hey cinccy-
i agree, I want to be liquid, 'just in case'.
so when you say tax free acount, are you refrring to what I think fidelity (i'm sure other companies have it too), but it's money market account. OR, is what you are refrring to something that follows the stock market indices such as NYSE,NASDAQ,etc?
So I should write a book on my advice. Basically the two things that will make you poorer are taxes and inflation, so how do you invest money? The best place to do your outside investing is Vanguard.com as they have the LOWEST FEES! They have a fan following on the internet called bogleheads.
What you do with your allocation is put your age in the s and p 500 and the rest in bonds. So if you are 30, you would have 70% in stocks and 30% in bonds. Now the interesting part with taxes. You pay 15% capitol gains with stocks and your tax bracket of 36% with bonds, so you want bonds in your tax deferred accounts as it is much cheaper to pay 15% tax versus 36% tax. Now you have to watch taxes each year and reallocate as things change.
I prefer TIPS bonds over traditional treasurys as they are indexed to inflation.
Let me show you how taxes are really bad. If you double $1 20 times, you will have $1 million bucks. If you have to pay 30% tax at each double, you only end up with 70,000 bucks. Thus taxes are bad.
1. Setup a treasurydirect.gov account so you can buy 10k in i bonds and your wife also can get 10k in i bonds for a total of 20k in i bonds. i bonds are linked to cpi inflation and will grow tax free for up to 30 years until you cash them out. Last year CPI inflation was about 3.3%. Hopefully you will be retired in a lower tax bracket when you go to cash out.
2. This next concept is very confusin, but it is called the backdoor roth ira. I would recommend using Vanguard. Basically put $5k of after tax dollars in a nondeductible ira, then the next day call vanguard and convert it to a roth ira.
3. max the 401k, if you can have it under umbrella of roth, then do it.
4. buy s and p 500 through vanguard in you taxable account. Just so you know, since 2000, s and p has returned about 2.5% on average per year, so stocks have been a rather poor performer for the past 12 years. Since 1926 is has been about 8.4%
5. if you plan kids but don't have then yet, use ohio college advantage for 529 plan as money you put into this will grow tax free and can be used tax free for college.
6. get a disability policy.
best of luck with everything.