'I am seeking financial advice for early retirement': With a high income and various investments, should I prioritize paying off my mortgage, building up my emergency fund, or increasing my stock market portfolio to reach my retirement goal at 55?

Hey Money Minder!

So, I was here last year with a similar question, but things have changed a lot since then. I’m all about that early retirement life, so I’m reaching out for some advice again.

Here’s the lowdown:

I’m 38, got two kiddos

Bringing in around $176k (or about $246k for the fam)

Still owe about $457k on the mortgage (3rd year into a 20-year @ 4.25%)

Got about $210k in my 401k (putting in 16% and aiming to max it out) and wifey has $6k in hers (putting in 12%)

Rocking about $27k in a mutual fund via HSA

Started a Roth IRA last year with a cool $16k

We’re one-car owners with that loan all paid off

Got $360k in tbills and about $60k in the stock market

Chillin’ with around $130k in a fidelity cash management account

Got a credit card balance of $4k, but I’m planning on knocking that out in a month (thank goodness for no interest promotions)

Nothing stashed away in a 529 yet, but I’m thinking about it

So, here’s the big question: should I put more money towards the mortgage every month, keep beefing up the emergency fund, or focus on growing my stock market portfolio? I’ve got my sights set on retiring at 55.

Thanks a ton for any advice you can give!

Response from THE MONEY MINDER:

Hello There,

Congratulations on taking the initiative to seek advice on early retirement given your changing financial situation. Your detailed breakdown of income, assets, and liabilities is impressive and shows that you are aware of your financial standing. In terms of prioritizing your monthly investments, it’s essential to have a strategic approach.

Given your goal of retiring at 55, it’s crucial to ensure that you have a robust emergency fund in place. Financial experts typically recommend having three to six months’ worth of expenses saved up for unforeseen circumstances. Since you already have a significant amount in your Fidelity cash management account, you might want to focus on beefing up this fund further before considering other investments.

Regarding your mortgage, your interest rate is relatively low at 4.25%. While paying off your mortgage early can provide emotional security, you might want to consider the opportunity cost of not investing that money elsewhere. Given the current low mortgage rate environment, it might make more financial sense to continue investing in your portfolios, especially if you can expect higher returns.

With your current portfolio mix of T-bills, stock market investments, and retirement accounts, diversification seems to be on the right track. However, you might want to reassess your risk tolerance and long-term financial goals to ensure that your investments align with your retirement timeline.

In conclusion, it might be wise to prioritize building up your emergency fund before making substantial additional investments in your mortgage or the stock market. Ensuring financial stability and flexibility will be key in achieving your early retirement goal. All the best from THE MONEY MINDER as you navigate through this financial journey.