Last month (January):
Years left: 2.25
P =$1,079.06, I =$135.34, Escrow =$788.73
This month (February):
Years left: 2.083333333333
P =$1,091.24, I =$123.16, Escrow =$788.73
One month’s prepayment savings: $7.90
Still pre-paying the mortgage. But I did make one other big change right before the New Year.
Usually I do all my retirement stuff from September to September, ignoring the tax year. But 2015 (and 2016) we’re going to be paying half of our taxes in a state with super high income tax. So it makes sense to get our taxable income down a bit. So I’m switching to 100% traditional 403b instead of half Roth. On top of that, the 403b/457 amounts that you can save went up by $500, so I’m increasing the amount saved.
I was thinking about how on half my salary next year, we may [will] not be able to max out retirement *and* pay for health insurance and benefits simply because my gross pay once taxes are taken out may not be enough to cover all of that. (DH’s retirement options suck. Though our income might be down enough next year to be able to do a Roth again, something to keep in mind.) So here we are making extra money now that we don’t need right now, but next academic year we may not be making enough to bring home any take-home pay from my paycheck if we keep things as they are now.
We already have a lot of cash just sitting in savings waiting to be turned into rent and deposits and daycare payments and state sales tax payments and all those things that we can’t afford on DH’s salary alone next year. It doesn’t make any sense to just keep stock-piling in there when we can pile extra money into retirement savings *this* (school) year and keep money in the paycheck *next* (school) year.
So that’s what I’m doing. I sent in the form to completely max out my 2015 403(b) from January to May (18K/5 = 3.6K/mo for the rest of the school year). I still haven’t sent in my 457 plan increase because I’m not sure we’re going to be able to afford to do both plans for 2015– it’s going to depend on housing and schooling options. If it turns out we *can* afford to keep adding to the 457 for 2015, then we should still be able to pay just it (and health insurance etc.) and still have at least some take-home pay left over.
So… from Jan [Feb paycheck] to May we will be: Prepaying the mortgage, maxing out my 403b in the traditional option, saving to (but not maxing out) the 457 (half Roth/half traditional), and putting any extra $ in cash. In May we will stop any substantive mortgage prepayment. In September we will re-evaluate the 457 situation and decide whether or not we can afford to save to that option or not while we’re living in paradise.
I had been planning on having >80K in savings before we moved to Paradise (because we are going to be spending more than we earn this next school year), but now it is going to be less than that. However, I will be getting half-salary (yay!) and (as of this change) won’t be making any 403b contributions during that time period, so our monthly take-home pay will be higher next year than I had been planning on when I set that savings target.
So, go me for shifting things around some. I hope I’m making the right decisions and doing the right things. I think we’ll be getting some pretty significant tax savings for the year from putting all this money in a traditional 403(b). And I think we’ll still be in pretty good shape, so long as DH doesn’t lose his job. (And if he does lose his job, Paradise is probably the best place for him to be to find a new one right away.)
[UPDATE: I may be doing completely the wrong thing– I had assumed we would be counted as residents because of someone’s previous experience, but it looks like there are significant differences between that experience and this one (namely that I will not be getting any Paradise income during this time frame). If I’m only temporary, then I should be funneling all our money into the ROTH choice to take advantage of lower tax rates. If I’m a part-year resident, then I should not be maxing out my retirement now, but trying to make my take-home pay as low as possible when we’re in Paradise. I think we need to talk to an actual tax professional about this stuff.]
UPDATE 2: Talked to the Paradise tax board. They are very confident that we will be nonresidents. “You are not planning on a permanent move, it’s temporary.” Which means a lot of the choices I’ve made (like timing donations, changing the IRA), were not great choices. But hey, maybe one of my grants will hit and I’ll get summer salary. I wonder if I should change the 403b back…
UPDATE 3: Talked to someone in almost my exact situation from two years ago, and ze didn’t have to pay Paradise state income tax either.
What are your 403b/401K/457/IRA plans for the year?