40 years old and just trying to figure it out

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Topic Author
cwwolf
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Joined: Mon Apr 15, 2019 9:24 am

40 years old and just trying to figure it out

Post by cwwolf » Mon Apr 15, 2019 9:50 am

Good morning! Going to be turning 40 this year and only now just getting started on figuring out retirement. Here is the quick synopsis:

Had a 401(k) from a previous employer
Had a 403(b) from a previous employer
Current employer is NYS, offering a pension plan (ERS, Tier 6 if that means anything). Earliest at retiring would be 2042 (age 63); pension should pay $6,000-$9,000 a month, if I did the math right (1.75%*years(28)*FAS+2%*years-20(8)*FAS)

Married, sole income, 3 kids under 7. Salary (w/ location stipend) $109,819

Thinking of taking more active role in my retirement, I talked with my folks and they recommended their FA who also had done my grandmother's finances. So I open a Traditional IRA with Edward Jones, and rollover the 401+403 into it - Currently $66,713. During the past two weeks of getting this set up I finally start researching. I join /r/personalfinance which unanimously says "RUN FROM EJ!!!!!" Doing more research I realize all the fees and costs (currently there is only $40 a year fee, I am not in the guided solutions account which is 1.35%). Reddit also pointed me here so I've been doing as much reading as I can. Just borrowed the Bogleheads Guide to Investing from the library.

I am thinking I will open a Vanguard IRA, and roll the EJ balance into that. I was thinking a 60%/40% stocks/bonds (bonds %=age based on the videos I found here. Total Stock Market, S&P 500, and something with bonds. I don't understand the three types of accounts though (taxable, tax deffered, etc).

I also have about $53K in CC debt, which I am paying off over the next couple years. Only paying about 3-4% interest on balance transfers to keep 0%APR on it all so I think a 2-year timeline is doable. Wife is expecting to get a job near the end of the year after the kids are all in full-day school. Using her income to pay debt down faster first. CC, then loans (student, car). Mortgage is 3.375% if that matters.

Right now, I have no money going into retirement, other than paying into my pension. There is just not enough to make payments into an IRA at this time while we try to burn down our credit debt.

Some questions:
1. Vanguard vs. Fidelity vs. Ally vs.... Vanguard seems to be referred to the most (biased? ;) ).
2. Traditional IRA? Roth IRA? Split?
3. What is the Taxable, Tax-free, and Tax-deffered options I have at this point with the answers to the above 2 questions? Or is it not something to worry about just yet?
4. I would like, once the CC debt is paid off, to start 529's for the kids. I have heard NY has great accounts. Do I do 1, 2, or 3? (two youngest are twins, so would be entering college / trade school about the same time if that matters).
5. Does my wife open her own IRA/RIRA, or can she even, when she starts working?

I think that's it for now. Sorry if too much info. I really appreciate any help or insight you can offer. I am still working through a lot of reading and videos trying to figure it all out.

{Edit with additional info per ruralavalon's request}
CCs:
BoA 27.74% $13,384.92 - Balance is at 0% promo APR
Discover 20.24% $9303.87 - Balance is at 0% promo APR
Citi Costco 17.49% $12,565.12 - $10,300 of balance is at 0% Promo APR. Remaining balance slated to be paid off in a month
Chase Amazon 16.49% $9,203.38 - Balance is at 0% promo APR
Citi Simp 15.24% $8,559.80 - Balance is at 0% promo APR
Other cards with no debt. Total credit line $115,000
All CC debt is balance transfered to my capital one card at $0 fee, then bounced right back to the originating card at 3%-5% for another year at 0% interest. Last month's finance charges were $44 for everything.

Car loan $6,326.88 @ 3.24%

Mortgage 30 year fixed, $305,517.79 at 3.375% ($350,00 original amount, payed off 5/1/2043)

Wife's Student loans $16,300.25 @4.75%

Parent Plus loan my parents took out for me, owe $6,100, paying $153.53 a month.

Married, filing jointly. Federal allowances were 5, state (NY) 4, but that ended up with $7700 return each year. I've updated the allowances to F9,S5, but looking at the change in pay rate, that's still not enough. I want to reduce the return as much as possible and put all the "extra" directly to CC bills, so I am still making adjustments.

Taxes - I don't understand the tax brackets to be honest. From here https://www.nerdwallet.com/blog/taxes/f ... -brackets/ it says I'm in the 22% which should be $9086 + 22% above 78,950, but I only payed $7,967 federal income on my W-2, and I ended up getting $5453 federal return... so I don't know.

Retirement - I have a pension with NYS, I don't have a 401, 403, et al. otherwise.
Wife's retirement will depend on the job. That is still up in the air if she gets a part time job while going back to school for nursing which is ultimately what she wants.
Last edited by cwwolf on Tue Apr 16, 2019 10:03 am, edited 3 times in total.

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Wiggums
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Re: 40 years old and just trying to figure it out

Post by Wiggums » Mon Apr 15, 2019 10:07 am

If you can have an IRA, so can she.

Vanguard, Fidelity and Schwab are mentioned on here.

I wouldn’t worry about the 529 until you pay off the credit card and fully fund retirement accounts. You can borrow for college, but you can’t borrow money for your retirement.

delamer
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Re: 40 years old and just trying to figure it out

Post by delamer » Mon Apr 15, 2019 10:29 am

This is a very helpful and short primer in investing: https://www.etf.com/docs/IfYouCan.pdf

It is geared to young people, but the basic information is applicable to everyone.

You are right that the credit card debt should be your first priority. Then you should make sure you have adequate life insurance and an emergency fund (for car and house repairs and in case you aren’t working temporarily) so you don’t get into credit card debt again.

Then start saving more the college and retirement. Your pension will be so large that you don’t need to be as aggressive a saver as those who only have Social Security.

niceguy7376
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Re: 40 years old and just trying to figure it out

Post by niceguy7376 » Mon Apr 15, 2019 10:42 am

Welcome to the forum.
You are not late, just a delayed start.

