No. of Recommendations: 1
..4) Any extra monies, put towards mortgage (which should leave me with < 20 years of mortgage payments)....

Unless you your numbers come up showing that this is a slam dunk great choice, I would open a separate account and keep the house payoff fund invested there until you have enough to pay it off as a lump sum. The reason is that if interest rates and inflation spike upwards, then a fixed rate mortgage in the ballpark of 6% might look extremely good. In a few years if you change you mind, you could always pay down the mortgage then.

...3) Put 5% (After Tax) in a 529 for the girls...

The 529 has gotten better but unless you are in one of the states with tax breaks for contributions, then they still don't really impress me for someone that is not in a real high tax bracket. There seem to be just too many ways for them to not work out well.

I ended up moving my kids college money to iBonds about five years before he was ready to start college because of the tax advantages, safety, and flexibility. They are too conservative for your long time frame, but when they are older(and you might be in a higher tax bracket) they are worth considering.

..According to my calculations, I could very well be in a higher tax bracket when I retire....

But not all your income will be taxable, or may be taxed at capital gains tax rates, in addition you will no longer have some of your biggest expenses(mortgage, retirement savings, kids, etc.) If you are in a high tax state now and might retire in a low tax rate state, the Roth would be less desirable.

Like the kids at Lake Woebegone, that are all above average, people sometimes tend to think that their biggest financial problem in retirement is that they have so much money that they would be paying painfully high taxes. While that is possible, realistically "stuff happens" and I've seen a lot of people with financial or life setbacks and a lot more modest retirement than they expected.

I would concentrate on getting the "core " retirement funds in the 401K and traditional IRA built up first in case you have a setback before you retire. If the tax laws are anything like they are now, you will want to have maybe $40K or so in taxable income each year because of the lower tax rates on your first chunk of income. Until you are on track to have that much, I would tend to fund the other tax deferred retirement accounts before the Roth.

You also need to consider your tax rates over your entire retirement, a lot of people base their decisions on their first few years of retirement when they might be indeed be in a higher tax bracket but not for their entire retirement. For example: if you retire at 55 you might indeed be in a high tax bracket for a few years, but to still be in a high tax bracket at 75 would be very exceptional when you could only be halfway through your retirement if you live to be 95.

Greg
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