What now?

[optimist]

I need some advice on how to proceeds with my savings/investments. By the end of his month my student loans will be paid off, and my emergency fund will have a 6-8 month worth of expenses saved. This frees up quite a bit of cash ($1,100/month), which I need to decide where to invest.

My only remaining debt will be the two mortgages - one on the primary residence and one on the rental, which pays for itself - and a retirement account loan of $40K. We don't intent to repay our primary mortgage earlier than its term because we don't plan on staying there beyond the next 10-15 years.

I have close to $200K in retirement account (not counting the loan). At 36, I think that's an adequate sum, so I do not intend to increase my retirement savings.

I imagine I should put aside at least $300/month for various home repairs/improvement projects, and perhaps another $400/month to buy a new car in 4 years. This still leaves $400/month that need a home. Should I invest it in mutual funds, for example, or use it to pay off my rental property sooner? It's currently on track to be paid off in 20 years.

Any advice would be greatly appreciated!

[bjl584]

I think that the first thing that I would do is pay off the $40K loan on your 401K.

[humandraydel]

I have close to $200K in retirement account (not counting the loan). At 36, I think that's an adequate sum, so I do not intend to increase my retirement savings.

Are you SURE $200k at 36 is adequate? Don't get me wrong, it's by no means bad and probably beats 70% of Americans. And it might be adequate, but it's certainly not a "set for life" type of sum. At least, I'll have about $200k at 36, and I don't consider it anything more than barely adequate.

[bjl584]

Are you SURE $200k at 36 is adequate? Don't get me wrong, it's by no means bad and probably beats 70% of Americans. And it might be adequate, but it's certainly not a "set for life" type of sum. At least, I'll have about $200k at 36, and I don't consider it anything more than barely adequate.

That will depend on his lifestyle and where he lives. $200K will go a lot further if you are a hermit in Wyoming than it will if you are a socialite in Beverly Hills.

[Bob B.]

my emergency fund will have a 6-8 month worth of expenses saved. This frees up quite a bit of cash ($1,100/month), which I need to decide where to invest.

a retirement account loan of $40K.

I have close to $200K in retirement account (not counting the loan).

I imagine I should put aside at least $300/month for various home repairs/improvement projects, and perhaps another $400/month to buy a new car in 4 years. This still leaves $400/month that need a home.

You're way ahead of me. I'm three years older than you are, and have about 1/2 of what you have saved for retirement. Also, I have 5K in credit card debt. So, I'm not exactly the picture of financial health to be giving advice.

But, if your EF is at at least 6 mo. expenses, I would suggest throwing most, if not all of the $1,100 at the retirement account loan. You should be able to get that loan taken care of fairly quickly.

[optimist]

Are you SURE $200k at 36 is adequate? Don't get me wrong, it's by no means bad and probably beats 70% of Americans. And it might be adequate, but it's certainly not a "set for life" type of sum. At least, I'll have about $200k at 36, and I don't consider it anything more than barely adequate.

Well, I do plan to continue saving at the same pace I'm saving now. According to the CNN retirement calculator I should be fine. In addition, I should be getting a (smallish) pension from my employer, so between the two, and the income from the retnal property which should be paid off by then I'm guessing I'm in ok shape.

[optimist]

Are you SURE $200k at 36 is adequate? Don't get me wrong, it's by no means bad and probably beats 70% of Americans. And it might be adequate, but it's certainly not a "set for life" type of sum. At least, I'll have about $200k at 36, and I don't consider it anything more than barely adequate.

Well, I do plan to continue saving at the same pace I'm saving now. According to the CNN retirement calculator I should be fine. In addition, I should be getting a (smallish) pension from my employer, so between the two, and the income from the rental property, which should be paid off by then, I'm guessing I'm in ok shape.

[sandrark]

Pay off the 401k loan as quickly as possible.

I would refinance the primary mortgage. If you are going to stay there 10-15 years, I would get a 15 year fixed mortgage and have that paid off by the time I move.

+1, and increase your retirement contributions until you're maxing out the 401(k) and ROTH, if eligible. Then I'd focus on after-tax investments.

[snafu]

Since you will have a pension your circumstances are different to many who post here You haven't mentioned the interest rate of mortgages, EF savings or holdings & annual growth in value of [non pension] retirement funds. You will need to consider tax consequences of income as a senior.

I have a totally different take on savings. 1st, it's helpful to work out figures to determine whether it's more cost effective to pay off current debt [mortgages] or invest for growth. I suggest you ask for information from Vanguard or any of the low [MER] cost Mutual Fund groups for their simplified prospectus which lists all of their funds in the different categories. It's helpful to identify which categories you already hold in your current retirement portfolio and category percentages.

2nd only you can work out your ''RISK' ratio. You need to be able to sleep at night without worrying about money and without feeling stressed as the market moves up and down sometimes like a roller coaster. For example, keeping large sums in a saving account generates such a small return that the individual has lost 3% - 5% buying power without realizing they are losing money week-by-week, month-by-month and horribly year-by-year. Since 2008 lows the DOW has increased 30% for example. In those 5 years, inflation has decreased the buying power of savings accounts significantly as any flight, fill up, or trip to the grocery store attests.

A lot of folks prefer buying an Index Fund to start. Personally, I like Vanguard's Dividend Fund because of it's holdings [see list on-line]. I started my portfolio via dollar cost average [DCA] with automatic monthly payments. It buys more units when the market is down [on sale] and less units when the price is up but I know exactly how much is leaving my bank account.

Understand that nothing is written in stone, you are free to make changes that you see as necessary if your circumstances change or the economy changes or you want to increase sums or increase risk. This is a lot to digest, hope something is helpful