Should I invest, pay down mortgage, or just stay put?

[moneymama]

Awhile back I posted this:

Here's some background: I'm a stay at home mom, we have a 4 year old and a baby. My hubby's salary is about $53,000 a year and we live in a low cost of living area. I do bring in some extra income by babysitting but it's not tons and it's not consistent. I'm 32 and my hubby is 39. We owe $110k on our house, the interest rate is 3.75% and we have 18 years left. We have in retirement (with Vanguard): Me: about $49k and him $10k. I freak out because I feel like we are so behind with retirement savings!

Here's where I'm confused. We have $73k in savings because when I worked I saved all my paychecks in anticipation of being a stay at home mom. I don't know if we should take some of the money from savings and put it in retirement (our ROTH IRAs) , on the mortgage, or put it in some other type of investment account. It's not making hardly anything from interest in the savings account.

BUT that money includes savings for new cars for us (his car is 14 years old and mine is 11 so we'll have to replace them eventually), our emergency fund, and money for house expenses like new roof, windows, HVAC etc that we will eventually have to replace.

What would you do? I hate to put a lot of money in retirement and then need it, or put it on the mortgage and then not be able to access it. I just feel like that money sitting in savings is not working for us like it could. Maybe I'm just being crazy.

I ended up maxing out our 2016 AND 2017 IRA contributions, and we now have around $57,000 in savings.  I'm not sure what I should do now. Do I take some of the savings and invest in a taxable account? Do I pay some down on the mortgage? Wait until the market goes down and buy?  Keep the money in savings and max out our IRAs next January for 2018?  Any thoughts? I just don't know where to go from here.

[Bracken_Joy]

So are you still waiting on the cars to die? Because I would make sure I had emergency fund plus car cost (x1 minimum, x1.5 is what I would do, x2 is the safe option). Past that, I would NOT pay down the mortgage. At that rate, it is a hedge against inflation, which is super valuable. Assuming you have no debt, I would then invest after market- unless you foresee not being able to save enough to do your IRAs next year, in which case consider saving it for then.

The always useful MDM's investing order:

WHAT
0. Establish an emergency fund to your satisfaction
1. Contribute to 401k up to any company match
2. Pay off any debts with interest rates ~5% or more above the 10-year Treasury note yield.
3. Max HSA
4. Max Roth or Traditional IRA based on income level
5. Max 401k (if 401k fees are lower than available in an IRA, swap #4 and #5)
6. Fund mega backdoor Roth if applicable
7. Pay off any debts with interest rates ~3% or more above the 10-year Treasury note yield.
8. Invest in a taxable account with any extra.

WHY
0. Give yourself at least enough buffer to avoid worries about bouncing checks
1. Company match rates are likely the highest percent return you can get on your money
2. When the guaranteed return is this high, take it.
3. HSA funds are totally tax free when used for medical expenses, making the HSA better than either traditional or Roth IRAs.
4. Rule of thumb: trad if current marginal rate is 25% or higher; Roth if 10% or lower; flip a coin in between
5. See #4 for choice of traditional or Roth for 401k
6. Applicability depends on the rules for the specific 401k
7. Again, take the risk-free return if high enough
8. Because earnings, even if taxed, are beneficial

[wscott]

You are young and stable and it doesn't sound like you intend to access that savings account anytime soon. You are missing out on a lot of potential gains by not having that money invested.

You might look at your state to find out if you can get tax credits by opening a 529 for your kids. Mine gives you a 20% tax credit for 529 contributions, so that is free money you will use eventually.  As long as the 529 allows good low-fee investment options.

Traditional wisdom says to keep 3-6 months of income available in an emergency fund. You have a little over 12.

Personally, I keep 30 days of expenses in my checking account at all times.  (https://www.youneedabudget.com/ is great for that) And I invest everything else.  In your investments keep an extra 6 months of income in bonds to act as your emergency fund.  It shouldn't take more than a week to get that money back in your checking account, and your 30day balance and possibly a credit card can handle that time.
(This advice might be controversial.  Do what helps you sleep well, $15k in your savings would be fine if it feels better.)

I like jlcollins book for dead simple investing advice: https://www.amazon.com/Simple-Path-Wealth-financial-independence/dp/1533667926/