I am mid-way through my current savings goal of $100K in 529s for my two pre-school aged kids. I am close enough to achieving this goal that I am having to think of the next saving goal. In particular, I am trying to decide if I should pay-off my car loan before paying down my mortgage.
- Minimum retirement savings goal already accomplished. Creating a decent sized 529 was my next goal after the retirement savings goal.
- I have a single income family and it will stay that way for the foreseeable future.
- I have a car loan of ~$17K (amount remaining, loan at ~1% interest rate) which pays off in 2.5 years if I don't put down additional payments.
- I have a mortgage of ~$163K (remaining amount, loan at 2.9% interest rate) which pays off in 7 years if I don't put down additional payments.
- I am 43 and expect to change careers in 7 years. Very likely my earning power in this new career will be much lower than what I make now.
- My overarching goal is to situate myself as well as I can when I transition to the lower paying career. I do expect that this career will cover my family's monthly expenses for several more years, but may not leave too much for 529 or retirement savings.
By the time I get done with my 529 savings goal (via some bonus/employer-stock windfalls in the next few months), I expect that between $10K and $14K will be left on my car loan. Paying the car loan off obviously decreases my monthly expenses (by about $575) which is attractive. On the other hand if I pay down the house instead, it brings the house pay-off date closer (but still ~6.5 years away) giving me some wiggle room before I transition to a new career.
I am looking for recommendations/rationale on which goal to pick. What would you do in my situation?