Do you have term life insurance? If not, please do get quotes from term4life or policygenius ot quotacy websites.
Since you are the only bread earner and your pension is dependent on you completing a set # of service years, I see a huge need for term life.

Is your pension inflation adjusted? I have no idea of pensions, specifically state ones.

In your case, following would be the order of preference of savings outside of pension and paying off the CC debt.
1. Roth IRAs for both of you. Since you have income, your spouse can definitely contribute to IRA even if she is currently not working.

2. Do you have HSA eligible health ins? If available and it makes sense to get HSA plans (most employers are making sure that HSA plans are better for most employees), go for them and contribute to HSA.

3. Emergency Fund - Do you have enough money saved that meets 3 to 6 months of expenses? State govt jobs might be stable but they might also have furloughs that have hit federal jobs in the last few yearss.

4. Now, I might think of 529s for kids.

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ruralavalon
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Location: Illinois

Re: 40 years old and just trying to figure it out

Post by ruralavalon » Mon Apr 15, 2019 10:42 am

Welcome to the forum :) .

Age 40 is not too late to start.

You are right, get away from Edward Jones. I think a rollover to a Vanguard IRA is a good idea.

You are right to to direct your wife's income from the new job first to paying off the $53k credit card debt.

Paying off higher interest debt is a high priority, sometimes even ahead of retirement investing. Please list your debts (CCs, student debt, car loans, mortgage, etc.) giving types, amounts and interest crates for each debt. Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.

the Boglehead's Guide to Investing was an excellent choice as an introduction to general investing.

In my opinion an asset allocation of 60/40 equities/fixed income is within the range of what is reasonable at age 40.


cwwolf wrote:
Mon Apr 15, 2019 9:50 am
Some questions:
1. Vanguard vs. Fidelity vs. Ally vs.... Vanguard seems to be referred to the most (biased? ;) ).
For account locations and funds to use I suggest --
1) Vanguard,
2) Fidelity, or
3) Schwab
-- in that order of preference.

We have all our accounts with Vanguard, and all of our investments are Vanguard mutual funds.

Vanguard offers by far the largest selection of low expense mutual funds, and the largest selection of ETFs. I like their website and app. I also like their mutual structure.

Both Vanguard and Fidelity offer total international stock index funds, Schwab does not. Vanguard offers better yield on their money market funds.

Both Fidelity and Schwab have local customer service offices in some cities, Vanguard does not. None have a customer service office in our area, so that was not a factor for us.


cwwolf wrote:
Mon Apr 15, 2019 9:50 am
Current employer is NYS, offering a pension plan (ERS, Tier 6 if that means anything). Earliest at retiring would be 2042 (age 63); pension should pay $6,000-$9,000 a month, if I did the math right
. . . . .
So I open a Traditional IRA with Edward Jones, and rollover the 401+403 into it - Currently $66,713.
. . . . . .
2. Traditional IRA? Roth IRA? Split?
In addition to the pension, are you also eligible for Social Security?

Because of the pension benefit, my suggestion is primarily Roth contributions.

But first is there a work-based plan (such as a 401k, 403b, 457, etc.) with your employer? If so is an employer match offered? What funds are offered in the plan? Please give fund names, tickers and expense ratios. Does the plan allow Roth contributions?

What is your tax bracket, both federal and state? What is your tax filing status?

Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.

If there is a good work-based plan with very low expense funds, then that can take priority over using an IRA. If a poor work-based plan, then an IRA is the priority.


cwwolf wrote:
Mon Apr 15, 2019 9:50 am
3. What is the Taxable, Tax-free, and Tax-deffered options I have at this point with the answers to the above 2 questions? Or is it not something to worry about just yet?
I don't understand this question, can you clarify this?

cwwolf wrote:
Mon Apr 15, 2019 9:50 am
4. I would like, once the CC debt is paid off, to start 529's for the kids. I have heard NY has great accounts. Do I do 1, 2, or 3? (two youngest are twins, so would be entering college / trade school about the same time if that matters).
I suggest that you defer the decision about 529 accounts until your retirement funding is in order.


cwwolf wrote:
Mon Apr 15, 2019 9:50 am
Wife is expecting to get a job near the end of the year after the kids are all in full-day school.
. . . . .
5. Does my wife open her own IRA/RIRA, or can she even, when she starts working?
Yes she can open an IRA, she can do this now if your tax filing status is "married filing jointly". She can contribute now based on your income, and later after she starts her job based on her income.

Will there there be a work-based plan (such as a 401k, 403b, 457, etc.) with her employer? If so is an employer match offered? What funds are offered in the plan? Please give fund names, tickers and expense ratios. Does the plan allow Roth contributions?

If there is a good work-based plan with very low expense funds, then that can take priority over using an IRA. If a poor work-based plan, then an IRA is the priority.

Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Topic Author
cwwolf
Posts: 18
Joined: Mon Apr 15, 2019 9:24 am

Re: 40 years old and just trying to figure it out

Post by cwwolf » Mon Apr 15, 2019 12:05 pm

delamer wrote:
Mon Apr 15, 2019 10:29 am
This is a very helpful and short primer in investing: https://www.etf.com/docs/IfYouCan.pdf
Thanks, I'll start looking at that today.
delamer wrote:
Mon Apr 15, 2019 10:29 am
You are right that the credit card debt should be your first priority. Then you should make sure you have adequate life insurance and an emergency fund (for car and house repairs and in case you aren’t working temporarily) so you don’t get into credit card debt again.
I am working on savings. I just moved our very small savings ($1500) from USAA to Discover to get their 2.1%. Putting away $125/paycheck for that. Life insurance I have over $1M.
delamer wrote:
Mon Apr 15, 2019 10:29 am
Then start saving more the college and retirement. Your pension will be so large that you don’t need to be as aggressive a saver as those who only have Social Security.
Sounds good. Thanks for the input!

