Well, one sensible thing to do with it is paying down the mortgage to finish it asap - that will give you even more leftover money.

First, you do save (and thus get) 2.8% as per your own information. That is not bad for an investment. Second, though - once paid off you have even MORE money AND the freedom to know you own your home. Heck, you an start putting those funds into renovation and upgrades to the home without "feeling" it. Psychologically - that is a significant. Basically, you reduce your monthly cash outflow, which is a step in giving you some serious peace of mind.

First of all, congratulations on what you've accomplished.

About the only remaining conventional tax-advantaged option is a Health Savings Account (HSA), and that's only available if you have a high-deductible health plan. Deposits into an HSA are pre-tax, and can be used for just about any medical expense.

After that, I would consider a standard non-advantaged brokerage account to invest in. Yes you'll pay taxes on capital gains and dividends, but I wouldn't let that stop you completely - would you rather pay 30% tax on a 10% return (a net return of 7%) or earn 1% in a money market account? Plus, you only pay tax when you sell investments, so if you don't need the cash right away you can make long-term investments in index funds that you plan to keep for a long time, deferring your tax until you actually need the money (note that non-Roth retirement accounts are tax deferred as well, but you pay tax on what you withdraw, so the accounting is easier). You can then make strategic decision tax-wise, like selling off losers for a loss to offset gains in other investments.

You could also look at municipal bonds (within a conventional investment account) that earn interest tax-free, but offer lower returns than other more risky investments.

The Roths are post tax money. Deposits go in post tax, grow, and are not taxed at withdrawal. (You know this).

Opening a brokerage account and buying a very low cost index fund would give you long term growth and the tax would be minimal each year, a low rate on the annual dividends received, and long term capital gains on the final sale. One benefit, compared to a pretax account, is you (well, your kids) get a stepped up basis on your death, making this optimum for long term planning. Better than pre-tax, but not quite as good as the Roth of course.

Again great job. To me you have really two choices and no matter what you choose you will end up with the second choice eventually.

First choice: Throw more at the mortgage. You may want to do this some of the 700 or all. Doing this, you will eventually pay off the house and will be left only with the second choice.

Second choice: Open up a brokerage and invest in low turn over mutual funds. These can be surprisingly fee and tax efficient. S&P500 Index funds spin off very little capital gains and dividends which are taxable events. If the value of the fund increases because of price appreciation you do not pay taxes until you cash the funds out. In your case these might just pass to your children at a stepped up basis.

Keep up the good work.

• If you live in an area where you guess there is a reasonable chance of real estate prices continuing upwards

• Move to a more expensive house, the most expensive house you can just barely afford.

Don't forget real estate price gains are massively leveraged.

(And this is the only leverage available on investments, in this world, to "civilians".)

If prices continue upwards, your gain will be spectacular.

If you look at (any of the >> many <<) world cities which experience cycles of real estate price growth, https://money.stackexchange.com/a/133985/41786 in the example turn $1 into two or three hundred over a couple decades. (And meanwhile the few pennies spent on the mortgage becomes trivial via inflation.)

Importantly, looking at point 1. YES, you surely have to guess if your area is going to continue upwards, and not be the (very rare) flat real estate market. BUT. Don't forget - you have to make exactly that guess with all investments. For example, the major US markets currently look exactly like the Japanese stock market the day before it started it's 20-30 year collapse.

Find a wealth management company that offers non-market holdings (REIT's, LLP's, etc.) it's good to be less dependent on the market (remember in 2008 ALL sectors of the market went down). And from personal experience these holdings while they don't have the liquidity of stocks and bonds do provide a nice return.

Also consider Annuities. Again, they have a liquidity issue but provide a very stable environment for money (low risk, moderate to high return). Look for the fixed indexed annuity that doesn't go negative (although there are caps on growth).

First off, congratulations on getting mostly debt free and having so much extra!

That said, even though $700 extra sounds like a lot, it isn't. You already have a 1 year emergency fund, so that's good, which wipes out my first suggestion. You also wiped out my next suggestion, which is looking at improvements to your house, such as appliances or other renovations.

