14 Comments

  1. Given everything you said, I’d just set the money aside to front load IRAs in January. Back when we had qualifying income, I used to really enjoy maxing out our IRAs on the first day the markets opened in the new year. (Yes, this was toward the end of our working careers, when we had the means to do so.)

  2. I’d do both. Attack the mortgage with another $1,000 or some number that rounds off the balance to a fun number (I can’t be the only one that does this!?) Then use the rest for your 2020 Roth contributions.

  3. My vote is for 2020 Roth IRA contribution. But I know how much you hate your mortgage. I’m at a point with my mortgage where I’m ok never making an extra payment again, so everything “extra” is going into my taxable brokerage and I make sure late in the year to set aside the next year’s Roth IRA contribution so I can max it out early in the new year. Talk about getting the year started on a great foot!

  4. Sherikr

    Since your mortgage is your top priority, I’d say throw your $6k there. Then you’re $6k closer to having it gone.

    I have every confidence that you will wipe that debt out within the next few years. Then you will have a lot of excess cash that you can throw at the next (non shoe) goal! 🙂

  5. Frontload the Roth IRA– You can only use that space once a year and then it disappears. The mortgage will still be there until you pay it off.

    When it comes time for your kid(s) to be going to college you’ll be able to hide money (for financial aid purposes) in your house, but you won’t be able to put it in 2020’s IRA account unless you make that decision now (technically, before April 2021).

  6. Karen

    I’m gonna agree with life zemplified and say split the difference between Roth contribution and mortgage pay off. A little bit of joy split between the two. Enjoy!

  7. Hey Penny, is there a contribution limit for Roth IRAs being from Canada I don’t know if you have a limit? I think I would invest the $6,000 in your IRAs and get that money working for you. If there is a limit then once they are maxed you could then start making the extra payments on your mortgage. That’s my two pennies worth of thoughts 🙂

    Please let us know what you guys decide to do!

  8. This is a good problem to have!

    I know you were not particularly keen on your 457s, but that is probably where I would consider putting that $6k. Even if the plans are riddled with fees, the tax savings presumably would be so great that you come out way ahead.

    Let’s say 22% in federal taxes avoided on that income, plus maybe a 7% annual return on the investment, that’s 29% total return….even if there are 2% in fees you’re way ahead.

    But I obviously don’t know the specifics of the 457 or how bad the options are. As always, you’re the expert on your own situation!

    If you have room in your 403b, that also would be good. Though it sounds like maybe you max those out already for 2019.

    If the 457 is just a non-starter, I think I like the mortgage a bit more than the Roths since it sounds like you may already have enough available to max those out on an annual basis, too. (Also, kuddos! That’s rad.)

    • Yeah, we are going to max out our Roths (baring a major catastrophe) regardless. I really should look at a 457. Sometimes, I think I let the PF world noise cloud my judgement, too.

      My only option is a variable annuity from AXugh. But the tax benefit might be the angle I needed to pull the trigger?!

  9. Oh man, I dunno what I would do! I do love the idea of paying down our mortgage but ugh, it feels like such an insurmountable number. Somehow, it almost feels like the money just disappears when we send it over to the mortgage because it’s such a small drop in the bucket.

  10. You have good options, at least none of them are bad.

    Personally I would use the money to fund the Roth IRAs early in the year, then decide between the 457 or mortgage paydown.

    I know this may sound like horrible for a personal finance writer to say, but I would be hesitant to put anything beyond what it takes to get a match into your 403b/457. With the projected pensions you both have in retirement, you’ll probably withdraw from your pre-tax accounts at a similar federal tax rate as you are paying now. Add in the kind of fee drag you are saddled with in those plans, I would take the sure thing and pay down the mortgage.

    Once the mortgage is paid off, then its worth running an analysis in the difference between the fee drag in the 403b/457 compared to the tax drag in just holding an after-tax brokerage account in a tax efficient index fund. My guess is #2 will win out, but only a guess.

    Best of luck

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