Topic Author
cwwolf
Posts: 18
Joined: Mon Apr 15, 2019 9:24 am

Re: 40 years old and just trying to figure it out

Post by cwwolf » Mon Apr 15, 2019 12:08 pm

Wiggums wrote:
Mon Apr 15, 2019 10:07 am
I wouldn’t worry about the 529 until you pay off the credit card and fully fund retirement accounts. You can borrow for college, but you can’t borrow money for your retirement.
Understood. When you say fully fund retirement, thats the max into each of our IRAs, correct?

Topic Author
cwwolf
Posts: 18
Joined: Mon Apr 15, 2019 9:24 am

Re: 40 years old and just trying to figure it out

Post by cwwolf » Mon Apr 15, 2019 12:28 pm

niceguy7376 wrote:
Mon Apr 15, 2019 10:42 am
Do you have term life insurance?
Yes, over $1M.
niceguy7376 wrote:
Mon Apr 15, 2019 10:42 am
Is your pension inflation adjusted? I have no idea of pensions, specifically state ones.

Add this to my list of things to research!
niceguy7376 wrote:
Mon Apr 15, 2019 10:42 am
In your case, following would be the order of preference of savings outside of pension and paying off the CC debt.
1. Roth IRAs for both of you. Since you have income, your spouse can definitely contribute to IRA even if she is currently not working.


Does this mean don't open IRA at Vanguard, but open Roth IRA instead? I can't put any money into it until the credit card debt is taken care of, so probably not for a couple years. Once they are paid off, I could see us maxing out those accounts each year easy. Also, same thing, we don't have the money to put into an RIRA/IRA, so not sure we'd open one for my wife just yet. She is listed as benificiary to mine though just in case.
niceguy7376 wrote:
Mon Apr 15, 2019 10:42 am
2. Do you have HSA eligible health ins? If available and it makes sense to get HSA plans (most employers are making sure that HSA plans are better for most employees), go for them and contribute to HSA.
So, NYS offers a HSCA- http://www.flexspend.ny.gov/2019/hcsa.asp. With the kids, we spend a lot in copayments for doc-in-the-box for colds and sore throats, so I guess saving that money pre-tax might be useful. Looks like $700+ on just clinics and meds for 2018 alone. I'll look into this next enrollment period (October). I am guessing that's why you said it, for tax benefits?
niceguy7376 wrote:
Mon Apr 15, 2019 10:42 am
3. Emergency Fund - Do you have enough money saved that meets 3 to 6 months of expenses? State govt jobs might be stable but they might also have furloughs that have hit federal jobs in the last few yearss.

Not nearly enough, but we are working on it. 2k is savings (1500 in 2% account at Discover) and adding $125/paycheck at the moment.
niceguy7376 wrote:
Mon Apr 15, 2019 10:42 am
4. Now, I might think of 529s for kids.
Got it.
Thank you so much for the input!

Topic Author
cwwolf
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Re: 40 years old and just trying to figure it out

Post by cwwolf » Mon Apr 15, 2019 1:16 pm

ruralavalon wrote:
Mon Apr 15, 2019 10:42 am
Welcome to the forum :) .
Please simply add this to your original post using the edit button.

Done!
ruralavalon wrote:
Mon Apr 15, 2019 10:42 am
In my opinion an asset allocation of 60/40 equities/fixed income is within the range of what is reasonable at age 40.
Part of my naivete is - I said stocks/bonds, you said equities/fixed incomes. Are these interchanable terms in this context?
ruralavalon wrote:
Mon Apr 15, 2019 10:42 am
Both Fidelity and Schwab have local customer service offices in some cities, Vanguard does not. None have a customer service office in our area, so that was not a factor for us.
The FA I am dealing with at EJ is in KY, I live in NY. Dealing with someone over the phone/email is not an issue for me, if I need someone to talk to.
ruralavalon wrote:
Mon Apr 15, 2019 10:42 am
In addition to the pension, are you also eligible for Social Security?
As far as I know I am. I used to get annual updates for SS in the mail, but haven't seen one for a while. I was not aware that I would be inelligible. How do I find out for sure?
ruralavalon wrote:
Mon Apr 15, 2019 10:42 am
But first is there a work-based plan (such as a 401k, 403b, 457, etc.) with your employer?
No.
ruralavalon wrote:
Mon Apr 15, 2019 10:42 am
What is your tax bracket, both federal and state? What is your tax filing status?
Tried to answer this above, but I am confused. I just put a voicemail in to my preparer to ask about this. My w-2 says I paid $7,967.39 in federal income tax. I got $5453 back as a refund. This seems like I am only paying $2K? That seems small. Or do I include other taxes with that? (SS $6,467.03, Medicare $1,512.45).
ruralavalon wrote:
Mon Apr 15, 2019 10:42 am
cwwolf wrote:
Mon Apr 15, 2019 9:50 am
3. What is the Taxable, Tax-free, and Tax-deffered options I have at this point with the answers to the above 2 questions? Or is it not something to worry about just yet?
I don't understand this question, can you clarify this?

The video here https://www.bogleheads.org/wiki/Video:B ... philosophy Rule #8 Minimize Taxes shows three types of accounts to invest from - Taxable, Tax-free and Tax-deferred. Just trying to get a handle on what these three are, and what should be invested out of each, and if that's even something I should be looking at right now.
ruralavalon wrote:
Mon Apr 15, 2019 10:42 am
I suggest that you defer the decision about 529 accounts until your retirement funding is in order.
Understood.

Thanks again for all the insight and info!!!

