What to do with 550k TC
Wife and I combine for 550k TC. Have a 500k mortgage at 7% (yay us lol), a 0% interest car loan around 15k, and less than 50k in student loans. Currently maxing out both our 401ks, backdoor ROTHs, HSA, and I’m doing a mega backdoor ROTH. What’s next? Pay off mortgage? Throw extra cash into brokerage? This all happened pretty quickly and I’m trying to figure out how to take advantage. I’ve followed the flow charts on personal finance Reddit and we seem to be on track just wanted to confirm. #personalfinance #investments
So you max out mega back door (66k)? That’s a lot of money for the retirement.
Yes, it’s my first year exercising that option after finding out about it. With mega backdoor, wife’s 401k, and other ROTHS, we should see around 100k a year contributions.
Just asking as I also want it …How you found 0% interest on car loan ?
Wife needed a work car. Okay so 0.9 interest sorry. This was in 2021. Total finance charge for the 3 year loan is $450ish dollars so we’re treating it as 0% lol
Sounds like a Toyota 👀
Are you in CA? I have the same TC, however single income. 30M. Thinking of moving to NyC and pay city tax, currently in Nj and saving 20k flat in city tax, however the money is so much, I think I can manage to splurge. Hate to give free money to go end though.
I am in Washington
At these interest rates, it's probably a good ROI to pay off the mortgage if you have $$. I would still max out the tax protected investments first if you can (maybe even selling out of your brokerage if you need to). If your spouse has access to stock options and thinks their company can make it big, exercising the options (either early exercise or even just exercising the vested ones) could be a good way to save on eventual taxes (pay long term capital gains instead of paying at your marginal income tax rate)
Yeah it sucks the interest is what it’s at otherwise it would be a no brainer to not pay it off ASAP. It sucks but we’re both so much happier after renting in a bad area for 3 years. Quality of life has 10x. I don’t currently have much in my brokerage as my initial focus was maxing out my tax protected investments. For sure, I’ll have her check with that. That would be great and I didn’t even know about it thank you!
Why are you maxing out both backdoor roths?
Wife can do 6500 into backdoor and I can do 6500 into backdoor. I’m doing mega backdoor 401k Roth through my employer
Is there any tax benefit of doing mega back door towards W2 income ? Just refreshing my basics.
I usually love debt financing but at 7% and “only” $500k, yeah pay that off asap. Look into rental property and hire a management company. Usually the fee is 8-10% of rental price, which is kinda minimal tbh. Buy land and let it appreciate. Then sell after 1-2 years. Rinse repeat Invest in AAPL
But that rental mortgage is gonna be like 7-9%. Debt + Property management is gonna make it tough to cash flow.
Yeah 7% is a dagger. We both aren’t stoked about it but it is what it is.
Max out any retirement options… roths, 401ks, get that match.. Not all bad news. Your mortgage interest is tax deductible, so actual rate is less… could prob pick up a percent or two higher in the market. I might split any savings half in market, half mortgage payoff. Keep an emergency fund around.
Yup retirement options for my wife and I are completely maxed. I do like that split idea though too
Payoff your mortgage as fast as you can honestly. If you feel like your investment returns would be lower than your mortgage interest rate, I’d even say pull out whatever money you can afford from investments and be done with the mortgage if it’s fixed amount and you can build up the funds in the future remaining period of your mortgage.
Second home with short term rental potential when you aren’t there.
Ideas for location? I’m so tired of not having a vacation home
I would love this. We’re in Washington, rains fun and would like something to escape to eventually. No idea where
Pay off mortgage
That’s what we were thinking honestly. Tempted to try and throw 150-200k a year at it and invest the rest. It sucks it’s so high but we didn’t have a down payment until end of 2022
At 7% you don't really need to worry about any sort of game of "if I got last decades returns this decade and funneled my dividends in I could get an extra 1% return vs paying off my..." Just take the win. Which is killing 7%/y debt.