$80,000 in savings

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cashisking500
Posts: 100
Joined: Fri Dec 02, 2016 1:08 pm

$80,000 in savings

Post by cashisking500 »

Hi Everyone,

We have a HHI of $175,000. Our jobs are stable and we have been fortunate to do a good job of saving over the years. We have $80,000 in savings ($60,000 in liquid savings and $20,000 in a Vanguard taxable account). $55,000 represents one year of expenses for us, which includes monthly Roth and 529 contributions. Our only debt is our mortgage.

We are currently doing the following. Both of us are 38:

- Maxing Roth’s for both of us (balance of $68,000 and $27,000 respectively)

- Maxing 401K’s ($193,000 and $70,000 respectively)

- $250 per month going to our 3 year old daughters 529 ($23,000 balance)

- We typically have $1200-$1500 left over each month

- Mortgage left is $325,000 on 30 year (28 years left)…house valued at $450,000

Do we take a portion of the 80k savings and pay down some of the mortgage with that? Use excess monthly savings and apply to the mortgage? or just focus on building taxable account?

Thanks for your valuable insight.

-Cashisking500
Triple digit golfer
Posts: 8737
Joined: Mon May 18, 2009 5:57 pm

Re: $80,000 in savings

Post by Triple digit golfer »

I would build the taxable account and in fact, that's exactly what I do after maxing out retirement accounts.
exodusNH
Posts: 1426
Joined: Wed Jan 06, 2021 8:21 pm

Re: $80,000 in savings

Post by exodusNH »

cashisking500 wrote: Tue Nov 23, 2021 9:23 pm Hi Everyone,

We have a HHI of $175,000. Our jobs are stable and we have been fortunate to do a good job of saving over the years. We have $80,000 in savings ($60,000 in liquid savings and $20,000 in a Vanguard taxable account). $55,000 represents one year of expenses for us, which includes monthly Roth and 529 contributions. Our only debt is our mortgage.

We are currently doing the following. Both of us are 38:

- Maxing Roth’s for both of us (balance of $68,000 and $27,000 respectively)

- Maxing 401K’s ($193,000 and $70,000 respectively)

- $250 per month going to our 3 year old daughters 529 ($23,000 balance)

- We typically have $1200-$1500 left over each month

- Mortgage left is $325,000 on 30 year (28 years left)…house valued at $450,000

Do we take a portion of the 80k savings and pay down some of the mortgage with that? Use excess monthly savings and apply to the mortgage? or just focus on building taxable account?

Thanks for your valuable insight.

-Cashisking500
You can eat your house. With a child, I'd keep 9-12 months liquid. The rest I'd invest according to my AA.
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9-5 Suited
Posts: 723
Joined: Thu Jun 23, 2016 12:14 pm

Re: $80,000 in savings

Post by 9-5 Suited »

Given your total financial picture as posted, I think you’re fine to use the modest leverage of a mortgage to continue to build a larger pile of liquid investable assets. That should be the optimal play in most cases**

** If you hold any cash or bonds above and beyond a small emergency fund, then I would suggest you place what would have gone into bonds to pay down the mortgage. The probability of coming out ahead with cash or bonds vs. the mortgage rate is really low and requires a lot of factors to go in your favor.
fareastwarriors
Posts: 1341
Joined: Tue Feb 14, 2012 12:31 pm

Re: $80,000 in savings

Post by fareastwarriors »

I would keep the 80k as emergency fund and put the $1200-1500 leftover into taxable investment account.
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Alto Astral
Posts: 875
Joined: Thu Oct 08, 2009 10:47 am

Re: $80,000 in savings

Post by Alto Astral »

+1 for setting a taxable investment account. Invest according to your desired asset allocation. Contribute to HSA if you have the option. i bonds is a better place than liquid savings account for emergency expense.
mortfree
Posts: 2645
Joined: Mon Sep 12, 2016 7:06 pm

Re: $80,000 in savings

Post by mortfree »

Why are you doing monthly Roth?

Do you have term life insurance?

I would put future money to building the taxable account. Leave the cash pile as is for now.

I wouldn’t attempt to pay down the mortgage because (for me) the balance is too high.
ivgrivchuck
Posts: 984
Joined: Sun Sep 27, 2020 6:20 pm

Re: $80,000 in savings

Post by ivgrivchuck »

Many good options here.

1) Personally I would build an emergency fund using I-bonds
2) Opening a taxable account is fine as well
3) Using some of that (30k-40k) against mortgage is fine, but you want to retain some liquid assets

Or some combination of above.
40% VTI | 40% VXUS | 13% I-bonds | 7% EE-bonds
chipperd
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Joined: Sat Sep 24, 2011 5:58 am
Location: here and now

Re: $80,000 in savings

Post by chipperd »

It seems like when you say "we" you are referencing a spouse, so under that assumption, +1 on building up I bonds. 10k for you and 10k for the spouse this calendar year, the next year, and so on. This can be used, in part, for your emergency fund until you reach 1 year expenses.

As to whether or not to pay down the mortgage, what is your mortgage rate?
"A portfolio is like a bar of soap, the more it's handled, the less there is." Dr. William Bernstein
ClassOf2021
Posts: 17
Joined: Sat Dec 19, 2020 10:11 am

Re: $80,000 in savings

Post by ClassOf2021 »

Sounds like you are doing great.

If ibonds pay better than paying off your mortgage, and provide an emergency fund that would be a good first step 20 out of the 80 k…could do this month to get the most out of currently high rates.

Of the remaining 60 it would be good to have a taxable account that would provide for emergencies (noting ibonds will not be available for first year) but as your savings grow keep a growing portion of the taxable account invested in equities or used for other profitable investments.
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Harry Livermore
Posts: 959
Joined: Thu Apr 04, 2019 5:32 am

Re: $80,000 in savings

Post by Harry Livermore »

ClassOf2021 wrote: Wed Nov 24, 2021 5:55 am Sounds like you are doing great.

If ibonds pay better than paying off your mortgage, and provide an emergency fund that would be a good first step 20 out of the 80 k…could do this month to get the most out of currently high rates.

Of the remaining 60 it would be good to have a taxable account that would provide for emergencies (noting ibonds will not be available for first year) but as your savings grow keep a growing portion of the taxable account invested in equities or used for other profitable investments.
I like this answer the best.
OP, If you were feeling saucy, since you have one year in cash, your could buy VTI or VTSAX in the taxable account instead of iBonds, using some, or all, of the $20K there. There would be a change in your AA, but you could always introduce or increase a bond holding in Roth or tax-deferred to keep your AA constant. Speaking of which, you gave dollar amounts, but not asset allocation. It might be helpful for the big brains at BH (not me) to know this.
I would not be quick to pay the mortgage down ahead of schedule. It sounds like it originated 2 years ago, and I assume you caught the close-to-the-lowest-we'll-ever-see rates in effect then?
I think you are doing great. I would advise you to do the same thing I would advise my own 38 year old self- stay the course and consider tax diversity amongst your investments (which I did somewhat, and you are doing somewhat as well) It's a long game.
Cheers
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