Author Topic: Young family in the Southwest - How are we doing?  (Read 2211 times)

AZDuke06

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Young family in the Southwest - How are we doing?
« on: November 08, 2019, 10:56:52 PM »
Hi Everyone, I am new to posting on these boards after having been a reader for many months.  I'd love to get some inputs on how well my wife and I are doing.  Here is a very brief summary below, just looking for some high level commentary/suggestions/etc:

I am 35, wife is 33.  2 kids - a 4 year old and a 6 month old.  Live in Phoenix/Scottsdale metro area.

Net Worth: 630k
  - Home equity of 225k (home worth 350k, owe 125k, 15 year loan at 3.25%, payment of $1,480 a month)
  - 170k liquid cash
  - 235k in retirement (215k in 401(k)s, 20k in a Roth IRA)

Gross Household Income - $185k a year (wife and I both work)
Two SUVs owned outright worth about 50k combined (not included in net worth calc)
Zero debt of any kind aside from the mortgage

We contribute 15% of income to 401k(s), not actively contributing to the Roth IRA as I'm searching for a new administrator/advisor.  I've kept the higher amount of liquid cash because we plan to move up in house in the next year or so and want the flexibility to have the down payment for a 500-650k house before our current home is sold.

In terms of weak spots, a lack of established college funds for the two young kids comes to top of mind. I'm thinking in the next year I will peel off a chunk of the 170k (or the eventual proceeds from sale of current home) and establish two funds, maybe with 10k each.  Would that be too aggressive given my time horizon?  As the kids come to schooling age, we are contemplating private school, but are not set on that during the elementary and middle school years.  It may hinge upon the quality of the schools nearby the eventual new house we end up in.  I lean towards having a lot of liquid cash on hand to be able to fund such possibilities debt free, and this seems reasonable to me since we are still consistently kicking 15% of our household income into retirement, with generous company matches dollar for dollar of 6% for each of our accounts.  If I'm being too conservative with cash on hand, should I be more aggressive in a non-retirement brokerage investments in addition to the 15% retirement contributions?  Maybe pay down the house a little faster despite the low 3.25% rate?  Where else could I think about aiming the resources I have on hand?

Thanks all!


 

efree

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Re: Young family in the Southwest - How are we doing?
« Reply #1 on: November 09, 2019, 04:49:20 AM »
Welcome to the forum!

My question after reading your whole post is this: what is your goal? Is it to retire as early as possible? Or just to make sure you can have a comfortable retirement starting at 60? Or maybe something else? We can't advise you how to "aim the resources you have on hand" if we don't know what it is you want to achieve.

Typically people on this forum want to retire as early as possible (within reason, of course). But you have two SUVs (spending lots of money on gas, insurance etc.), you are planning to move to a bigger house, and you are thinking about private school for your kids. And your savings rate is only 15% if I understood correctly. Those don't seem like the actions of a Mustachian. With your level of salary, most people here would be able to save at least 40-50%. So again, do you want to save more and retire earlier?

As for your investment questions, you should follow the Investment Order. It's a sticky topic over in the Investor Alley. As you will see, paying off your low-rate mortgage is not on the list, which means in general it's better to invest this money in a taxable account.

P.S. Establishing college funds for your kids is fine, but you should also keep in mind that not every kid wants to go to a college and not every parent thinks that their paying 100% of college costs is best for the kids. Just something to think about.

AZDuke06

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Re: Young family in the Southwest - How are we doing?
« Reply #2 on: November 09, 2019, 06:11:47 AM »
Thanks so much for the reply.  Let me try to add a little more color regarding our savings rate and ultimate goals...

We save about 3/4 of my wife's take home pay, which works out to about 30k a year.  So our overall savings rate is about 35% of our gross income when company match on retirement is included.  This may be an area to improve.

