Author Topic: Whoohoo! Debt paid! Now what??  (Read 2314 times)

bye-bye Ms. FancyPants

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Whoohoo! Debt paid! Now what??
« on: June 08, 2014, 03:00:20 PM »
We are new at this investing business and Iím a little uncertain where to put our savings.  We are finishing up paying off our debt.  After a $500/month investment into VTSMX, we have an extra $1200/month (soon to increase) to do something grand with.  My husband will be able to draw his pension at age 53 (he is now 37) and has some stock options through his employer.  We have 3 rentals that each have about 50% equity (1) 10 yr mortgage @ 4.5, (1) 15 yr mortg @ 4% and (1) awful 20 yr balloon @ 5.9%

Alone I have a dismal retirement savings so far.  I have an old 401K with about $25K.  My current employer does not offer a match. Neither one of us has access to a HSA. 
 
I was thinking we should at least open up a Roth IRA and max it out.  After that Iím a little unsure if we should put money toward the 5.9% balloon rental or increase the VTSMX allocation.  Or something completely different I'm missing? 

What is your opinion? 

waltworks

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Re: Whoohoo! Debt paid! Now what??
« Reply #1 on: June 08, 2014, 03:08:04 PM »
What is your tax situation? If you are planning to FIRE at some point soon, or at least work less, you may want to look at minimizing your current tax burden (ie contribute to 401k even without a match, IRA, etc). If you think you'll make *more* money in the future, on the other hand, maybe that's not as important. You might want to read the "how to write a case study" sticky and edit your post - there's a ton of detail missing to answer this seemingly simple question.

That said... if the 5.9% rental is a solid property (for cash flow, for appreciation, for both, etc) then absolutely kill that mortgage first. In theory you could do a *tiny* bit better in the stock market but that 5.9% is a completely guaranteed return. Putting aside diversification concerns, it's probably a no-brainer to pay that one off as fast as possible. I'm assuming you're in the US - you might also look at refinancing it since you should be able to easily get ~4% (or less) and 15/30 year amortization on that 5.9% loan.

If you can refi it, then I'd just dump everything available into the index fund of your choice, in whatever way works best for your tax situation since you have plenty of RE in your portfolio already.

-W
« Last Edit: June 08, 2014, 03:17:39 PM by waltworks »

bye-bye Ms. FancyPants

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Re: Whoohoo! Debt paid! Now what??
« Reply #2 on: June 09, 2014, 01:46:15 PM »
Thanks for your response Waltworks.  I would like to FIRE or at least work less.  I will work on an official case study to share more details.  Thanks again!

AssetGrinder

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Re: Whoohoo! Debt paid! Now what??
« Reply #3 on: June 11, 2014, 02:14:27 PM »
Max out your registered accounts asap! makes your tax free investments work for you!

You are heavily into property and it would make sense to diversify your investments to cut down on real estate market risk.

Sounds like Index investing or select ETF funds will be the best direction for you.

bye-bye Ms. FancyPants

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Re: Whoohoo! Debt paid! Now what??
« Reply #4 on: June 11, 2014, 08:50:21 PM »
Thanks assetgrinder!

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