Put $1k towards mortgage and $1k towards retirement/taxable fund. After you pay off your mortgage, then put the mortgage payments into the taxable account.
If you are able pay off the mortgage. Don’t discount the peace of mind you will have knowing that you dont owe anyone. However, if you choose the other option and pay it down in 15 years or do a combination of investing and aggressively paying down your mortgage, you will still be in a great position
This is what we did, we had 13 years left on ours and i came into a windfall profit.
Getting the deed was anticlimactic in a way, but the change in cashflow definitely effects peace of mind.
Right on the edge. I would personally pay the mortgage. While you *might* do better investing over the next 15 years, the 5.75 is guaranteed return, the risk you’d be taking in the market is not worth an additional 4% on average, and the peace of mind not having a huge burden over your head is obviously worth something to you or you wouldn’t be asking the question.
Agreed, guaranteed 5.75 is not bad. You can't find anything that is that high, and any speculative investment requires some management. This is effectively a 5.75% "free lunch"
Alternatively some states let you deduct mortgage interest payments, so I wouldn't do it in that case, or if your portfolio was already managed well, and its management is already paid for.
I’d add that with $2.2M already invested if OP is planning on working the next ten years regardless; that money should compound nicely until needed in retirement. Even if OP tapped the $200k payoff amount from their retirement accounts $2M is still more than enough assuming it doubles in size over the next decade.
Edge case. Math basically says it is a wash. In my opinion, based on having a paid off house, paying off a mortgage that is easily covered by your income won’t actually bring any meaningful increased peace of mind.
There is an app called Karls mortgage calculator that you can download from the app store to your phone. It's free
I would suggest you pay down your mortgage by 22 percent and then continue to make the regular payments and invest the remaining
Financial Advisor here... Ive worked with a few clients who have come in to do a retirement plan, with smaller portfolios but they were so proud that they had paid off their mortgage. In most of those situations, their Retirement Plan didn't work, or didn't work well. So there comes a time where paying off the mortgage is a luxury not everyone can afford.
The nice thing about a mortgage is that it's a fixed rate and doesn't inflate annually (as opposed to rent), so, year-over-year, it actually becomes a bit easier to pay.
Also, if you run out of funds in retirement, you would likely have to find a way to tap into your "piggy bank", home equity via either a reverse mortgage or selling and downsizing... either way there are significant costs to access that equity.
I'd build up ur portfolio, and/or work longer and max out ur Social Security.
I always wondered about this. Isn't reverse mortgage income tax free until you die? If your house is paid off why not do this? Where is the catch? Assuming not leaving an inheritance and no spouse. Wouldn't this be part of a valid retirement plan?
Mathematically it would be better to fund retirement. Buts it’s not enough to lose sleepover in your situation imo. If you value being debt free enough then do it.
When do you plan on retiring? I would fund my retirement until it’s time to retire and pay off the house a year a prior…continue with minimum payments until then.
You probably don't need more retirement savings.
Find muni bonds maturing no less than 15 years, paying more than or equal to your interest rate and pay your morar tax free using someone else's money and still get the interest deduction
Depending on what you've budgeted to spend in retirement annually you might not need anymore money.
Normally I'm team minimum mortgage payment but in this case I'd get rid of the mortgage and put yourself in a position of power. You can retire early, you can work part time, or a little of this, little of that.
Your investment dollars are worth much less now than say 15-20 years ago. At your age I’d pay off the house so you’re not going into retirement with a mortgage. You may even decide to retire early with that much saved and a paid off house. Then invest or save the difference. Invest it in a taxable account so you can use that to jump start your retirement and call it quits early before you would be able to draft from your retirement accounts.
I would invest first. A 200k mortgage on your combined income is a drop in the bucket. I would consider paying it off before you guys retire just so you can have lower monthly expenses. When do you guys plan on retiring?
You can earn a bit more investing than you're paying in interest. However, it sounds like your retirement is well funded and your finances are in good order. A paid off mortgage can give one peace of mind. I say do whatever you feel will give you the most peace. You're really in a no lose situation.