So my next suggestion is putting some of it into the mortgage. (I say some, because I have other suggestions.) The faster you pay off the house, the less interest you pay and the sooner your payments go away, plus your credit rating goes up. But that's all covered in other Answers.

New ideas

What none of them (so far) cover is: have some fun! I'm not saying to blow all of it on extraneous BS, but I am saying to invest in your mental health by not working yourself to death without any playtime.

Take time to be with your kids, your family. Take your spouse out on dates, even expensive ones. If there's anything you've wanted since you were a kid, like you would kill to have it, go buy it (not actually kill for it). Start a collection of things you enjoy. If you don't already have one (or several), start a hobby. Ok, so I'd stay away from the expensive ones, like motorbikes, boats, cars, and several others, but there's quite a few hobbies that don't take all your time and money.

Do you like to travel or go on cruises? Do it. And feel free to get some souvenirs. Do you or your spouse like jewelry? Get some (more).

You have already satisfied your basic and quite a few other "advanced" needs for yourself and your family, so go back and satisfy some basic needs that so many people with money (and on this forum) forget about. This life isn't just all about money. You don't have to spend all of your money this way, but you should be able to enjoy it, instead of worry about it, even the extra that isn't required for your survival.

Money is a tool, so use it as a tool, instead of it using you. You are in the position to make that happen. Some people try to do this with stocks and bonds, but what they are just doing is changing their worries to "am I going to lose my money when the stock market fails", because it will. It failed early last year, but then recovered, which "proves" to some people that stocks are safe. They aren't, but some people will gamble regardless of the reality of how often they lose.

Sure, you are already into stocks and bonds with your retirement funds. Those are generally extremely tightly managed, so you shouldn't have a problem there, unless the CEO of your company drains all the accounts, like what happened with my mother, and even I'll admit that's a pretty low possibility. But going outside the "retirement fund" area of investing can get real tricky very quickly. I'm sure I'll get some arguments in the comment for saying all that, but whatever. Far more people lose their money than make money in stocks. I'll just leave it at that.

Donations

You can also look at your neighborhood and surrounding community to see what needs help. Yes, you could donate more to your religious center, but I'm talking about parks, communal areas, homeless shelters, food pantries, and lots of other places that help the needy or the general area.

With the pandemic of 2020 and it continuing into this year, there are quite a few people in need. Even if they got hired again, millions of people lost their jobs last year. I'd wager that most of them are still suffering from months when they lacked income. Food pantries are still being overwhelmed with people needing food.

The $600 stimulus was great, but there are people still looking at eviction for months of back rent. Families with kids are probably looking at needing new clothes. One year in the same clothes for kids can become ragged or too small real quick, as I'm sure you know.

You might even consider giving your friends or family a boost. I had a friend that said had a negative bank account last month, so I have them money. I'm actually in a similar position as you, with making more money than I need to survive, but I just recently bought a house and did major repairs I had to get loans for, so not quite. However, I don't have any credit cards, student loans, and my car loan is low enough I could just pay it off, but my emergency fund isn't very high, so I'm not paying it off yet.

My car could also use some major repairs, but my friend needed the funds more than I did. I also (still) need to send some money to my mom, who suffered major losses in the derecho last year. She's retired and no longer physically able to work, and her insurance didn't quite cover everything, even with the help from her neighbors. My dad is working on packing up his house to move into a retirement community and is going to be sending me a collection of stuff we've spent over a decade putting together, so I need to send him some money for shipping and other expenses. He isn't expecting money, but I should do it anyway.

My point here is that you can get some mental ROI by helping others with your money. They may some day even help you if your situation ever turns around and you need money. It sounds like you have everything under control and covered, but that can unfortunately change quickly. The company you work for might get sued and they "throw you under the bus" for some reason. So instead of them taking the blame, you lose everything. There's probably a 1000 or more ways to lose everything, which is exactly when you need the help you gave to others. If you haven't already made deep, meaningful connections with people, now is the time to start.

