Life Situation: It's just my husband and me, no current plans for kids (we are 30, I guess the clock might still start ticking but I doubt it). Last fall I paid off my 70K in student loans, a huge goal of mine. No debt besides the mortgage. We bought in 2013, and at the time couldn't consider the 15 year loan due to my student loan payments. I'm still not sure whether or not it would be worth it, hence the post.
Our FI plan is to have the flexibility to walk away from our jobs, or dramatically cut down our hours (if we still want to) when we are 45 -- basically this means we are aggressively saving for retirement now and plan to stop contributing at age 45 (or cut down to the match amount or whatever), and then only need enough money to pay the bills. We are currently perhaps a bit behind in savings due to the prior fixation on the student loan, but are quickly catching up. We are a bit light on cash.
Gross Salary/Wages: $5,375 biweekly / $145,125 annual
Pre-tax deductions: $1,457 biweekly, which includes health insurance and paying into pension. We are putting $2,478/mo into 457 & TSP plans, which includes my 5% agency match ($170/pp).
Adjusted Gross Income: $4,035/biweekly, $108,950 annual
Taxes: $10,700 federal, $8,000 state, $8,500 social security, $2,000 medicare
Current expenses: Between 4.5K and 5.5K a month. Last year's total spending, not including student loan payments or husband's tuition, was 60K (20K of which was mortgage). It'll probably be a bit higher this year.
Mortgage:
Interest rate is 3.75%
$467 principal
$866 interest
$328 escrow
~$1670 total
Assets:
$10,000 in emergency fund (contribute $500/mo, would like this closer to 20K but am comfortable with the slow increases)
$69,000 across TSP, 403b, 457
House appraised at $305,000 in 2013 sale
+some small buffer/budgeting cash funds
Liabilities:
$277,000 mortgage
Specific Question(s): Our interest rate on our mortgage is great, at 3.75%. I believe common advice is if your interest is under 4%, you are better off investing your extra money rather than overpaying the mortgage. However, refinancing to a 15 year mortgage from a 30 year mortgage would save us about 100K in interest even if we get the same interest rate (and my understanding is we'd probably be able to get one a bit lower). It also lines up conveniently with the timing of our entry into stopping retirement/gaining more flexibility in life.
According to Bankrate, our P&I would jump to about $1,900 total, plus the $328 in escrow -- let's round up and say our total payment would be $2,300, or about $550/month higher than our current payments.
If we want to keep contributing to our emergency fund (which I do), and have a bit of a monthly buffer (which I do), I think we'd have to pull ~$300 or maybe even $400 a month out of our retirement contributions to be able to make the payments -- except of course taxes would eat up some of that so we'd have to pull a bit more.
We are both in the public sector and while our salaries are good, we do not expect any meaningful raises...probably ever again! We might be able to increase retirement contributions back towards our current level but it would be a slow process.
I am pretty happy with the amounts we are putting in retirement right now - we are on target for our quit-contributing-at-45 goal - but another complication is in the back of my head is I'm always thinking that we should put some money in a Roth IRA, as another form of semi-accessible cash.
So is this worth looking into? Or should we just stay the course with 457/TSP contributions?