As for retirement, the goal is not to do so early at this point, but to comfortably do so around 60.  I would also like to give my children the ability to go to college (if they choose) debt free at a public university in 15 and 18 years, respectively.  I think my main concern is that I like the feeling of having a big pile of cash on hand, but I'm worried I'm being too conservative with a large portion of my net worth and not putting it to work properly.  Let's say aside from retirement savings that we do successfully put aside that 30k a year....is it wise to just continue growing the liquid cash account?  I will definitely check out Investor Alley, as I suspect the right answer is a taxable brokerage account.  I probably need to stop thinking about a low yield money market as the only place that money can be readily accessible to me.

waltworks

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Re: Young family in the Southwest - How are we doing?
« Reply #3 on: November 09, 2019, 09:15:28 AM »
If your goal is to retire at 60 or so, you're probably fine to just keep doing what you're doing, but try to minimize the lifestyle inflation (bigger houses/fancier cars/etc). And you'll want to get your money working for you, 170k in cash is ridiculous. Figure out what you need for an actual emergency fund, then invest the rest.

Depending on your state rules about 529 contributions (ie, are they tax advantaged somehow) you may want to just put money in your Roth or taxable accounts. The 529 is pretty limiting and generally it's going to be your *last* item on the investment order, because there are a lot of other ways to invest for kids college that are more flexible and have better tax advantages. If you've already maxed out everything else, then you can think about 529s. If you think the kids are going to state schools (or that's what you're willing to pay for) I'd just invest normally and pay for school when the time comes out of taxable accounts.

-W

AZDuke06

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Re: Young family in the Southwest - How are we doing?
« Reply #4 on: November 09, 2019, 12:30:43 PM »
Thanks for your inputs, W.  I have wondered before if there was some sort of special sauce in the 529 that made it worth investing in such a vehicle as opposed to typical taxable investments.  The rules surrounding what are eligible uses for such funds make them a little unattractive to me.  I can certainly foresee a future where one or both of my kids may decide to forego college, but I want to be fully prepared if they decide to go.  My wife and I both went to 4 year public universities without a penny of debt thanks to our families and we壇 like to provide the same hand up to our children.

Taking a step back, One other open question - how have we done in terms of wealth accumulation to date given our ages?  I feel a bit ahead  of the curve compared to the larger population, but looking through the caliber of a lot of members on this site, I知 thinking we need to continue to push even harder to put ourselves among the more elite top 5-7% of households within our peer group.  I知 inspired by many of you!

RedwoodDreams

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Re: Young family in the Southwest - How are we doing?
« Reply #5 on: November 09, 2019, 01:41:38 PM »
Wow, you guys are doing great, especially for your ages! Bravo.

The advantages of 529 plans are that contributions are tax deductible ($4k/year for MFJ) in many states (if you're in AZ, it's deductible), and that all earnings are untaxed if the funds are used for qualified education costs. If you're thinking of private schools for the kids for primary school, you could use 529 funds (I believe the law changed a few years ago) and this could also save you some in taxes.

That said, you have a lot of time until college time for 529 funds to grow. If you wanted to go full bore mustachian re: college funds, you could focus on building your retirement funds and using any excess income after that to pay off your house by the time the kids go to college. The value of your home and retirement funds are not included in the FAFSA calculations, so you could minimize the types of investments that ARE included in the FAFSA calculation (investment accounts, savings accounts, etc.)

i.e., stuff it all in home and retirement funds so that the annual income you need to live on is low to moderate. The kids will get more financial aid because you look low- moderate- income on your taxes. This might be more complicated than you want, but it's an option (and one I'm only learning about myself as my child is a HS senior and I'm starting to learn how all this works).

waltworks

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Re: Young family in the Southwest - How are we doing?
« Reply #6 on: November 09, 2019, 02:34:53 PM »
Taking a step back, One other open question - how have we done in terms of wealth accumulation to date given our ages?  I feel a bit ahead  of the curve compared to the larger population, but looking through the caliber of a lot of members on this site, I知 thinking we need to continue to push even harder to put ourselves among the more elite top 5-7% of households within our peer group.  I知 inspired by many of you!

Comparing to the general population, you're kicking ass - a savings rate in the 30% range is astounding compared to the average 'merican, regardless of income level. Good work.

