Question about net worth and spending

My partner and I are both close to 40 and have 2 kids. We live in a high cost of living area but not as high as NYC or SF. We have 2 kids.

We have a home we bought for $600k locked in at 2.5% with 400k left on it. Home needs some re-modeling and improvements and is smaller for our family although its a single family.

We have some 700k in 401k and about $1mil in taxable investment accounts and cash in total. Another 100k in kids 529 and other savings. Our kids are still under 7. Household income is around $520k.

How do you view our net worth and savings, given inflation is massively high and future of jobs uncertain with AI?

Should we think about buying a bigger house of around $1.6 million without selling our current home and giving it for rent? We do not want to sell our current home but do want to move to a bigger space and better school district. Current home might need some improvements before giving out for rent but it will easily get us 500-100 above mortgage.

Thoughts on how we are doing and could be doing better in terms of investments?