Where should we be putting our money?

[Honest Abe]

Thank you

[DreamingofFreedom]

How certain are you that you will actually receive the pensions and get that full amount?

[Honest Abe]

Pretty certain.. they would have to open up the state constitution in order to take it away, and by all accounts our pension system is well funded. Also, the newer workers are paying in through their noses so they're not shy about upping contribution limits for the young ones.

Having said that, I realize that anything is possible in this world, hence my aggressive 401k contributions

[Another Reader]

In your shoes I would

- pay off the student loans.

- refinance the house at a much lower interest rate.  Pay the balance down to get sufficient equity for the best rate.

- pay off the car.

I would then look at investments with tax advantages, such as real estate.  Your income puts you squarely in the range of folks for whom the feds want to increase taxes.  You will be paying through the nose unless you find ways to shelter your income.

[Honest Abe]

In your shoes I would

- pay off the student loans.

- refinance the house at a much lower interest rate.  Pay the balance down to get sufficient equity for the best rate.

- pay off the car.

I was going to hit the 5.5% student loans first, without a doubt.. I could erase them all immediately but I also like to have some liquidity...


I've started the ball rolling on a refi for 15yrs @ 2.6%. However I'm going to wait until after Thanksgiving to pull the trigger... if my wife thinks our house is too small (it is) after hosting Thanksgiving we might be moving sooner than later.. Otherwise we'll definitely move in 4-5 years so a refi would be beneficial for sure in the meantime.

[chucklesmcgee]

2. We're getting very close to the Roth income limits... really not going to be sure until I get our tax returns this year.  Should we be thinking about backdoor Roth conversions?

Yes definitely. It honestly takes about 10 minutes to do through a site like Vanguard. You can even do it if you aren't sure about your income for next year.  It's much simpler if you just do one transaction.
1.Even if you aren't using Vanguard, open a traditional IRA account. (No upfront fees I believe).
2.Deposit your contribution into their standard, stable money market fund.
3.Convert the account into a Roth IRA Account. This can be done online under one of the settings menus.
4.Transfer and rollover the amount into your current Roth IRA.
5. Rinse and repeat.

You'll owe tax on the interest generated for the few days while your $5500 sat in that stable money market fund and you waited for the rollover, which shouldn't be more than a couple bucks.
 

[Honest Abe]

We can each contribute $34k/year for a total of $78k to our pre-tax accounts (our employer also offers a 457.) Would a Roth be preferable to that? On one hand I wouldn't want to pay tax immediately on a Roth, but on the other I wouldn't want to have a huge nest egg locked up because I'm worried about tax burden with our pensions.

[rtrnow]

We can each contribute $34k/year for a total of $78k to our pre-tax accounts (our employer also offers a 457.) Would a Roth be preferable to that? On one hand I wouldn't want to pay tax immediately on a Roth, but on the other I wouldn't want to have a huge nest egg locked up because I'm worried about tax burden with our pensions.

Personally, I love the 457 and max mine out. If you're planning an early retirement, the lack of withdrawal penalty on the 457 is great.

[Honest Abe]

I know the 457 is great for that reason... However the pension is so good at 55 that I'm going to stay until then