Within the MMM forum cohort, you're spending a fortune on stuff that arguably doesn't make you happier/healthier/the world a better place. Hence you are wasting a ton of money, and you could do far better. Your NW is average for your age for the crowd around here, but it's pathetically low given your income level. Assuming you've been working these jobs for the better part of a decade, most MMM forum folks would be FIRE by now.

That said, it's not a competition. You should do what works best for you, and if you truly need $50k worth of automobiles sitting around depreciating and belching exhaust as you drive back and forth on errands, or a bigger house with a bigger pool and more A/C all summer, so be it. A good exercise is to truly track all your expenses for a few months (or indefinitely) and look at what you're spending on things you don't really need or sometimes even really want - then cut that stuff all out.

-W

Freedomin5

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Re: Young family in the Southwest - How are we doing?
« Reply #7 on: November 09, 2019, 03:52:33 PM »
Taking a step back, One other open question - how have we done in terms of wealth accumulation to date given our ages?  I feel a bit ahead  of the curve compared to the larger population, but looking through the caliber of a lot of members on this site, I知 thinking we need to continue to push even harder to put ourselves among the more elite top 5-7% of households within our peer group.  I知 inspired by many of you!

Comparing to the general population, you're kicking ass - a savings rate in the 30% range is astounding compared to the average 'merican, regardless of income level. Good work.

Within the MMM forum cohort, you're spending a fortune on stuff that arguably doesn't make you happier/healthier/the world a better place. Hence you are wasting a ton of money, and you could do far better. Your NW is average for your age for the crowd around here, but it's pathetically low given your income level. Assuming you've been working these jobs for the better part of a decade, most MMM forum folks would be FIRE by now.

That said, it's not a competition. You should do what works best for you, and if you truly need $50k worth of automobiles sitting around depreciating and belching exhaust as you drive back and forth on errands, or a bigger house with a bigger pool and more A/C all summer, so be it. A good exercise is to truly track all your expenses for a few months (or indefinitely) and look at what you're spending on things you don't really need or sometimes even really want - then cut that stuff all out.

-W

+1

Your Money or Your Life is a great book to flesh out some of the ideas mentioned by waltworks.

former player

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Re: Young family in the Southwest - How are we doing?
« Reply #8 on: November 10, 2019, 02:08:43 AM »
Retirement aged 60 is a twenty-five year timeline, to 2045.  Are you sure that 25 years is a good timeline to be investing a large chunk of your money given the uncertainties over population vs water use and supply in your part of the desert?

MoneyizHere

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Re: Young family in the Southwest - How are we doing?
« Reply #9 on: November 10, 2019, 06:35:34 AM »
I'm not a fan of your plan. 

Think you should pay off the mortgage and not drop $4k/year in interest into oblivion really be debt free - since right now you could pay off the house and be done with it forever, supercharge your retirement and then evaluate if you want to go into debt again for a bigger house.

Going back into debt again on a larger house means that you'll have future years of slavery.
Spending additional on private school will give you future years of slavery

Feel what it is like to be truely "debt free" and enjoy the freedom that it brings.  You get more options when you're not indebted to your house or your spending.

People get all excited about 529 plans for the tax advantages - but the retirement plans are even more generous since you're exempt from Federal tax rates of (12%-22% @ your bracket+ your state tax rate) whereas your state income tax rate (for 529)is less than that?  By the time your kids are in college- you could decide whether your stash is enough to retire and then - your kids could get scholarships or perhaps an interest free loan from yourself (paid by being debt free for so many years while you were no longer slave to debt).

t-IRA all the way - keep your expenses low and be content with what you have.  That's the mustashian way. 

AZDuke06

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Re: Young family in the Southwest - How are we doing?
« Reply #10 on: November 10, 2019, 10:30:30 PM »
A lot of really great perspectives and advice here.  Thanks to everyone who has commented.

