Author Topic: What to invest and where to put it  (Read 2485 times)

ToughMother

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What to invest and where to put it
« on: April 08, 2012, 09:53:09 AM »
Ah, Mustachers,

Despite all my studies of this site and others, I'm not sure how to proceed and thus would appreciate a good punch in the face.

Here's the scoop:
Just got a promotion at my current job to 87K minus 11% which goes to the pension fund (eligible at 55 after 10yrs at the gig -- got 8.5 yrs to go on that count, if I leave before that I get 80% of what I put in (20% to taxes)).  I can actually see staying there that long (provided I don't get dumped along the line during cost cutting measures that happen every semester).  Anyway, this gig will give me a pension (based on years of service and last 3 years of salary).  If I retired as soon as I could and my salary didn't change, it would be about $1250/month.  Current monthly expenses run about $3000 which includes $1000 to mortgage principle/interest.

Have about 165K in a TIAA CREF account that can't be touched until 65.  No more going in there.  Another bit of retirement money in a traditional IRA ($6200).

Debt is about 185K in mortgage (no loans, CC, etc).

And I have about 50K in various and sundry accounts -- nothing with great interest, this was for emergency fund, savings, etc.

So here's where I need help.

A. With the raise, I'll now have an additional $1200 per month.  I'm thinking of putting $600/month towards the mortgage (get it way down over the next 8.5 years, but that won't pay it off).  When I can get rid of mortgage, monthly expenses are down to $2000 ish.  If pension is $1200 then I need to generate $800/month minimum.

B. So about generating $800 per month.  First, that 50K.  WTH do I do with it so it produces a bit more income, grows better over the next 8.5 years?  Roth IRA and dividend stocks?  I want to be able to access it should the SHTF... Also, that extra $600/month to invest -- same thing about where to put it.  Ideas?

C. Come 59.5 I'll be able to grab the $ in the IRA (that won't be too long after the 8.5 yr away retirement date) but that is chump change...

D. 62? A bit of soc security? Prior to this gig, I was putting $$ in there...

E. Come 65, I'll be able to access the TIAA CREF retirement money (or put it into an annuity or something).


Hit me.


In English and Latin,
ToughMother.

gooki

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Re: What to invest and where to put it
« Reply #1 on: April 10, 2012, 01:35:33 PM »
My 2 cents, keep $10k as emergency funds, and drop $40k on the mortgage then put all your additional income on your mortgage. YES ALL OF IT.

You'll be debt free in 6 years (assuming 3.5% interest rate). Once there then worry about what to invest in - you've got six years to learn so take your time and start tracking a few investment options.

If your interest rate is above 3.5% - even more reason to kill that mortgage ASAP.
« Last Edit: April 10, 2012, 01:39:30 PM by gooki »

AJ

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Re: What to invest and where to put it
« Reply #2 on: April 10, 2012, 03:04:07 PM »
Ok, wow, so much to digest. If I'm reading right you want to fully retire in 8.5 years, and you're about 50 years old now (just guessing based on what you said about your IRA)? So, you'll need to make up the $800 a month difference between when you retire at age 58 and your SS kicks in to make up the difference at 67. $9600 a year for 9 years is about $87k.

Sounds like your plan is two-fold:

1. Pay off the house in 8.5 years to reduce monthly expenses
2. Save up $87k to bridge the gap until SS.

For #1: If I make some assumptions about your current mortgage, I'm guessing you could fully pay it off in 8.5 years if you throw the whole $1200 at it each month. If you want to give more specific numbers, we could get more nitty gritty.

For #2: Your $50k can reach $87k in 8 years at 7%. How you reach 7% could be debated.

If you choose to take SS early #2 would be moot. $50k is enough to bridge the gap from 58 to 62 even at 0% interest.

ToughMother

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Re: What to invest and where to put it
« Reply #3 on: April 12, 2012, 09:50:07 AM »
Thanks for the good thoughts.

I'm not confident enough about job security to throw all but 10K into the mortgage, but it sounds like throwing more at the mortgage rather than splitting it between savings and mortgage is a recommendation.  My rate is 5.375 but due to declining home prices, refi to a lower rate just means that I'll pick up PMI where I have none now.

Sounds like tossing the extra cash at that, especially to get me down to where I can refi w/o PMI is a good way to go.

Thanks