Roth Contributions/Investment strategy

[Guest MustangMike]

..

[John G]

I started this reply in the morning but did not finish it until very late on Monday. I see that you deleted your earlier text. Let me know if you want the whole question deleted - as moderator, I can do that.

My comments:

First, congratulations on getting a very big start on your investments. Also, thanks for all the info. You only left out the possibility of children, the timing and how that might effect your incomes. I will assume that any changes a few years down the road.

You are likely to be filing "married - joint", which means you are likely to be either in the phase out for Roths next year or possibly prohibited. Therefore, I suggest that you fully fund both Roths this year. I am not sure why you did not fund your Roths completely in recent years as you seem to be active savers.

I would also suggest that you participate in the 401/403 accounts to collect at a minimum any match.

On debt - you are in good shape. However, I would not count on "making money" on a house sale unless you currently own two houses. Generally, your initial equity from a first home will probably be needed for any home upgrade unless you are lucky enough to hit it big on the real estate bubble in some markets. (Wash DC comes to mind)

Beyond the Roths (8K this year and more next year if possible) and 401/403 accounts, if you can still set aside additional funds then I would recommend that you consider a basic taxable brokerage or mutual fund account. You will need to track future changes in the tax laws governing income thresholds and tax rates on long term capital gains and qualifying dividends. Due to the mushrooming deficit, Congress is likely to tinker with the current rules.... 2006 and beyond. I would imagine that these taxable investments are going to be the likely source of funds for any franchise purchase. (I am curious if you have much experience or currently work for a franchise. I have no direct experience in this area, although I have done a lot of work in non-franchise start-ups.) You did not indicate a target amount you might need, but you seem to have the discipline to bank a healthy amount in three years.

There are lots of Acorn funds and apparently at least three Z funds (international, select and regular?). I am not very familiar with this family of funds. These appear to be mid size growth funds, and I think I saw that some of them are closed to new investors. Performance has been significantly above average, so no problem there. No load and modest annual expenses. When your assets in this fund grow to between 20k and 50k, you may want to consider finding a second mutual fund perhaps a "value" fund.

You did not say what your cash reserves look like. As you are getting a major bump up - it sounds like you are doing fine. Job security is not a big factor for teachers. School systems rarely downsize and there are lots of other locations that are always hiring. On the low end, you probably want to have about 30k in cash reserves. Some folks would recommend 6 months income...but in a era of home equity loans, signature loans and credit cards I think that most folks have some built in flexibility.

[Guest MustangMike]

Thanks, John - I've sent you a private message. Sorry for the inconvenience!