Her: Age=37, Income=100K
Desired AA: 80/20
Emergency Funds - 4 months (at $4K/ month living expense)
5% $80K Savings Account (Interest=0.40%)
Investments (77% stock, 23% bond)
40% $680K his+her 401k (+19.5K/year, Stock Index Fund, ER=0.01%)
24% $260K his+her 401k (+19.5K/year, Bond Index Fund, ER=0.03%)
23% $470K his+her taxable (Stock Index Fund, ER=0.04%)
3% $50K his+her i-Bonds (+$10K/year/person)
5% $100K his+her Roth IRA (+$11k/year backdoor, Stock Index Fund, ER=0.04%)
0% $8K his Mega Backdoor Roth 401k(+$30K/year, Stock Index Fund)
100% $1600K Total
Mortgage: $200K at 3.625% interest 30Y fixed (~$400k home value)
Tax: Married-Filing-Jointly, 35% Bracket
State: IL (State Tax=4.95%)
Kids: 8 years + 4 years
I expect needing ~$250K in 3-6 months for a foreign sibling's medical expenses in the US. There is no insurance so it will be out of pocket. This will put my AA temporarily out of whack but I plan to rebalance by the end of the year.
I have a total of $130K that I can access in 3 months ($80K in cash + $50K in iBonds). I need to find the best way to get $120K more. I see a few options:
- $70K from his+her Roth IRA contribution only (the rest $30K of the total $100K will stay, as its appreciation). This should not have tax implications. Once its out, I can only add back $12K his+her/year via backdoor. However, I do have the option to put ~30K/year in mega backdoor Roth, so I should be able to restore my Roth amount in ~2 years)
- $50K+$50K loans from his+her 401k (will pay back in ~1 year). I am okay with temporarily being out of the market. I may need to pause contributions till I replay the loan but I will check the plans rules.
- $40K pay using credit cards and pay off asap. I could apply for another credit card. My credit score is 800+
- $100K Cash out refinance the house. I plan to relocate in 1-2-years to another state and plan to sell this house at that time. So, I would not get full benefit of a lower rate. I could refinance to just 80% of the home value of $400K and get the $100K difference out (400K value, 80%=300K, 300K-200K=100K). This will avoid PMI. Then get the rest from one of the options above. Is this better than using the credit card?
- $120K after selling StockIndexFund from taxable account. I believe this will be taxed at the top bracket of my income? Or maybe at long term capital gains? I've not done this option before so I am not sure here. (I paused investing monthly to after-tax as soon ask I knew about the upcoming expense)
- $30-40K pause mega backdoor contributions. Also pause any unmatched 401k contribution. But this will be saved only over 12 months and I need the money sooner.
Thanks for your time.