Redwood/W/Freedomin5 - appreciate the mix of encouragement and some tough love on where we could, and maybe should, be at this point.  i thought I'd comment back on a few of the things mentioned.  Firstly, the 185k income has not in fact been in place for the better part of a decade, or even 5 years for that matter.  Things have started to spike from the low 100s to upper 100s over the past 2 years really.  In those two years our NW has grown by 200k...certainly a good chunk of this is attributable to real estate and retirement account appreciation, but we have been raising our savings rate and will hope to continue to do so.  I am going to take a closer look at our expenditures over the past 6 months and see where there are areas to clean up.

I've done a little more research on the Arizona 529 and I do think there is some opportunity to take advantage of there, though I think a mix of the 529 and some personal taxable accounts is probably the way to go.

former player - I'm not quite sure what you're getting at in regards to the water supply vs. population growth in the PHX area?  How would this play a part in my thinking in regards to investment, aside from anything other than maybe real estate strategy?  It strikes me as overly conservative to plan for a water shortage that will tank the equity in my home or other investments.  As far as I have researched, the Central Arizona Project and the Salt River project are two institutions in place to ensure plenty of water to handle population growth in the valley for many decades to come.  All that said, certainly would interested in hearing you expand on this...

MoneyizHere - You're coming right out of the Dave Ramsey school.  I've been listening to Dave for several years, so believe me when I say I've had the urge driven into me to take 125k of my liquid cash and pay off the house.  Haven't had the guts to do it, nor have I been fully convinced beyond any doubt that it's the right move.  You're right I'm essentially tossing away 3,800 annually on interest, though even the measly money market interest I make on the equivalent of the outstanding mortgage balance is roughly $2,500, so I don't see much of a gain here making it worth foregoing either the low yield MM return or using the cash for investment elsewhere.

One other question I haven't raised yet regarding HSA's - I have been contributing $5,400 pre-tax annually, in addition to a $1,500 contributed by my employer.  With the recent birth of my youngest child and some moderately expensive medical care for my older child over the past 1.5 years, I haven't sustained a balance of much more than $1,000 at any given time.  I see it driven home on these boards to max your HSA annually.  Naturally, these funds can only pay for medical expenses.  Is the idea here largely in place to allow for aggressive investment within the HSA, or simply just to pump up the account for short term tax sheltering and the assumption that you'll need tens of thousands of dollars of care down the line?  I suppose a combination of both, but I wonder what the thinking is here particularly if you anticipate a long stretch of time where you may not have a lot of medical expenses.


waltworks

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Re: Young family in the Southwest - How are we doing?
« Reply #11 on: November 11, 2019, 09:14:03 AM »
If you want to really kick yourself for not investing (and motivate yourself to do better), check out https://dqydj.com/sp-500-periodic-reinvestment-calculator-dividends/

If you'd invested $4k/month (easily doable on your previous ~$100k/year income) since 2009, your portfolio would be worth a bit over a million bucks, even if you never increased your contributions as your income increased. And that assumes no employer 401k matches or windfalls.

Now, you'd have to drive much cheaper cars and such to pull that off. Life is about choices. Keep that in mind going forward.

-W

Laura33

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Re: Young family in the Southwest - How are we doing?
« Reply #12 on: November 11, 2019, 11:12:20 AM »
A few thoughts:

1.  The biggest damage you can do to yourself is lifestyle inflation.  Every extra dollar you spend is another $25 you will need to have saved by the time you retire to continue that level of spending -- and worse, the more you jack up your lifestyle as your income increases, the less time you have to save all that extra money, because the bigger money tends to come later and later.  I am not worried specifically about A house or A car.  But I am worried about the thought process:  you don't want to have the next raise become an excuse to upgrade your lifestyle.  Your $350K house was just fine when that's what you could afford, right?  So is the $500K house something that you have been shooting for since you got married, or is it something that you have just decided that you want because now you can afford it?  Same with private school: it's not just the school, it's all of the expectations and peer pressure that go with it -- nicer clothes, nicer cars, nicer vacations, contributions to the PTA/endowment, phones and cars for the kids, you name it.  Look very, very, very hard at how all of the other families that go to that school live, because that is what you will naturally drift towards if you send your kids there.  I have said it many times, but the best decision I ever made was living in a neighborhood that was well below what I can afford, because it helped shape my own and my kids' expectations about what life is like and how much crap parents need to provide.