Money just gets you on some people's radar, but if you are enthusiastic and actually mean to help people, and help them with some sweat equity as well, you'll make those bonds deeper than just your or their pocketbooks.

Not much extra

I said this earlier, but didn't explain it, so I'll do that now.

You aren't going to become a millionaire any time soon with just $700 extra a month. Sure, it's absolutely fantastic you have that much extra after doing all the other stuff you've already accomplished, but that's not "buy a BMW with cash" kind of money. You still need to make sure that you don't over spend.

Yes, I suggested spending lots of money, but in this section I'm going to remind you not to go completely off the rails and ruin your budget.

You've done a great things by paying off most of your debt, so you can loosen the purse strings some, but you can't let them go completely. Even when you are having fun, donating, or whatever, you still need to make sure you are doing it at least semi-responsibly. You don't want to get back to the point where you have to worry about money.

It might not seem like it, but you are still on the thin line between being completely financially stable and completely broke, like most people. Yes, you have a 1 year emergency fund, but what happens if you can't find another job in a year? I've had times where it took 12-18 months to find another job. My brother-in-law was in such a niche managerial job when his company downsized that it took him over 2 years to find a job. And he ended up taking a job in building maintenance. Evidently it pays their bills, and he likes it, so that's what he's doing. I'm sure they aren't as well off as they were, but that's not my decision.

Do your own thing

If you want to make yourself fully financially independent, you should start your own business. I've started a business on far less than $700 a month. Maybe that's why it's still a side gig after +6 years, but with your resources, you could make a real go of it. "All it takes is..." No, it takes a fair amount to get started and to keep going, but it's not as expensive as it used to be. Depending on what you do, you might use your current job as the basis of the business or you could pivot a hobby into a business.

Whatever it is, it needs to be something you could do for 60-80 hours a week for the next couple years to get it off the ground. At first, you don't want to do that much, as you'll still be working your current job to fund the business, but that $700 a month goes a long way to getting a domain name, website, advertising, equipment, and more. Maybe it's not you, but your spouse that starts this business. Maybe you go into business together. Some people will say this spells disaster, but many times it's the family business that works where an individual fails.

And you still don't have to spend all of that money on the business. You can still do the other things I suggested earlier. In fact, having fun is key to preventing burnout from working so much. I know I don't take enough time for myself.

Conclusion

There's a lot of things that you've done, which is a great accomplishment, but there's quite a few things you either haven't mentioned or aren't already doing that you could do. I didn't cover all of them, but I hope I offered some options you like.

Keep up the good work and I'm sure you'll get it figured out. The key thing to remember is that you don't have to "have it all figured out" now or at any other time. And you should remember that decisions you make now may not make sense later, so remember you have the freedom to change your mind at any time.

Good luck and have fun!

OP is in mid-Atlantic US, small town 1-hour from major metropolitan area. Time to retirement 20 yrs.

Try to estimate house price increase over 20 years. Step 1, look back 20 years.

Taking a random example,

https://fred.stlouisfed.org/series/ATNHPIUS51157A

So 250% nominal growth in 20 years.

OP can do this for their actual town.

Step 2, all you can really say is "it's likely" the next 20 years will be similar. Some real estate markets are flat; they stay flat. Growing markets grow. Intense markets stay intense.

Of course anything can happen but that statement is much more true about investing in securities and much less true about your home price.

Step 3, the rich get richer, in all real estate markets at all times the best properties accelerate in price more than the median.

Step 4. So in the Rappahannock example, reasonably hope for 2x to 5x gain by 2040

Step 5. Priciest house you can buy is (say) $3m with $1m down. 2040 profit, $6m to $15m less the $3m so 3m - 12m on $1m. Costs along the way evaporate with inflation so not worth worrying about much (the "Grandpa chuckles at the mortgage he took out when Abba were big and keeps it for a laugh because the numbers are so small" factor), and you have to pay eg. property tax anyway to live.

