Need advise on numbers I have come up with.

[kilapapipa]

Sorry to Jim and Steve because you heard me ask this last year at this time but here goes.

My wife and I teach and earned $105,437 for 2008. We have 3 kids at home and $6600 of this goes to 403B's. We also invest in a 529 after taxes. We withheld 6% Fit this year and do not itemize. We will pay in roughly $1480 to the IRS with a taxable income of $70,450. If we could get that down to $65000 or so, we would come out even, saving us the $1480.

Here is my plan. We have 12+ yrs left on a 15 yr. note with balance of $116,000 at a rate of 5%. P and I is $1091 and $188 escrow. A new 30 yr. note at 5.25 will save us $450 a month or $5400 a year that when applied to the 403B's will take the tax bill down and save us the $1480. The $450 a month will be $64,800 + int. in the 403B when we would have paid off current note. At that time we will be age 53 and balance of the 30 yr. note will be 86,000. At age 56 when we could retire, we would owe 76,000 on the 30 yr. note and have 86,000 + int. in the 403B from the $450 a month alone.

We could keep working or pay off the note, we would have a choice or would the taxes kill us to take it out and of course this all depends on the markets. All the while, we would be taking our tax liability down as well and saving that $1480 a year as well.

Punch holes in this if you wish. I can handle it.

Thanks

[kork13]

How much would refinancing cost you (in fees)? I don't know myself, but I've heard that it can be up to $1000 or more. Once you consider that cost, plus the cost of the additional interest which you will be charged (even understanding that the interest is deductible), is it really worth the one-time savings of ~$1500?

I think a better way to go forward for the future would be to decrease your expenses in other ways, thereby freeing up more money for your 403b/529 accounts, which in turn can decrease your taxable income level. Your proposal is to saddle yourself with more debt (or rather, extended debt). That really doesn't seem like your best possible option, IMO.

[MonkeyMama]

Agreed.

My first reaction is why can't you save more otherwise? I looked up your old thread and you are 40. If the only way you can save more in your 401k is to refi your home loan to 30 years, well, that is not a good thing.

Your post a year ago showed you had a lot of other debts. Pay those down and put that money in your 401k. I think that would be a much better plan.

It also makes little sense to increase your mortgage rate. Aiming for a 15-year at 4.5% may be a better bet. But the fees may not make it worthwhile either.

Your mortgage & escrow is only 15% of your income. I think you have bigger fish to fry.

[kilapapipa]

How much would refinancing cost you (in fees)? I don't know myself, but I've heard that it can be up to $1000 or more. Once you consider that cost, plus the cost of the additional interest which you will be charged (even understanding that the interest is deductible), is it really worth the one-time savings of ~$1500?
I think a better way to go forward for the future would be to decrease your expenses in other ways, thereby freeing up more money for your 403b/529 accounts, which in turn can decrease your taxable income level. Your proposal is to saddle yourself with more debt (or rather, extended debt). That really doesn't seem like your best possible option, IMO.

This savings would be each year from now on. Our plan originally was to pay off the house before retirement as part of retirement and that may still be our best option.

[kilapapipa]

Agreed.

My first reaction is why can't you save more otherwise? I looked up your old thread and you are 40. If the only way you can save more in your 401k is to refi your home loan to 30 years, well, that is not a good thing.

Your post a year ago showed you had a lot of other debts. Pay those down and put that money in your 401k. I think that would be a much better plan.

It also makes little sense to increase your mortgage rate. Aiming for a 15-year at 4.5% may be a better bet. But the fees may not make it worthwhile either.

Your mortgage & escrow is only 15% of your income. I think you have bigger fish to fry.

Well, there are lots of ways to save money but this would give us options later depending on how the markets recover.

I don't think I can get the int. rate down enough to make a new 15 yr. feasable. I don't see that happening.

We have spent this year paying down debts. Our payment on House, Truck, and Camper are now only 26% of our gross monthly income and Truck will be done soon reducing that figure to just under 20%. I am not sure how these numbers are but they seem good to me.

Almost 41 now so that goal is shot.

[jIM_Ohio]

Take all 529 monies and direct to the 403b plan or a deductable IRA (if eligible).

The tax deduction now will be worth it (saves you 25% and the 529's are not going to get that return for you right now).

How much mortgage interest do you pay per year? Property taxes? state taxes? Married filing jointly?
I agree refinancing from 15 to 30 would not be the way to tackle the problem.

[kilapapipa]

Take all 529 monies and direct to the 403b plan or a deductable IRA (if eligible).

The tax deduction now will be worth it (saves you 25% and the 529's are not going to get that return for you right now).

How much mortgage interest do you pay per year? Property taxes? state taxes? Married filing jointly?
I agree refinancing from 15 to 30 would not be the way to tackle the problem.

Jim, I have wondered about the 529 doing much. Mortgage int. this year is about $5500, Property taxes are $1500 and no state taxes here. We do file jointly. I just can't seem to find enough to itemize.

Honestly, when Monkeymama stated that she looked back to last year, I did as well just now and I feel good about some of what we have done this year and ask myself why go through all that again and I surely don't want to put you through it again, LOL.

[disneysteve]

Take all 529 monies and direct to the 403b plan or a deductable IRA (if eligible).

I agree. Saving for retirement comes FIRST. You only put 6.25% of your income into the retirement accounts. That isn't enough. There are lots of ways to finance college. Not so with retirement.

[kilapapipa]

I agree. Saving for retirement comes FIRST. You only put 6.25% of your income into the retirement accounts. That isn't enough. There are lots of ways to finance college. Not so with retirement.

Great point Steve.

[jIM_Ohio]

Jim, I have wondered about the 529 doing much. Mortgage int. this year is about $5500, Property taxes are $1500 and no state taxes here. We do file jointly. I just can't seem to find enough to itemize.

Honestly, when Monkeymama stated that she looked back to last year, I did as well just now and I feel good about some of what we have done this year and ask myself why go through all that again and I surely don't want to put you through it again, LOL.

I have no idea what was posted or done last year- we cannot change that. I look at current situation only-

What is your state sales tax? There is a table you can use to deduct sales taxes which might allow you to itemize (would have to be $3500 or so from the table).