2.  Your retirement stash includes only the assets you intend to spend to cover your retirement.  So a bigger house gets you nothing unless you are planning to sell it and downsize.  And trust me, once you get used to a certain lifestyle, you're going to find yourself very hesitant to downgrade at 60, so I wouldn't even plan on freeing up that equity then (if you downsize at all after 30 years of private schools and half-million-dollar neighbors, I can almost guarantee it will be to a smaller-but-upscale-and-thus-equally-expensive place that caters to wealthy retirees).  As a result, I consider a home as a consumption item in retirement planning, not an investment.

3.  The 4% rule assumes that your assets are invested in a balanced portfolio of stocks and bonds.  That means cash doesn't count.  You are welcome to look at your cash as a backstop to cover X years of expenses, but you can't just include it in the rest of your assets and figure it in the 4% calculations.  If you want the kind of growth you're going to need to retire at 60, you need it invested.

4.  I am strongly against paying off such a low mortgage -- if the market doesn't return more than 3.5% over the next 30 years, we have bigger problems as a country, and none of us are going to be retiring anyway!  OTOH, it makes less than no sense to owe money at 3.5% while having well over six figures sitting there earning nothing.  So either invest it or use it to get rid of the debt.  What you're doing now is the worst of both worlds.

5.  I am a fan of 529 accounts.  I have gotten to knock $10K off my state taxes every year, which saves me about $900/yr that I can use for other stuff.  I also now have more than twice what I invested, which I can cash in and use without paying any capital gains taxes at all.  Total win-win from my perspective; in fact, if I get close to dying with a buttload of money in the bank, if I'm smart, I'll use it to set up 529s for younger relatives and start working on some generational wealth.  To mitigate my risks, I contributed only to the amount of the state tax deduction, and then saved extra in a regular taxable VTSAX account that I can use for whatever I need.  But what's the worst that can happen?  Well, I have two kids, so if one doesn't use it, I can roll it to the other (who appears to be on a med school track and so will need every penny and then some).  I can use it for a kid's trade school if that's what they want.  Or I can roll it over to myself, or to my niece and nephew who could really seriously use it.  Or I cash in any leftover and pay the same taxes I'd have been paying anyway on the growth, plus a 10% penalty -- again only on the growth.  So personally, I'm taking the 100%-certain up-front tax deduction and tax-free growth, and I'll take my chances on that 1% possibility that I might need to pay a small penalty on the earnings of whatever small amount of money doesn't get spent.

6.  HSAs:  the idea is that you pay current medical expenses out of cash flow, invest the HSA aggressively, and then let it ride until you need the money for medical expenses in retirement. 

ZMonet

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Re: Young family in the Southwest - How are we doing?
« Reply #13 on: November 11, 2019, 03:02:52 PM »

5.  I am a fan of 529 accounts.  I have gotten to knock $10K off my state taxes every year, which saves me about $900/yr that I can use for other stuff.  I also now have more than twice what I invested, which I can cash in and use without paying any capital gains taxes at all.  Total win-win from my perspective; in fact, if I get close to dying with a buttload of money in the bank, if I'm smart, I'll use it to set up 529s for younger relatives and start working on some generational wealth.  To mitigate my risks, I contributed only to the amount of the state tax deduction, and then saved extra in a regular taxable VTSAX account that I can use for whatever I need.  But what's the worst that can happen?  Well, I have two kids, so if one doesn't use it, I can roll it to the other (who appears to be on a med school track and so will need every penny and then some).  I can use it for a kid's trade school if that's what they want.  Or I can roll it over to myself, or to my niece and nephew who could really seriously use it.  Or I cash in any leftover and pay the same taxes I'd have been paying anyway on the growth, plus a 10% penalty -- again only on the growth.  So personally, I'm taking the 100%-certain up-front tax deduction and tax-free growth, and I'll take my chances on that 1% possibility that I might need to pay a small penalty on the earnings of whatever small amount of money doesn't get spent.


