Emergency funds: Yes and then some, more details in questions below. Currently holding in Discover savings & Ally no-penalty CD's.
Debt: 152K mortgage, 10-yr ARM @ 2.875% through July 2026 then rate subject to change.
Tax Filing Status: Married Filing Jointly
Tax Rate: 22% Federal, 4.95% State
State of Residence: Illinois
Age: 35 / 39, 2 kids age 6 & 3
Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: unknown
Current retirement assets
His 401k
-$130K in Vanguard Target Retirement 2050 (.045% ER)
-Currently contributing as roth, maxed for first time this year and will continue to do so. $55K of balance is roth basis.
Her IRA
-$44K Traditional
-$124K Roth
-held with EJ. Not listing all the holding details but majority in ETFs and mutual funds in similar AA to desired. I know the recommendation of this forum will be to pull these from EJ, which I'm working on convincing spouse
His & Her Corporate Pension
-Both have defined benefit pensions with same megacorp.
-He is still working and if stay with company, will be based on salary and yrs (currently 12 yrs and $150K total income with ongoing career progression expected if remain with employer)
-Spouse stopped working after having kids, will receive benefit but only modest based on 13 yrs service and $70K top salary. Even if returns to work for same company, will not resume pension benefits as plan is no longer offered to new/re-hires.
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Contributions
New annual Contributions
$23K (max) his 401k (employer matches a few thousand for employees with pension)
Questions:
1. We currently have $122K sitting in mix of Discover savings and no penalty CD's with Ally, earning 4-5%. When spouse stopped working 6 years ago we intentionally held larger than typical emergency fund, expecting to potentially need to draw from it to make it work on single income while wife is SAHM. My income has increased 2x since starting family and current expenses are supported by one income while maxing 401K, so I feel comfortable putting more of this into investing.
Plan is to open IRA's for him and her (have current Fidelity account) and contribute annual max for this year in simple three-fund at desired AA - assume this is advisable first step?
This still leaves ~$110K which I plan to invest a portion of - assume in a taxable account with Fidelity in same funds & AA as IRA accounts would be the next step after maxing IRA's?
Additional considerations:
-Current expenses are around $80K, I would be comfortable with 3-6 months in mm or current no-penalty CD's with some in savings as well for flexibility
-Have 529's for each kid, $10K balance currently and plan to increase contributions to $300-400/month.
-We don't have any major expenses planned/needed but have been discussing some home improvements as funds and time allows - mostly modest and that can be supported between cash flow and/or pulling a month or so from emergency fund. Only mentioning as justification to stay a little heavier in emergency (or more liquid funds) - maybe $40-50K target.
-Wife will likely return to some income when we're done having kids
2. I know there is not one answer to the traditional/roth question but should we be looking at switching to traditional given current amount in roth and expecting ongoing income increases through career, eventual pension benefit?
3. Mortgage - I'm obviously kicking myself for not locking in low rate... any guidance here knowing our current low rate will start changing in 2026? Should we just wait and see what rates do but generally assume to keep a mortgage at lowest rate possible.
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