortgage to compare rates and closing costs next week.

As for refinancing the primary property, that's an option too, except, I don't want to lock into a higher payment just in case our situation changes but its something I can look into as well. I don't mind increasing the mortgage payment on the investment property as long as the rent would cover it.

Gin1984

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Re: Reader Case Study- Help me with my Financial Plan!
« Reply #25 on: March 25, 2016, 12:13:49 PM »
I personally would no extend the loan (increase the interest) to pay off a low rate loan.