Last month (March):
Years left: 6.666666667
P =$881.26, I = $333.14, Escrow = 621.66
This month (April):
Years left: 6.5
P =$887.38, I = $327.03, Escrow = 621.66
One month’s prepayment savings: $2.62
So, as we’ve discussed, this past year we’ve been contributing $500/month to each of the DCs’ 529 funds. DH and I have been contributing to various forms of IRAs (now all Roths) since we graduated from college. We’ve been putting money in 403(b)s and 457s as well, and are now pretty much caught up to where we should have been retirement-wise had we not wasted our youth frittering away our time in graduate school. We’ve also been paying around $600 extra each month on the mortgage (though that varies with our escrow).
All of that is going to stop being automatic next year, other than my mandatory 403(b) contributions (~12% of my salary if you include the match).
We will have some extra money on top of our emergency fund at the end of the summer because (in theory) I’m getting summer salary. This will be somewhere between 18K and another number (depending on things like emergencies, whether/when DH gets consulting, and so on).
Last semester when DH was thinking about quitting his job, we wrote out a list of priorities of what to do with extra money above and beyond our emergency savings. #1 was 529 plans. #2 was DH’s Roth IRA, #3 was my Roth IRA, and so-on.
Now I’m questioning the wisdom of putting money in the 529 plans before funding the IRAs. On our current path, our children may very well get financial aid, which is something we hadn’t been planning on when we started the 529 saving. Mint tells me that DC1 has over 40K at this point and DC2 has over 4K. Do we really need to keep putting 12K/year away in these funds?
Earlier when I talked about this, I suggested filling up DC1’s 529 and not doing much with DC2’s, even though we are planning on paying for four years of college for each. The reason would be that if DC1 doesn’t use all of hir money, it could easily be transferred to DC2 and we could stop saving for DC2. People didn’t like that because they didn’t want DC2 to feel like a lesser loved child. I want to emphasize that we will be paying the full college tuition for both children to the schools of their choices, even if 529 pots are unequal sizes (which they will be, even if we contribute the same amount just because of the vaguaries of the stock market).
Also, I would love to just put money into the Roth IRAs now, but there’s always the chance that DH will make a full salary before the next fiscal year is out and push us over the limit. Undoing that sounds like a hassle. Though maybe that’s too unlikely a proposition to keep us from waiting until January.
Anyhow, here’s our dream list of savings:
$12K/year in 529 plans (6K/kid)
DH Roth IRA (5.5K)
My Roth IRA (5.5K)
Mortgage prepayment (up to the amount left)
My additional 403(b) (17.5K/year)
My 457 (17.5K/year)
A SEPA or other self-employment retirement vehicle for DH (up to the amount he earns or 51K whichever is smaller)
Taxable stocks (infinity!)
Keeping in mind that I already must contribute 12% to my 403(b), that we’ve caught up with where we should be an our ages and income on retirement, that our mortgage is as described above, we want to pay full tuition to college for two children, we’re in the 25% tax bracket (we were also in that bracket before DH left his job), and we have a healthy emergency fund in cash, In what order would you put extra money and why?