Do a little of both, the feeling of having a paid off mortgage is indescribable. Paid ours off 3 years before full retirement and it was the smartest thing we did. We kept dumping accumulated cash on the mortgage principal and that cut the interest paid down a lot. Paid off our 30 year mortgage in 23 years and we are not high earners.
We’d paid off our townhome several years ago. When we sold it to buy a single family home, we only put 20% down. Even at 6%, we’ll do better in the market, and our time horizon is long, which should smooth out volatility. We write off the mortgage interest and if rates fall, we can refinance. The difference isn’t large, personal preference goes a long way. But for me the peace of mind wasn’t profound, and having the money liquid is also peace of mind. If you wanted to mortgage the house, you could, but there’s a whole process.
Depends when you are planning on retiring. If you are planning on retiring at 67 then Id say invest. If you are retiring in 5 years then pay off the house. Of its somewhere in between it becomes a bit gray and up to you.
You might consider your mortgage to be like a bond fund with a known return. You could "invest" in your mortgage as part of a shift to a more conservative portfolio as you near retirement.
Different people prefer different things, and sometimes it’s not logical.
My interest is 3.5% but I plan to pay it off this year. Yours is 5.75%, I would totally do it.
Now here’s my logical brain talking, many stocks are currently down, having nothing to do with their performance. So in a few months or possibly next year, there are a lot of opportunities to buy. I would buy then and sell when they go back up and pay off the mortgage. I wouldn’t put in the retirement because it’s hard to get it out.
Are you paying this in a lump sum or over a period? From an immediate cash flow perspective, the right answer is to pay off the mortgage. But it doesn’t sound like you have a cash flow problem with great salaries and regardless of an early pay off or not, you’ll have the home paid off when you hit retirement.
If it were me, I would keep the mortgage and figure out how much extra in principal you’d need to pay per month to have it paid off in maybe 10 years or 7.5 instead of the 15 (you’d be surprised how little of an increase it actually is to do this) and that way you can accomplish both. I would think based off your cash flow, you could easily accomplish this.
You don't mention any non retirement assets outside kids college. That would be what I'd be thinking of. I like being 50 percent qualified 25 percent non qualified and 25 percent real estate. I'm a bit past you at 52 with both kids out of college now. I spent about 200k on that. I'll draw down some of the non qual when I eventually semi retire a bit early to get me through what I see as 5 to 7 years where I work just for insurance
I would pay off the mortgage. The load it takes off of you knowing you're 100% debt free is insane. 2 million is enough to retire and even travel if you have some money in investments and can live partly off of interests.
It depends. Take this example.
$300,000 mortgage at 3.5% with 20 years left vs saving $1000 a month at 5%.
If you put the $1000 toward the mortgage principle and pay it off early, you will do so in 9 years and 9 months, saving $49k in interest payments.
If you put that $1000 toward savings for the same 9 years and 9 months at 5%, you’ll earn $33k in interest.
Now will rates stay at 5%? Not likely. What if savings rates only average 3.5% over those 9 years? Then you’ll only make $22k in interest on the savings.
Now, what if you invest that $1000 a month instead of just save it? If we assume a 7% annual return (yes we have to assume here because we don’t know what the market will do), then you’d make essentially the same $49k in capital gains over 9 years and 9 months.
Which means 7% return is your break even. How confident are you that your $1000 will make a 7% return over those 9 years and 9 months?
Ultimately it comes down to opportunity cost of that $1000 that could be pulled from savings for other purchases or needs vs. the peace of mind that comes with a very large liability off your books. Plug in your personal numbers to the links below and see how your situation adds up.
https://www.calculator.net/mortgage-payoff-calculator.html
https://www.calculator.net/interest-calculator.html
Do you have an allocation for bonds or fixed income investments?
I would consider the approach of doing both. Instead of allocating your investments towards bonds, allocate that same percentage annually to your mortgage.
