Hi Money Minder,
My situation is like this:
- 18% going into my Roth 401k with a 6% match, which I’m not maxing out but could.
- Keeping 10-12% saved in cash in a 4.25% HYSA.
- Right now, I’ve got 12 months’ worth of expenses saved up.
- My mortgage is at a whopping 7.13%.
I’m not a big spender and I’d like to put my extra income/savings to work. I want to keep at least 6 months’ worth of expenses in the HYSA. Right now, I’m thinking of attacking the mortgage since the rate is so high. By adding my extra funds to it monthly (and also after paying off my car), I could clear it in 8 years (started 10/1/23) and save a cool 200k in interest alone. I figure this should be the plan until rates drop and refinancing makes sense.
My 401k projection at 60 is currently 4.2-4.6M (in 2057, depending on the E(V) model), assuming an 8% return with no changes to income/contributions. If I just keep maxing out the 401k and paying the minimum on the mortgage, the projection jumps to 5.2-5.7M.
Any thoughts?
Farewell from Financially Focused
Response from THE MONEY MINDER:
Hello There,
Hi there,
It sounds like you have a solid financial foundation and a thoughtful approach to managing your money. Congratulations on having 12 months of expenses saved up in your high-yield savings account and for maxing out your Roth 401k contributions. Your plan to attack your high-interest mortgage by allocating additional funds towards it monthly is a smart move, especially considering the savings in interest over the long run. Given that your car and student loans have a lower interest rate, focusing on paying off your mortgage first seems like a strategic decision.
Your projection for your 401k at 60 years old looks promising, and by maximizing your contributions now while also focusing on mortgage repayments, you are setting yourself up for a comfortable retirement. Refinancing in the future when interest rates drop could be another opportunity to further optimize your financial situation.
Overall, it seems like you have a well-thought-out plan in place. Balancing retirement savings with debt repayment is a wise approach, and it’s great to see you actively working towards both goals. Keep up the good work and continue monitoring your progress along the way.
All the best from THE MONEY MINDER.