3m - 12m, compare: $1m at 8% for 20 yrs = $5m

Step 6. Unfortunately the US has cap. gains tax on your house - of course this could change either way in 20-30 yrs

Step 7. Risk. If at some point during the 20 yr journey for some reason all income ends ... say after 10 yrs, sell, take the 1m-5m profit and live on beans.

Hence ...

step 1, OP could investigate something like this: https://fred.stlouisfed.org/series/ATNHPIUS51157A (bearing in mind point 3 above) to guesstimate 20-yr price growth in home town.

Long term gains on r/e eclipse anything else if you're in a gainy area.

As others have said, you can put that money into index funds or pay down your mortgage. Personally, I'd put it in index funds:

• Paying down the mortgage effectively "earns" a 2.875% "return" on interest you didn't have to pay. Do you think index funds could earn a higher return? If so, index funds will make you more money.
• Interest on your mortgage is tax deductible. With the standard deduction as high as it is now this probably doesn't matter for most people, but that could change.
• Mortgages are non-recourse loans, meaning if you can't or won't repay the loan, all the bank can do is foreclose on your home. It's not a criminal offense to not repay your loan. It's a risk the bank decides to take when they issue the loan. If the financial markets should crash and you end up underwater on your mortgage, you have the option of walking away and losing no more than the equity on your home. If your stock market investments crash however, your risk isn't shared with any bank and you can lose up to the entire cost basis of the investment.

So in summary, index funds probably offer higher returns, and keeping your mortgage keeps your options open for the future.

There aren't many other tax-advantaged investment options you have left, but you should consider how to arrange your money most efficiently within the accounts you already have. Broadly you might have three kinds of accounts:

• ordinary taxable accounts: you pay income tax on non-qualified dividends and short-term capital gains when you sell investments, and capital gains tax (a lower rate) on qualified dividends and long-term capital gains.
• pre-tax IRA/401k: you can deduct your contributions from your income taxes, but pay income tax on all money you withdraw from the account.
• Roth IRA/401k: no up-front income tax deduction; instead you pay income taxes on gains when you withdraw from the account.

A key point is both kinds of "tax-advantaged" accounts don't allow you to take advantage of the lower capital gains tax rate. But, both kinds of tax-advantaged accounts allow you to defer taxes until you withdraw the money from the account. So this means:

• Income-generating investments, such as bonds and REITs, should go in a tax-advantaged account. This is because these investments are constantly generating income which is taxed as regular income (not capital gains). Thus it's the same tax rate no matter where you hold them. Deferring taxes is good not just because paying later is better than paying today because you can earn returns on the money meanwhile, but also you will likely be in a lower tax bracket in retirement than you are now.
• Your taxable account should consist of long-term investments that don't generate much income. This would be things like stocks or stock index funds. This way you take advantage of the capital gains rate.
• If the markets should take a downturn, perform tax loss harvesting in your taxable account. This means selling your losses so you can deduct them on your taxes, then immediately buying a similar but not too similar alternative. In effect, this is an interest free loan equal to the losses times your marginal tax rate.

In summary, the strategy is to pay taxes at the lowest rate possible, as late as possible. But do keep in mind it's important not to obsess about reducing taxes: if you're paying taxes it's because you made money. Some people get so hung up on tax advantages that they start making bad decisions, like not investing money because they don't want to pay taxes on the gains, or worse, investing in failing businesses so they can get a tax write off.

I recommend putting at least some of it into cryptocurrency. Little risker than some, but the governments of the world are doing their best to destroy their currencies. Corona bailouts helped them out a lot with that mission. Real inflation(as opposed to the government fake number) is predicted to be over 12%. Alternative currency is needed.

You can setup an account on Coinbase and automatically purchase $50 worth per month or so.

Perhaps you have not truly exhausted all tax-advantaged options. As a state employee you may also be eligible to contribute to a tax-advantaged 457 plan administered by your state. These have VERY high annual contribution limits. Check with your Human Resources department for eligibility.

Also if you choose to start a small business you could consider a self-employed retirement plan.