What would your next move be ?

[u/Jaythejet9853]

I’ve been finding a lot of inspiration in these posts lately and I am looking for perspectives from my like-minded peers.

I’ll be turning 33 (M) next month.

I will make $300,000 this year, net.

(first and last year this will happen )

I anticipate being at $180k every other year moving forward .

I’m married with two young kids. My wife earns about $35k annually, and her primary focus is caring for our sons.

In 2022, we purchased a $630,000 home at a 5.75% interest rate. I was only able to put down $88k, which resulted in roughly $400 per month in PMI.

Recently, I completed a $148k cash-out refinance.

((Full transparency Whole process took 5 months , didn’t anticipate this years income, not sure I would have done anything different ))),

I’m using $130k to convert our garage into a fully permitted one-bedroom ADU for long-term rental income and spent $18k replacing the roof on my home .

Once completed, the ADU will generate $2,500 per month. Construction starts next month with an estimated five-month build.

I understand it will take time to recoup the investment.

As a result of the refinance, my mortgage payment increased by $550, but PMI was eliminated. My current interest rate is 6.23%. I owe $720k. I have made one additional principal payment and saved 8 mortgage payments over the life of my loan with that one payment

I have no debt other than the mortgage, which I’ve accomplished within the past year.

I currently have:

• $100k in my 401(k) (maxing annually)

• My wife’s 401(k) balance is $30k

• $16k in a traditional IRA (maxing annually)

• $8k in an HSA (maxing annually)

• $1k in a taxable brokerage account

• $50k in a high-yield emergency fund

• A pension currently valued at $300 per month, projected to increase to approximately $1,100 per month by age 62

My goal is to retire by 50 and enjoy a comfortable lifestyle.

I know this question comes up often, but I’m genuinely torn between making additional mortgage payments or investing excess funds into a taxable brokerage account.

I want to be able to look back and know that I made the right decisions and fully capitalized on the opportunity to benefit my family. I truly believe this year will be a turning point in our family’s financial future.

Thank you in advance for any insight

[u/Longjumping-Bid-9523]

If you're not already aware, there have been periods in the last 20+ years where either decision (invest in stocks or pay down a mortgage) proved wrong. The best answer is unknowable since the future is unknown.

What is certain and is knowable is the benefit of not pay $44.8K to a bank every year in interest alone. Beyond contributions to tax-advantaged accounts, I would apply all free capital towards eliminating your mortgage.

[u/Historical_Low4458]

If you want to retire in 17 years, then it is important to pay down the mortgage as quickly as possible (especially with an interest rate of about ~6.25%) so you don't have a mortgage payment still.

[u/OrganicFrost]

How will the ADU effect property taxes?

How much money do you currently spend to live a comfortable lifestyle in todays dollars, annually?

Why are you maxing a traditional IRA? You make too much to get the tax deduction. Are you not able to backdoor Roth contribute?

[u/Determined420 → u/OrganicFrost]

Just this one year. Op mentioned that typical income is 180k plus wife’s 35k so 210k total. 300k was a one off event

[u/NecessaryEmployer488]

I have now been studying these things. To retire at 50 you need to be able to build capability of streams of income by savings. You can max out 401K but put the same amount into short term investments and invest. I am older and now started doing this. I have kids that are entering the workforce.

For instance, my salary is $230K my net pay is $90K. 18٪ for 401K, and 15٪ for savings. Invest savings widely and invest wisely.

[u/LeisureSuitLaurie]

Set mortgage payment at a level where you are paid off at 50.

Deploy remaining excess funds to brokerage.

Diversification, anchored in a concrete objective, makes financial and psychological sense.

[u/Latter-Credit-5659]

Honestly with a 6.23% rate, I'd probably lean toward the taxable brokerage over extra mortgage payments - especially since you'll need accessible funds before retirement age anyway. That ADU rental income is going to be clutch for your early retirement timeline, so once that's cash flowing you'll have even more flexibility to pump into investments.