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I just wanted to re-iterate that you may make too much to contribute fully to a Roth and might have to go with the traditional non-deductible. However, every once in a while the government decides that it needs some extra money and they let you roll that traditional non-deductible into a Roth. You have to pay on your earnings when you roll it over, but after that it's a regular Roth and you'll never have to worry about paying taxes on that money again.
We learned the hard way that we can't contribute to a Roth any more. Turbo Tax told us, actually! We had to take the money out (and whatever it earned) and then on next year's taxes we'll pay tax on the interest that we made during the short period of time it was in the Roth. From now on we'll be maxing out our traditional non-deductible IRS and twiddling our thumbs until Uncle Sam decides that he needs a little extra cash, then we'll roll it over.
So my suggestions, like others, are as follows:
max out your 401k (16,500 for each of you)
max out your IRA of some kind (5,000 for each of you)
pay off your car loan with your surplus cash
refi your mortgage to a 15 year 4.25%
That's just the easy stuff. Now you're at the point where my husband and I are. We were grad student for EVER, but now we're 30 and making $224k between the two of us. We PERSONALLY have chosen to take $1,000 per pay period (so 26,000 a year) and put it into additional long term investments. We take $500 per pay period and save it for stuff like vacations and big purchases. The rest of our money we spend.
Now, I did recently waste about and hour playing around with an online amoritization (sp?) table to see how fast we could pay off our house if we really really wanted to and put all our extra money (outside of tax advantaged retirement accounts) toward it. It was fun, but we're not going to pay it off. We're at 4.5% and our P&I payment is only about $1,500. But it's fun to see how fast you could pay off your house if that were a goal.
If you really are set and are maxing out your tax advantaged accounts AND putting aside something extra for retirement AND putting aside enough to enjoy your day to day life and have some special occassions, then your only real options are spend it on something you don't really want, save/invest it for some sort of mid term goal in the future, donate to charity, or attack your mortgage just because you can.
eta: You could also open one of those college fund accounts, but as we don't have kids, I don't know anything about them.
Good luck!
We learned the hard way that we can't contribute to a Roth any more. Turbo Tax told us, actually! We had to take the money out (and whatever it earned) and then on next year's taxes we'll pay tax on the interest that we made during the short period of time it was in the Roth. From now on we'll be maxing out our traditional non-deductible IRS and twiddling our thumbs until Uncle Sam decides that he needs a little extra cash, then we'll roll it over.
So my suggestions, like others, are as follows:
max out your 401k (16,500 for each of you)
max out your IRA of some kind (5,000 for each of you)
pay off your car loan with your surplus cash
refi your mortgage to a 15 year 4.25%
That's just the easy stuff. Now you're at the point where my husband and I are. We were grad student for EVER, but now we're 30 and making $224k between the two of us. We PERSONALLY have chosen to take $1,000 per pay period (so 26,000 a year) and put it into additional long term investments. We take $500 per pay period and save it for stuff like vacations and big purchases. The rest of our money we spend.
Now, I did recently waste about and hour playing around with an online amoritization (sp?) table to see how fast we could pay off our house if we really really wanted to and put all our extra money (outside of tax advantaged retirement accounts) toward it. It was fun, but we're not going to pay it off. We're at 4.5% and our P&I payment is only about $1,500. But it's fun to see how fast you could pay off your house if that were a goal.
If you really are set and are maxing out your tax advantaged accounts AND putting aside something extra for retirement AND putting aside enough to enjoy your day to day life and have some special occassions, then your only real options are spend it on something you don't really want, save/invest it for some sort of mid term goal in the future, donate to charity, or attack your mortgage just because you can.
eta: You could also open one of those college fund accounts, but as we don't have kids, I don't know anything about them.
Good luck!
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