ExitStageLeft
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Re: 40 years old and just trying to figure it out

Post by ExitStageLeft » Mon Apr 15, 2019 1:31 pm

Welcome to the forum!
cwwolf wrote:
Mon Apr 15, 2019 12:08 pm
...
Understood. When you say fully fund retirement, thats the max into each of our IRAs, correct?
Fully funding, in my view, is saving enough very year so that you are on track to reach your desired retirement goals. Generally maxing out IRAs is not sufficient, but you need to gauge your progress based on what your pension income will be. That requires some gazing in the crystal ball to figure out what your expenses will be in retirement and how much of those expenses will be met by your pension(s) and social security.

Many folks retire in their 50s and 60s and don't take their social security benefit until age 70. They spend down their nest egg in the interim years. For you to know if you're on track to reach your retirement goals, you need to get a sense of what your nest egg needs to be. Once you figure that out, then you can determine how much you need to save every year to get there.

ExitStageLeft
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Re: 40 years old and just trying to figure it out

Post by ExitStageLeft » Mon Apr 15, 2019 1:50 pm

cwwolf wrote:
Mon Apr 15, 2019 1:16 pm
ruralavalon wrote:
Mon Apr 15, 2019 10:42 am
What is your tax bracket, both federal and state? What is your tax filing status?
Tried to answer this above, but I am confused. I just put a voicemail in to my preparer to ask about this. My w-2 says I paid $7,967.39 in federal income tax. I got $5453 back as a refund. This seems like I am only paying $2K? That seems small. Or do I include other taxes with that? (SS $6,467.03, Medicare $1,512.45).
Just Federal income tax is all that's used for this. It appears you are itemizing, because your taxes for last year are lower by about $2.5k than if you took the standard deduction. That analysis would be:

Wages shown on W-2: $109k
Adjusted gross income (AGI): $109k
Less standard deduction: -$24,000
Taxable income: $85k
Federal Income Tax: $10,585
Less Child tax Credit: -$6,000
Tax Owed: $4,585

That is how someone in the 22% bracket only pays $4.5k in taxes. Note that some payroll deductions such as health care premiums are pre-tax, so your reported wages may be much lower than $109k.

Topic Author
cwwolf
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Joined: Mon Apr 15, 2019 9:24 am

Re: 40 years old and just trying to figure it out

Post by cwwolf » Mon Apr 15, 2019 2:31 pm

ExitStageLeft wrote:
Mon Apr 15, 2019 1:50 pm
Just Federal income tax is all that's used for this. It appears you are itemizing, because your taxes for last year are lower by about $2.5k than if you took the standard deduction. That analysis would be:
Wages shown on W-2: $109k
Adjusted gross income (AGI): $109k
Less standard deduction: -$24,000
Taxable income: $85k
Federal Income Tax: $10,585
Less Child tax Credit: -$6,000
Tax Owed: $4,585
That is how someone in the 22% bracket only pays $4.5k in taxes. Note that some payroll deductions such as health care premiums are pre-tax, so your reported wages may be much lower than $109k.
Oh, whew, this made more sense. Yes, I have pre-tax for pension and health care, so the federal income was only listed as ~$97,703 ish(dont have it in front of me anymore). Thanks for clearing that up!

ExitStageLeft
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Joined: Sat Jan 20, 2018 4:02 pm

Re: 40 years old and just trying to figure it out

Post by ExitStageLeft » Mon Apr 15, 2019 2:47 pm

cwwolf wrote:
Mon Apr 15, 2019 2:31 pm
ExitStageLeft wrote:
Mon Apr 15, 2019 1:50 pm
Just Federal income tax is all that's used for this. It appears you are itemizing, because your taxes for last year are lower by about $2.5k than if you took the standard deduction. That analysis would be:
Wages shown on W-2: $109k
Adjusted gross income (AGI): $109k
Less standard deduction: -$24,000
Taxable income: $85k
Federal Income Tax: $10,585
Less Child tax Credit: -$6,000
Tax Owed: $4,585
That is how someone in the 22% bracket only pays $4.5k in taxes. Note that some payroll deductions such as health care premiums are pre-tax, so your reported wages may be much lower than $109k.
Oh, whew, this made more sense. Yes, I have pre-tax for pension and health care, so the federal income was only listed as ~$97,703 ish(dont have it in front of me anymore). Thanks for clearing that up!
Reducing the AGI by $22k puts my estimate about exactly what you ended up paying. So it looks like you didn't itemize this year. Under the new tax law, most folks will see no benefit from itemizing, since the standard deduction exceeds what they can itemize. You may want to consider filing your own taxes next year and save you the cost of a tax preparer. If you don't have rental property, other income sources, etc. it would be rather straightforward to do it yourself.

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ruralavalon
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Re: 40 years old and just trying to figure it out

Post by ruralavalon » Mon Apr 15, 2019 3:53 pm

Here is a general account funding priority that usually works well for many people (when there is no available work-based account like a 401k and no HSA use):
1) Pay off high interest debt (a guaranteed high return, the next best thing to free money);
2) Contribute the maximum to an IRA, traditional or Roth, depending on eligibility and personal circumstances; and
3) Contribute to a taxable investing account.

Please see the wiki article "Prioritizing investments".


cwwolf wrote:
Mon Apr 15, 2019 1:16 pm
Car loan $6,326.88 (dont have the ppwk in front of me. Paying $160/mo w/ $143.92 principal and $16.08 interest)

. . . . .

Wife's Student loans $16,300.25 paying $173.73 a month

Parent Plus loan my parents took out for me, owe $6,100, paying $153.53 a month.
Please find out and add the interest rate on each debt. (This will be important in establishing investing priorities.)

In addition to the $305k mortgage note, you have:
$57k credit card debt;
$6.3k car loan;
$16.3 her student debt; and
$6.1k your student debt.
$85.7k debt in addition to the mortgage note.
(It is important to develop a strategy for paying off debt while still contributing to IRAs. Interest rate information on the debts is necessary for that.)

. . . . .

