Before my husband and I went self-employed, I had a 401k and hubby had a pension plan building up. Those went bye-bye when we did. So we had to stop technically paying ourselves first, but we are looking into how to do that again.

Planning for Our Retirement

Our main retirement accounts are our two Roth IRA funds right now. We make sure to fully fund them, but that’s only $11,000 a year currently. Our paid off rental house is part of our long-term plan too. But we are ready to start hitting the financial independence goal even harder. Now we’re trying to figure out how to pay off credit card debt. No matter what, we want to be ready to make the leap by the time the normal retirement year deadlines arrive, but ideally, we would like to get there by our mid-late forties. With that in mind, we have to decide how to actually hit our target.

Options for Our Money to Invest

On average, we usually have about $10,000 extra each year after all of our expenses and the Roth IRA savings. Some years we may have less and some we may have more, but I think that is a realistic average.

We could open up a SEP IRA and contribute $10,000 a year, which would lower our tax liability by $10,000 every tax year too. That could mean about $2000-$2500 a year in tax savings.

Or we could set the $10,000 aside for 2-3 years and put 20% down on another rental house. With the rental property, we’d be looking at another $1000 a month or so in total housing costs. But we could rent it out for $1300 or so per month. So we’d be bringing in about $300 per month, or $3600 a year, in extra rental income. But our overall living and saving costs would be increased to about $8500 per month, so whenever one of our rental homes wasn’t being lived in, it would be stressful.

Putting Off the Decision

I’ve mentioned this decision before but said we would wait until late 2013 or early 2014 to choose one path or another. The problem is that the point is moot right now until we get our emergency fund built back up after all of the dental expenses. That could technically be as soon as January 2014, but I am betting it will be closer to May. And even then, I am not sure which way we should go.

So, SEP IRA or another rental house? Which one sounds best to you?