[USER]

Looking for financial advice for my financially illiterate family.
I’m an immigrant who came to the U.S. at 30 years old and became a Physician Assistant almost at 40, currently earning $110K a year (two years out of school).

My husband earns a similar salary. We both started very late—literally from scratch—in our late 30s.

Through hard work, we’ve paid off our insane student loans and saved approximately $200K (after making a down payment on a townhome).

We pay about $2,500 per month in mortgage payments with a 7% interest rate (I know…) on a $300K townhome ($100K paid, $200K remaining).

Here’s my question: Should we use the $200K to pay off the mortgage with its wild interest rate? Should we seek financial counseling for investment options?

(Though, what could reliably give us over a 7% return?) Should we save this amount for our kids’ college education (ages 9 and 3)? Or should we put everything into our 401(k), if possible?

Navigating the American financial system feels like a nightmare to me—taxes, pensions, investments, etc.—and I feel lost (we still pay a professional to do our taxes).

We both have stable jobs and don’t anticipate any changes soon. Even if we empty our accounts, we believe we can rebuild a 3–6 month emergency fund fairly quickly.

We’re not planning to retire anytime soon (probably not until we’re 150 if we’re lucky, with this economy!) and are willing to work hard to give our kids the future we never had.

If anyone is willing to offer advice on what to do with this hard-earned $200K, I’d be so grateful.

Thank you in advance, and Merry Christmas!

[Michele]

1) Read A Simple Path to Wealth
2) Look at the steps in order from the Money Guys (should be pinned on their page).

This should give you all the info you need.

But basically, set aside your 3-6 month emergency fund first in a HYSA or Money Market or CD, somewhere you have quick access if you need it

Get your retirement funded

Get your kids 529 started
Then work on your mortgage

As part of your regular budget, get your sinking funds set up.

[Robert]

First off, CONGRATULATIONS on how far you have come so far. When I was in private practice, I did immigration defense and immigration benefits, and part of that involved bringing people here from overseas and getting them their lawful permanent residency.

The story you’ve just told is exactly the American Dream. Well 7% is high for a mortgage; in mind the effects of time and compounding on $200,000 in your retirement accounts.

Remember – the male half of you has a life expectancy of 79 with a good chance of living into his 80s; and the female half of you has a life expectancy of 88, with a good chance of living into her 90’s.

To avoid a threadbare retirement; I recommend turbocharging your retirement savings to the greatest possible.

As far as your children; I am not a fan of parents taking out loans for their children’s education; your children can take out loans themselves; or better yet use the military and have the military pay for college – but there are no loans for retirement.

I’ve looked at the other responses you received so far and many of them are quite brilliant.

Good luck and keep us posted.

[Tom]

We are retired, started saving late, built our home late, etc.
We lived on one income and split the other 50/50, mortgage/retirement.

We paid off our 15 year mortgage in 4.5 years.

That gave us 15 years to put 100% of one income into retirement.

The gods have smiled on us and our portfolio has gone up 50% in the last 5 years being retired.

Intentionality is a powerful thing.

[Wei]

Congrats on getting to this point!
My two cents – for a 7% interest rate I don’t think it’s worthwhile paying down the mortgage any faster, as you should be able to deduct the mortgage interest off your tax now anyway.

I would personally just wait for interest rates to eventually drop and then refinance, perhaps even do a cash out refinance.

My view is that if you put your savings towards paying down your mortgage now, then you’re going to have trapped equity, rather than actively putting your money to work for you.

As to what to do with the $200k, depending on your risk appetite, and how much time you want to spend on managing your investments, I would consider:

1. Putting into an indexed fund that tracks the stock market

2. Look at using it towards a deposit for an investment property, so long as the rent will more than cover the mortgage. This may or may not be possible at these rates, in the area where you living in.

If you can start building another asset that can cashflow for you, then you can set yourself up for the future with additional income streams.

[Alex]

Just plan to payoff over the next 5 years. I wouldn’t be cash poor and house rich right now.

Never know what may happen.

[Don]

Bogleheads wiki has a good getting started page. Keep personal expenses low. Use 401k for the tax savings.

Save for retirement before college.

Use low fee diversified investments.

[Lauren]

What would give you the greatest peace of mind? If I were in your shoes, I would first make sure I had very well funded term life insurance on both parents, umbrella liability insurance to protect against lawsuits, and disability insurance in case you cannot work.

Then I might consider paying off the 7% mortgage – leaving aside 3 months of expenses for an emergency fund.

then use the cash you free up to put the maximum possible into retirement savings.

529 accounts are great for education but after you take care of retirement and immediate family income protection first. Good luck.

The mortgage payoff advice is purely a peace of mind measure.

As others mentioned it is theoretically possible to earn more via investing. Being debt free is relaxing.

[Bassel]

At 7% I’d go either way on the early pay off. Remember the tax advantage. You don’t pay taxes on gains until realized.

Great to save for your kids, but after you’ve maxed out on all advantaged retirement savings.

Good work.

[Andrea]

A fee only financial advisor (certified financial planner) does not take a percentage of assets invested, and can help you understand what to invest in and give a comprehensive analysis of your entire financial picture, including even estate planning and insurance needs.

They don’t invest for you or sell you anything.. Well worth it.

[Author]

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