Wiki article, "Traditional vs Roth".
"Tax considerations:
* If your current marginal tax rate is 15% or less, prefer a Roth.
* If you expect to have higher marginal rates than your current marginal rate for most of your career, prefer a Roth.
* If you will have a traditional account or a pension large enough to meet your expected retirement expenses (and you expect to take that pension shortly after retiring), prefer a Roth.
* Otherwise, prefer a traditional account."

Do you expect that you will be in a higher tax bracket for most of the rest of your working life?

cwwolf wrote:
Mon Apr 15, 2019 1:16 pm
ruralavalon wrote:
Mon Apr 15, 2019 10:42 am
What is your tax bracket, both federal and state? What is your tax filing status?
Tried to answer this above, but I am confused. I just put a voicemail in to my preparer to ask about this. My w-2 says I paid $7,967.39 in federal income tax. I got $5453 back as a refund. This seems like I am only paying $2K? That seems small. Or do I include other taxes with that? (SS $6,467.03, Medicare $1,512.45).
Add this information when you hear back from your tax preparer. (This will be important in deciding on whether to use traditional IRAs or Roth IRAs.)

cwwolf wrote:
Mon Apr 15, 2019 1:16 pm
As far as I know I am [eligible for Social Security]. I used to get annual updates for SS in the mail, but haven't seen one for a while. I was not aware that I would be inelligible. How do I find out for sure?
I ask because sometimes public employees do not contribute to Social Security and so are not eligible for Social Security benefits. (This will be important in deciding on whether to use traditional IRAs or Roth IRAs.)

Is Social Secuty tax being withheld from your paycheck?

cwwolf wrote:
Mon Apr 15, 2019 12:28 pm
niceguy7376 wrote:
Mon Apr 15, 2019 10:42 am
In your case, following would be the order of preference of savings outside of pension and paying off the CC debt.
1. Roth IRAs for both of you. Since you have income, your spouse can definitely contribute to IRA even if she is currently not working.

Does this mean don't open IRA at Vanguard, but open Roth IRA instead? I can't put any money into it until the credit card debt is taken care of, so probably not for a couple years. Once they are paid off, I could see us maxing out those accounts each year easy. Also, same thing, we don't have the money to put into an RIRA/IRA, so not sure we'd open one for my wife just yet. She is listed as benificiary to mine though just in case.
Do rollover the Edward Jones IRA ($66.7k) to an IRA at Vanguard, no matter what your debt situation. Its very important to avoid the unnecessary high fees at Edward Jones.

Just call Vanguard asking them to help you rollover the IRA, ask for a trustee to trustee transfer with the money going direct from Edward Jones to Vanguard.

Since you want a 60/40 asset allocation consider investing in either Vanguard Balanced Index Fund Admiral Shares (VBIAX) ER 0.07% or Vanguard LifeStrategy Moderate Growth (VSMGX) ER 0.13%.

In addition you will need to open a Vanguard IRA for each of you, Roth or traditional, for additional contributions. The annual maximum allowed is $6k each. You need to carefully examine your spending to find a way to start contributing to these IRAs.

. . . . .

cwwolf wrote:
Mon Apr 15, 2019 1:16 pm
Part of my naivete is - I said stocks/bonds, you said equities/fixed incomes. Are these interchanable terms in this context?
Equities = stocks or stock funds.

Fixed Income = bonds or bond funds and sometimes also CDs, savings accounts and money market funds if held for long-term investing.

cwwolf wrote:
Mon Apr 15, 2019 1:16 pm
The video here https://www.bogleheads.org/wiki/Video:B ... philosophy Rule #8 Minimize Taxes shows three types of accounts to invest from - Taxable, Tax-free and Tax-deferred. Just trying to get a handle on what these three are, and what should be invested out of each, and if that's even something I should be looking at right now.
Tax free = a Roth account. You have already paid income tax on the money you contribute (you get no tax deduction for the contributions), and you pay no income tax when you withdraw the money later.

Tax-deferred = traditional accounts. You get a tax deduction on the money you contribute, and you pay income tax when you withdraw money later.

Both types are tax-advantaged. The dividends and gains paid every year by the investments held in the account are not taxed the year paid, so the accounts grow and compound protected from tax.

Taxable = any other account not specifically insulated from income tax by some provision of the tax code.

. . . . .

If you have other questions just ask.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Duckie
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Re: 40 years old and just trying to figure it out

Post by Duckie » Mon Apr 15, 2019 5:20 pm

cwwolf wrote:
ruralavalon wrote:But first is there a work-based plan (such as a 401k, 403b, 457, etc.) with your employer?
No.
Are you sure? You say you work for NYS. If that means New York State, they have a Deferred Compensation Plan (457b).

Figuring_it_out
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Re: 40 years old and just trying to figure it out

Post by Figuring_it_out » Mon Apr 15, 2019 7:13 pm

cwwolf wrote:
Mon Apr 15, 2019 9:50 am
{Edit with additional info per ruralavalon's request}
CCs:
BoA 27.74% $13,384.92 - Balance is at 0% promo APR
Discover 20.24% $9303.87 - Balance is at 0% promo APR
Citi Costco 17.49% $12,565.12 - $10,300 of balance is at 0% Promo APR. Remaining balance slated to be paid off in a month
Chase Amazon 16.49% $9,203.38 - Balance is at 0% promo APR
Citi Simp 15.24% $8,559.80 - Balance is at 0% promo APR
Other cards with no debt. Total credit line $115,000
All CC debt is balance transfered to my capital one card at $0 fee, then bounced right back to the originating card at 3%-5% for another year at 0% interest. Last month's finance charges were $44 for everything.

Car loan $6,326.88 (dont have the ppwk in front of me. Paying $160/mo w/ $143.92 principal and $16.08 interest)

Mortgage 30 year fixed, $305,517.79 at 3.375% ($350,00 original amount, payed off 5/1/2043)

Wife's Student loans $16,300.25 paying $173.73 a month

Parent Plus loan my parents took out for me, owe $6,100, paying $153.53 a month.

