Question:
1. What is the best bucket to put our money? Is it a Roth and then pull out only our contributions?
2. Do we start putting money away into a taxable account?
3. I've thought about putting money into a taxable dividend generating mutual fund, but not sure if that is the best approach given our tax bracket.
4. Do I pay down the mortgage on my rental property given that it's 5.5%? The rent I collect covers the mortgage and taxes.
5. Do we increase my wife's 401k contributions?
All of these are what *I* would do in your circumstances, with quick notes as to why. YMMV
1) Up your wife's 401(k) contributions to $18k and contribute $11,000 to a tIRA (not a roth). THis will save you 25% on taxes.
2) yes - but only after maxing out both 401(k)s and tIRAs. Based on your spending ($4500/mo) and income - tax-deferred investments you should have approximately $1,000 after taxes/mo
3) Given your tax bracket your best approach is to max out your 401(k)s and tIRAs. This will save you $11,750 come tax time (25% of $47k in contirbutions)
4) at 5.5% I would pay down the mortgage faster. You may want to do this while contributing to a taxable account or just forgo the taxable account for a while and take the 5.5% 'return' on paying down your mortgage.
5) Yes (for reasons stated above).
Final remarks: You are in a nice spot - good income but still within IRA ranges after deductions. You have no debt other than the mortgages, and quite a bit in savings. I would NOT contribute to a ROTH at your bracket, but plan on using a ROTH pipeline late in life (you already have $75k in there, so that's a great start).
Finally - $4,500/mo is a very high burn rate for monthly living expenses. There's probably a lot of fat there you could trim - if you do a case study and/or break down expenses we might be able to find another $500-1500/mo you could use to kill that rental property loan.
If you have a HELOC that's under 5% (and fixed) you might consider using it to pay down your rental property. Alternatively, if you have a lot of equity in your home, now is a good time to refinance to cash out some of that equity and pay down that rental property debt.