Could you not roll it over to grandchildren, if any come into the picture?  I agree with your idea of creating generational wealth via a 529, obviously via education, and was wondering why you couldn't overfund a 529, limited to the maximum amount per account, and let it rid for multiple generations?  Seems better than willing money in a post-tax account.  Maybe I',m missing something though.

Laura33

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Re: Young family in the Southwest - How are we doing?
« Reply #14 on: November 12, 2019, 08:26:05 AM »

5.  I am a fan of 529 accounts.  I have gotten to knock $10K off my state taxes every year, which saves me about $900/yr that I can use for other stuff.  I also now have more than twice what I invested, which I can cash in and use without paying any capital gains taxes at all.  Total win-win from my perspective; in fact, if I get close to dying with a buttload of money in the bank, if I'm smart, I'll use it to set up 529s for younger relatives and start working on some generational wealth.  To mitigate my risks, I contributed only to the amount of the state tax deduction, and then saved extra in a regular taxable VTSAX account that I can use for whatever I need.  But what's the worst that can happen?  Well, I have two kids, so if one doesn't use it, I can roll it to the other (who appears to be on a med school track and so will need every penny and then some).  I can use it for a kid's trade school if that's what they want.  Or I can roll it over to myself, or to my niece and nephew who could really seriously use it.  Or I cash in any leftover and pay the same taxes I'd have been paying anyway on the growth, plus a 10% penalty -- again only on the growth.  So personally, I'm taking the 100%-certain up-front tax deduction and tax-free growth, and I'll take my chances on that 1% possibility that I might need to pay a small penalty on the earnings of whatever small amount of money doesn't get spent.


Could you not roll it over to grandchildren, if any come into the picture?  I agree with your idea of creating generational wealth via a 529, obviously via education, and was wondering why you couldn't overfund a 529, limited to the maximum amount per account, and let it rid for multiple generations?  Seems better than willing money in a post-tax account.  Maybe I',m missing something though.

I think you can -- I'm just not counting the grandkid eggs before they're hatched, as DD is currently adamant about no kids.  ;-)  I'm also not ready to make that commitment before I know that we have enough for our own needs -- at this point, it looks like we'll have enough for college, but not much left (if any).  But yes, if we do have grandkids, I plan to open a 529 for them at birth and contribute as my circumstances allow.  This is something my mom and stepdad started doing as Christmas presents a few years ago, and boy do we appreciate it now that the college bills have started to hit -- they have a whole semester of tuition/room/board covered!

frugal_c

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Re: Young family in the Southwest - How are we doing?
« Reply #15 on: November 14, 2019, 05:29:55 PM »
Really consider paying off the home if you're not going to invest. I think it's more like $2k a year extra if you do that, assuming you are getting 2% on your cash. You are also taxed on your money market funds i assume, so there's that too. You can make $2k a year extra for basically no work. Easy.  Imagine if someone offered to pay you 2k for an hour of busywork, I would certainly take it. You can always remortgage or you can get a LOC on your home as a fallback. 
« Last Edit: November 14, 2019, 05:33:54 PM by frugal_c »

tamuaggie2011

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Re: Young family in the Southwest - How are we doing?
« Reply #16 on: November 15, 2019, 10:18:31 AM »
Quote
One other question I haven't raised yet regarding HSA's - I have been contributing $5,400 pre-tax annually, in addition to a $1,500 contributed by my employer.  With the recent birth of my youngest child and some moderately expensive medical care for my older child over the past 1.5 years, I haven't sustained a balance of much more than $1,000 at any given time.  I see it driven home on these boards to max your HSA annually.  Naturally, these funds can only pay for medical expenses.  Is the idea here largely in place to allow for aggressive investment within the HSA, or simply just to pump up the account for short term tax sheltering and the assumption that you'll need tens of thousands of dollars of care down the line?  I suppose a combination of both, but I wonder what the thinking is here particularly if you anticipate a long stretch of time where you may not have a lot of medical expenses.