HMMM.....$80K in consumer debt... (not counting mortgage)....
Image

I might suggest starting with Dave Ramsey as well. I see that the 0% APR is the game you are playing but that is too much credit card debt.
The game here (that Dave would not approve of) is paying off all balances monthly and use only a few of the highest cash back credit card available. (Generally a 2% to 5%) Daves thing is cash or debit card for everything but I don't agree with that unless you have a free spending problem. The psychology is that when you see those green dollars laying on the table, there is an emotional attachment to seeing them leave. Swiping a card is painless therefore you are more likely to either buy things in impulse that you don't need or unnecessarily upgrade something just because (higher end phone, car upgrades you don't necessarily need or want but whatever..swipe)

Sooner or later that debt will popup and grab you around the throat. I would make a plan to pay all that down first before major investing.

You can never borrow/refinance your way of out debt.

teamDE
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Re: 40 years old and just trying to figure it out

Post by teamDE » Mon Apr 15, 2019 7:40 pm

How are all of those credit cards in the 0% promo phase? That's a lot of debt to be revolving around, it's really hurting your credit. How much time before the promo rates start to end? Those are absolutely priority #1.

The good news is that you found this forum and escaped Edward Jones. You're in good hands now! :sharebeer

lakpr
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Re: 40 years old and just trying to figure it out

Post by lakpr » Tue Apr 16, 2019 7:55 am

I would add that, at 40 years old, you should be paying off that Parent-Plus loan for $6100 immediately. If I were a parent (and I am), I'd not want my adult child still have me on the hook for an educational loan.

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cwwolf
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Re: 40 years old and just trying to figure it out

Post by cwwolf » Tue Apr 16, 2019 10:11 am

ruralavalon wrote:
Mon Apr 15, 2019 3:53 pm
Please see the wiki article "Prioritizing investments".

Thanks for the reading, I will get this on my list.

ruralavalon wrote:
Mon Apr 15, 2019 3:53 pm
Please find out and add the interest rate on each debt. (This will be important in establishing investing priorities.)
Added the interest on the car loan and wife's loans. Waiting to hear back from the folks on the parent plus loan.
ruralavalon wrote:
Mon Apr 15, 2019 3:53 pm
Wiki article, "Traditional vs Roth".
"Tax considerations:
* If your current marginal tax rate is 15% or less, prefer a Roth.
* If you expect to have higher marginal rates than your current marginal rate for most of your career, prefer a Roth.
* If you will have a traditional account or a pension large enough to meet your expected retirement expenses (and you expect to take that pension shortly after retiring), prefer a Roth.
* Otherwise, prefer a traditional account."

Do you expect that you will be in a higher tax bracket for most of the rest of your working life?
Probably. I need to do a little more work on understanding the tax brackets stuff, but that shouldn't take too long. I will look into this and review the info in your link!
ruralavalon wrote:
Mon Apr 15, 2019 3:53 pm
Is Social Secuty tax being withheld from your paycheck?
Yes it is.
ruralavalon wrote:
Mon Apr 15, 2019 3:53 pm
Just call Vanguard asking them to help you rollover the IRA, ask for a trustee to trustee transfer with the money going direct from Edward Jones to Vanguard.
Will do.
ruralavalon wrote:
Mon Apr 15, 2019 3:53 pm
In addition you will need to open a Vanguard IRA for each of you,
I was going to open one for me for the rollover. You don't mean open a second one for me, right? (other than a Roth in the future as needed)?
ruralavalon wrote:
Mon Apr 15, 2019 3:53 pm
Tax free = a Roth account. You have already paid income tax on the money you contribute (you get no tax deduction for the contributions), and you pay no income tax when you withdraw the money later.

Tax-deferred = traditional accounts. You get a tax deduction on the money you contribute, and you pay income tax when you withdraw money later.

Both types are tax-advantaged. The dividends and gains paid every year by the investments held in the account are not taxed the year paid, so the accounts grow and compound protected from tax.

Taxable = any other account not specifically insulated from income tax by some provision of the tax code.
Thanks for the explanation. I think I will research this more once everything else is settled and my money is in Vanguard.

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cwwolf
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Re: 40 years old and just trying to figure it out

Post by cwwolf » Tue Apr 16, 2019 10:14 am

Duckie wrote:
Mon Apr 15, 2019 5:20 pm
cwwolf wrote:
ruralavalon wrote:But first is there a work-based plan (such as a 401k, 403b, 457, etc.) with your employer?
No.
Are you sure? You say you work for NYS. If that means New York State, they have a Deferred Compensation Plan (457b).
Huh. Well, color me embarrassed. I know when I started (5 years ago) we had to pick one type of retirement account (from a specific selection), but I don't remember there being additional options, but its been a while. I will look into this this week. Thanks for pointing it out! (And yea, I meant New York State).

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cwwolf
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Re: 40 years old and just trying to figure it out

Post by cwwolf » Tue Apr 16, 2019 10:23 am

Figuring_it_out wrote:
Mon Apr 15, 2019 7:13 pm
HMMM.....$80K in consumer debt... (not counting mortgage)....
Image

I might suggest starting with Dave Ramsey as well. I see that the 0% APR is the game you are playing but that is too much credit card debt.
Yup! I've been working these past few months on coming up with a budget, planning out paychecks, planning out debt consolidation, monitoring for finance charges, etc. I have an excel spreadsheet with all bills and all paychecks from now (started a year ago) through 2021, including when I have to balance transfer each debt to maintain 0$ apr. Every bill is scheduled on the sheet, there is about ~$120 left in checking after each paycheck just in case, some is going to savings, and the rest is all going to the CC's. With my wife looking to start working at the end of the year, and the contractual raises for my job, I think we can get out of the CC debt in about 2 years (planning on only my income at the moment I think 2 years is doable. If she gets a job, then it will only go that much faster).