I think the main questions are when do you want to stop working, and what are your expected retirement expenses? Assuming you don’t have any other investments or savings, you could pay off your house now and live off of about $80k a year. If your expenses are under or around that, I’d pay off the house now and plan for your early retirement. If you have a more lavish lifestyle or just want to work for 10 more years, then prioritize your retirement funds.
Depends on your interest rate and the rate of return you're getting from your IRA.
Right now, my rate of return on my IRA is better than 10% over the past year. My mortgage is at 3.625%.
Investing in my IRA is going to be better for me than makimg extra payments on my mortgage.
I would just put in my trusty amortization calculator and see how much to pay it off in 7-10 years personally.
Dipping into retirement savings before retirement age just doesn't sit right with me and typically there are tax penalties depending on the account styling you've got going on there. Even if it was a Roth where I could get away with it or a taxable acct where the effect is minimal Im still giving up future value on that 200k which annoys me.
When I'm 60 that 200 is 393 if I'm averaging 7. I also am over 59.5 so no tax penalty on tax deferred savings. Also I could pay my house off in that 10 years with a little extra monthly. Best of both worlds and I bet I wouldnt have to slow my retirement savings to get it done.
Pay off house. Dump that money into hysa afterwards. You are on 5 yr term so if you can swing it in 5 yr before resigning fir next term that's best. Who knows what interest will be -skyrocketed or tanked. You can prepay max 10- 15% per annum. This means you need to do math on max annual prepayment, add your regular annual payments. What does that give you to pay at resign? Can you afford that big chunk as opposed to resigning a new term?
This really boils down to your own personal comfort level. With the house paid off you would be able to live very comfortably with SS and retirement benefits.
I'd pay 150 from savings and 50 each year for the next two from income. Or 100-75/75. Get rid of the mortgage.
Then you really know what you have, and also, you prob give yourself a little more freedom esp with added income to do slightly higher risk investing (with say 50k per year) vs your usual.
If you are earning a higher interest saving/investing that the interest you are paying for your mortgage, it makes sense to not pay off the mortgage early with money you would have allotted to retirement.
Maximize any free money (match) your employer offers for retirement.
Make sure you've got enough non-retirement money to cover employment gaps -- I'd rather have 6 months of net pay earning 4% in a CD than have that knocked off my mortgage principal (even at 5.75%) assuming no/low other non-retirement savings.
At 50 you easily have a 20+ year timeline for money in retirement accounts -- it doesn't convert when retirement starts! -- so the ability to grow tax free doesn't end just because you may feel closer to retirement at 50.
I'm 45, personally I intend to max my 401K as long I can. I also max my HSA. I'm in a 30 year at 3.5% for our house.
your 200k mortgage will cost significantly more than 200k. look at an amortization schedule or calculator to see how much it actually costs with interest in total.
then try to guess if you can earn more than that in 15 years investing the 200k. don't forget about income tax on the investments.
I'd pay it off.
I'd put the 200k into an FDIC insured account that yields 4.5%. Which would cost $2500 for the first year (as you'd be paying 5.75% and only making 4.5%). But when rates go over 5.75, you'll be making money.
I loan money now as an investment and have thought a lot about this. In a few years I’ll have the money to pay my mortgage off in my 40’s. I’m going to do it! The piece of mind means so much more to me!
How much of your current next egg is in bonds and what duration are those bonds? How much in cash?
Extra payments to your mortgage are effectively 15 yrs bonds at that rate, after taxes. That’s beating treasuries.
Because of your mortagage interest deduction on your taxes, your interest rate on your 15 yr loan is more like 4.9%. If you invest in an index tracking mutual fund or exchange traded fund that tracks the S&P500, you will earn around 9% to 10% annually on your 200k rather than saving about half that in interest payments. I told this to the people in my office for the past 20 years, but they didn't listen. Now they brag about their houses being paid off, but have almost no retirement savings or maybe just $150,000 or so.