The other benefit of the HSA is money can be taken out beginning at age 65 for any reason. Now you would have to pay taxes on the gains but you were able to defer that for 30 years.

Quote
I am strongly against paying off such a low mortgage -- if the market doesn't return more than 3.5% over the next 30 years, we have bigger problems as a country, and none of us are going to be retiring anyway!  OTOH, it makes less than no sense to owe money at 3.5% while having well over six figures sitting there earning nothing.  So either invest it or use it to get rid of the debt.  What you're doing now is the worst of both worlds.

I completely second this. However really the thing that needs a bigger examination is why you feel the need to have such a high cash stash? Once you have done as other posters have said and estimated your yearly expenses you should for sure drop this amount down to AT MOST one year of expenses on hand. The rest should be deployed in some money to increase you and your wife's net worth and make the money work for you.

AZDuke06

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Re: Young family in the Southwest - How are we doing?
« Reply #17 on: November 15, 2019, 10:38:20 AM »
The driving factor behind keeping the cash on hand in the short term is we are thinking of moving up in house and having enough for a large down payment without needing to have our current home sold is a big benefit when searching for a home.  Takes away the contingency of getting our home sold first before entering into contract.  That being said, that benefit may not be worth what I'm losing out on.  That cash pile has grown substantially in the past 1.5-2 years, so it hasn't been sitting there for 10-12 years, but I'll admit its not working for me at all right now.  I've been paying for the flexibility to jump when an opportunity presents itself.  I also could consider a mortgage recast if I invest the money and have less to put down up front, recasting after selling the current home.

Taking all recent commentary into consideration, I'm thinking of something along these lines in the short term...I'm leaning towards not paying down the mortgage in full, but instead drawing down on the 170k over time.  First off, continue maxing out my 401k and HSA.  Secondly, ensure my wife is maxing her Roth 401k at work, which we foolishly hadn't been doing yet, though it was close.  Additionally, open up two new Roth IRAs and get 22k in them in immediately (Dec + Jan) in the form of our '19 and '20 contributions.  In addition to that, open up a new online brokerage account and dump money into some long term growth funds.  I'm thinking invest the excess cash into the brokerage in intervals over the next 2 years or so, given that stocks seem relatively expensive right now.  I understand timing the market is a fool's errand, but does this make more sense than to invest say 100-120k all at once?  I think I'd like a liquid fund of about 40k at the end of the day, so this would give me about 100k to strategize around aside from the roth IRA contributions for this year and next.

former player

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Re: Young family in the Southwest - How are we doing?
« Reply #18 on: November 15, 2019, 02:42:22 PM »
A lot of really great perspectives and advice here.  Thanks to everyone who has commented.


former player - I'm not quite sure what you're getting at in regards to the water supply vs. population growth in the PHX area?  How would this play a part in my thinking in regards to investment, aside from anything other than maybe real estate strategy?  It strikes me as overly conservative to plan for a water shortage that will tank the equity in my home or other investments.  As far as I have researched, the Central Arizona Project and the Salt River project are two institutions in place to ensure plenty of water to handle population growth in the valley for many decades to come.  All that said, certainly would interested in hearing you expand on this...

I just googled, looking for terms like "climate change" and "water supply".  I then looked for stories from reputable sources, preferably scientific ones, which projected at least a decade into the future.

When you look at the statements of government and public sector organisations such as water supply companies, you need to remember that they are rarely thinking seriously beyond a few years into the future (ie the election cycle or length of time of appointments to the boards of public organisations) and that they have a consistent interest in projecting a positive future for their locality.

Taking all that into account, the problems for Phoenix in 30 years' time will be an increase over that time in extreme heat (a third of days over 100C) and problems with both ground water and river water supply which will be exacerbated by increasing population.

Your risk, of course, but compared to more environmentally sustainable locations your half million investment now may be more or less worthless in 15 or 20 years' time.