We've reduced spending, and I am always looking for ways to save (like I will be moving us off Verizon and probably over to Boost Mobile to save $70 a month on cell phone bill). I also subscribe to /r/personalfinance, r/thirfy, r/frugal, and any other sub I can find for ways to save money / earn extra cash. Now I have bogleheads to further research and educate myself. We'll get this under control!

In terms of longer picture, I also did an excel worksheet where I can plan what year to retire and what my pension would be that year (making estimates on contractual raises and whatnot in the interim). I'm a numbers guy, and I review the numbers weekly. Just going to take a little bit to get us out of the hole and start putting more away for retirement.

I appreciate all the input and help from everyone here!

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cwwolf
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Re: 40 years old and just trying to figure it out

Post by cwwolf » Tue Apr 16, 2019 10:29 am

teamDE wrote:
Mon Apr 15, 2019 7:40 pm
How are all of those credit cards in the 0% promo phase? That's a lot of debt to be revolving around, it's really hurting your credit. How much time before the promo rates start to end? Those are absolutely priority #1.
I have a capitalone card. It allows for a $0 fee balance transfer. So what I do, when a promo balance is ending is transfer that debt to the capital one card for free, then as soon as the transfer clears, I bounce it back to the original card at their promo rates, which are typically 12 months at 0% (for a 3-5% fee depending on the card). While I am still paying the 3-5% once on the remaining debt, it generally works out to costing only about 2 months worth of interest over the same 12 month period. Credit score just went up to 715 during the last check (Credit Karma and Mint).

I was also getting over $7000 in refunds between federal and state each year. I've just started increasing the allowances on fed and state to get more of that money in my paycheck and putting all of the "increase" directly to the CCs. Not sure I can get the state down to $0 refund, even using those online calculators I can only get it down like $4-5 a paycheck, still leaving about $1200 in refund. My last adjustment (fed 5->9, state 4->) changed my paycheck by only $80. I made another adjustment and will just keep raising it until I get closer to the $200 a paycheck back.
teamDE wrote:
Mon Apr 15, 2019 7:40 pm
The good news is that you found this forum and escaped Edward Jones. You're in good hands now! :sharebeer
INDEED!!
Last edited by cwwolf on Tue Apr 16, 2019 10:33 am, edited 1 time in total.

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cwwolf
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Re: 40 years old and just trying to figure it out

Post by cwwolf » Tue Apr 16, 2019 10:32 am

lakpr wrote:
Tue Apr 16, 2019 7:55 am
I would add that, at 40 years old, you should be paying off that Parent-Plus loan for $6100 immediately. If I were a parent (and I am), I'd not want my adult child still have me on the hook for an educational loan.
I have automatic transfers setup between my bank account and my parents so they get their money. I would like to pay it off faster, but the CC's and higher interest debt is more important. I graduated $54,000 in debt for college, so I've been paying them steadily for 20 years. There were some issues where I was paying them more than needed and instead of applying it to the loan which I wanted, they were saving the extra in the account in case I was short. We communicated and fixed that. Once the CC's are done, the loans come next.

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cwwolf
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Re: 40 years old and just trying to figure it out

Post by cwwolf » Tue Apr 16, 2019 10:56 am

Duckie wrote:
Mon Apr 15, 2019 5:20 pm
Are you sure?
Well, looks like I have three options: 457(b) or 403(b) or both. Now I need to figure all that out! :)
https://www.suny.edu/benefits/vsp/

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ruralavalon
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Re: 40 years old and just trying to figure it out

Post by ruralavalon » Tue Apr 16, 2019 12:18 pm

cwwolf wrote:
Tue Apr 16, 2019 10:56 am
Duckie wrote:
Mon Apr 15, 2019 5:20 pm
Are you sure?
Well, looks like I have three options: 457(b) or 403(b) or both. Now I need to figure all that out! :)
https://www.suny.edu/benefits/vsp/
Be sure to determine if the plans offer an employer match.

If there is an employer match offered, then contributing enough to get the full employer match is a top priority, as important as (or even more important than) attacking the debt problem. Wiki article, "Prioritizing investments".


cwwolf wrote:
Tue Apr 16, 2019 10:23 am
We've reduced spending, and I am always looking for ways to save (like I will be moving us off Verizon and probably over to Boost Mobile to save $70 a month on cell phone bill). I also subscribe to /r/personalfinance, r/thirfy, r/frugal, and any other sub I can find for ways to save money / earn extra cash. Now I have bogleheads to further research and educate myself. We'll get this under control!
That's no small thing to reduce the cell phone bill by $70/month, = $840/year.

Keep up the effort to reduce spending.


cwwolf wrote:
Tue Apr 16, 2019 10:23 am
In terms of longer picture, I also did an excel worksheet where I can plan what year to retire and what my pension would be that year (making estimates on contractual raises and whatnot in the interim). I'm a numbers guy, and I review the numbers weekly. Just going to take a little bit to get us out of the hole and start putting more away for retirement.

I appreciate all the input and help from everyone here!
Here are two websites you can use to help plan and asses progress toward retirement goals:
1) www.firecalc.com; and
2) www.i-orp.com.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

zeke1975
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Re: 40 years old and just trying to figure it out

Post by zeke1975 » Tue Apr 16, 2019 1:15 pm

cwwolf wrote:
Tue Apr 16, 2019 10:56 am
Duckie wrote:
Mon Apr 15, 2019 5:20 pm
Are you sure?
Well, looks like I have three options: 457(b) or 403(b) or both. Now I need to figure all that out! :)
https://www.suny.edu/benefits/vsp/
If you're in SUNY, You've hit the mother load for pre-tax savings vehicles. Since you're in the pension, the 401a/414h (that's the ORP) is out, but you still have the 403b and 457b. You can currently contribute up to 19k/year in each of those (total of $38k pre-tax). I contribute to both. I started many years ago with the 403b, and started contributing to the 457b (NYS deferred comp) more recently. I wish I knew the details on the 457b sooner, I'd certainly suggest starting with the 457b first, max it out before moving on to the 403b. the 457b's funds (CITs really) have much lower fees than any of the 403b options. The 457b's index funds have expense ratios of .001 and .002 %. The big advantage of the 457b is you can begin drawing from it as soon as you leave service, no matter your age (including prior to 59.5), with the 403b you can't withdraw from it till 59.5, unless you do roth conversions or other trickery to get your money out earlier. Both the 403b and the 457b are both available in pre-tax and Roth varieties, so if you decide to go the Roth route later to minimize taxes in retirement you have that option.

I currently contribute to the following:

401a: (Employer contributes 13% of my salary, 0% contributed by me) pre-tax
403b: 19,000 contributed by me (no match by employer) pre-tax
457b: 19,000 contributed by me (no match by employer) pre-tax

After the employer sponsored plans above you've also got tira and roth ira options as well. I do roth iras for both my wife (stay at home mom) and I, since i'm putting so much in pre-tax already, I go the roth route for tax diversity in retirement, besides after all my existing pre-tax contributions and deductions, my effective tax rate is so low I wouldn't get much tax benefit from the tira contributions anyhow.

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cwwolf
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Re: 40 years old and just trying to figure it out

Post by cwwolf » Tue Apr 16, 2019 1:38 pm

zeke1975 wrote:
Tue Apr 16, 2019 1:15 pm
If you're in SUNY, You've hit the mother load for pre-tax savings vehicles. Since you're in the pension, the 401a/414h (that's the ORP) is out, but you still have the 403b and 457b. ... I wish I knew the details on the 457b sooner, I'd certainly suggest starting with the 457b first, max it out before moving on to the 403b. the 457b's funds (CITs really) have much lower fees than any of the 403b options. The 457b's index funds have expense ratios of .001 and .002 %. The big advantage of the 457b is you can begin drawing from it as soon as you leave service, no matter your age (including prior to 59.5).
Indeed I am in SUNY. Thanks so much for all the info. I will start looking into the 457 next week (too much going on this week). Too bad I couldn’t do the ORP, but it makes sense why.

Thanks again! This is very helpful!

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cwwolf
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Re: 40 years old and just trying to figure it out

Post by cwwolf » Wed Apr 17, 2019 12:04 pm

ExitStageLeft wrote:
Mon Apr 15, 2019 1:50 pm
Wages shown on W-2: $109k
Adjusted gross income (AGI): $109k
Less standard deduction: -$24,000
Taxable income: $85k
Federal Income Tax: $10,585
Less Child tax Credit: -$6,000
Tax Owed: $4,585
Just trying to learn how to calculate this myself when looking at putting money into an FSA and 457(b). When I checked https://www.nerdwallet.com/blog/taxes/f ... -brackets/ the calculation for someone makeing 85,000, I ended up with $10,417 ($9,086 + 0.22*$6,050). How did you get $10,585?

Thanks!

ExitStageLeft
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Re: 40 years old and just trying to figure it out

Post by ExitStageLeft » Wed Apr 17, 2019 12:26 pm

cwwolf wrote:
Wed Apr 17, 2019 12:04 pm
ExitStageLeft wrote:
Mon Apr 15, 2019 1:50 pm
Wages shown on W-2: $109k
Adjusted gross income (AGI): $109k
Less standard deduction: -$24,000
Taxable income: $85k
Federal Income Tax: $10,585
Less Child tax Credit: -$6,000
Tax Owed: $4,585
Just trying to learn how to calculate this myself when looking at putting money into an FSA and 457(b). When I checked https://www.nerdwallet.com/blog/taxes/f ... -brackets/ the calculation for someone makeing 85,000, I ended up with $10,417 ($9,086 + 0.22*$6,050). How did you get $10,585?

Thanks!
I'm pretty sure I plugged those numbers into the H&R Block estimator at https://www.hrblock.com/tax-calculator/#/en/te/aboutYou

Your link to Nerd Wallet has rates for the 2018 tax year as well as 2019. It looks like the numbers you have are for this tax year. If you do the calc for 2018 it is $8,907 plus 22% of the amount over $77,400, which comes out to $10,579. The 2019 tax year has increases for inflation in many categories such as the brackets and the standard deduction which is why the 2019 calc somes out lower. I'm not sure why my numbers are off by $6 though.

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cwwolf
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Re: 40 years old and just trying to figure it out

Post by cwwolf » Wed Apr 17, 2019 12:38 pm

ExitStageLeft wrote:
Wed Apr 17, 2019 12:26 pm
Your link to Nerd Wallet has rates for the 2018 tax year as well as 2019. It looks like the numbers you have are for this tax year. If you do the calc for 2018 it is $8,907 plus 22% of the amount over $77,400, which comes out to $10,579. The 2019 tax year has increases for inflation in many categories such as the brackets and the standard deduction which is why the 2019 calc somes out lower. I'm not sure why my numbers are off by $6 though.
Crud, yup. I thought 2019 meaning filing in 2019 for 2018. Helps if I actually read directions. Thanks again!

ClaycordJCA
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Re: 40 years old and just trying to figure it out

Post by ClaycordJCA » Fri Apr 19, 2019 12:37 am

Lots of good advice above, which I won’t repeat. I think there are two insurance issues that you should review, as well.

Have you evaluated whether your term life insurance is sufficient? Based on having almost $400k in debt (including mortgage), a wife who is still pursuing her a degree and therefore unlikely to replace your income for some time, if at all, 3 kids to support for 11+ years until they reach 18, and college if you intend to help with those expenses, I’d be worried about whether your $1M+ is actually enough.

Do you have disability insurance? Is it enough to replace your income? If so, for how long? If articles on the the internet are to be believed, there is a greater likelihood before age 65 of becoming disabled and not being able to work than dying.

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