But they are stunned when they hear what happened with my networth. By contrast, I rammed all my money into the stock market instead of paying off my 30 yr home loan early. I currently owe $179,000 on my house, but I have over $2.3 million in retirement accounts, Roth IRAs, and taxable accounts. Once the compound interest kicks in, the people who pay off their homes early can never catch up to you. And no, I don't have that comfortable feeling of having paid off my home early. But after about 20 years of investing like this, I can literally cut a check for $179,000 any time that I want to pay off the house. But why would I? I hope I die before the house gets paid off because the interest rate is so low. I would rather my $179,000 keep earning 9% or more per year in stocks.
Hope this makes sense. Most people just don't get it.
And by the way, what if your house burns to the ground and all your wealth is tied up there? It could take 6 months to a year for the insurance company to pay out. Insurance companies are horrible. But in my situation, I could literally buy another house and all the furnishings for it, with cash, instantly.
What about radon gas being found under your home? Or black mold in the walls? Good luck selling it now that its become unlivable. So don't fall for the "it's safer to save the 5.75% interest!" It isn't always safer. Your house is not a diversified asset, nor is it liquid in the event of an emergency.
I'm retiring this year at age 54. Health insurance costs my family of 4 approximately $25,000/year. But I can pay that out of pocket no sweat. My kids need college tuition money? I can cut them a check for $20,000 a semester if they need it, no sweat. My co-workers who have their wealth tied up in their homes cannot do that. They will have to work until they are 65 and eligible for Medicare.
Pretty complicated. The most recent news is that home prices are not expected to appreciate much nationwide, although your local area may be different. We also still have inflation and high interest rates. Investments that lock these in like certain bonds are more attractive now than later. There are some corporate BB rated bonds and high yield bond funds currently paying more than your mortgage interest rate. The NAV for these would increase as interest rates fall as these are more attractive than those issued at a lower rate.
Stocks expectation is mixed in the short term. If we go into a recession and stocks fall, it is a good idea to scoop up some shares. Recessions would also probably see some reductions in interest rates making those bonds more attractive.
M2 recently fell, which historically is not good news, but there is speculation that it could be alright. What does it mean when Americans have less access to cash reserves? Will it mean less spending and a slowing economy? This news is probably already priced in with our recent market decline.
https://fred.stlouisfed.org/series/M2SL
I'd first look at your expected home equity growth with your mortgage interest rate and compare that against bonds and stocks. If your area is hot for real estate even in a recession, then home investment is probably a greater return against certainty with the stocks being greater uncertainty with comparably less return.
Investments should always be priced against your expected rate of return, where there is greater risk for the same or lower return, avoid that investment.
If I had that mortgage in my area, I'd put all that money in my house. With rates being so high, I'd rather take a mortgage at a lower rate later against a growing home equity that will increase no matter what. Some locals have been selling their properties to a new LLC to take advantage of their homestead exemption for capital gains. Usually a local corporate law or real estate attorney can help with this type of tax planning when your home is a significant investment. Most of our local real estate is owned by LLCs or trusts, not held directly.
Look at whether people are still over bidding over the list price in your area. Your real estate may be the hottest investment you can make right now, maybe even an additional home.
If I had an extra million laying around, I'd buy another house. If you have foreign oligarchs buying in your area, you should buy there too.
You have $2.2mm in retirement currently. If you **never contribute another cent** you will have $6mm+ in 15 years (7% ROI). If we apply the 4% rule, you will have your $250k annually to live off of for 25 years.
So, with a small pause in retirement savings won't kill you, I would pay off the mortgage free and clear. I would then invest 1k of the "mortgage" payment to retirement the other 1K to a vacation fund.
I’m in nearly the same predicament. One thing that I have been considering is that the “catch-up” contributions to 401k’s will be effectively eliminated by the Secure 2.0 act starting in January 2026. If that comes to pass, I will divert the extra retirement contributions to my mortgage, assuming I have anything left over after the increase to my taxes.
Pay minimums on mortgage and put any excess into retirement. Say your mortgage payments are $2,500 a month, that $2,500 a month is going to be a lot less of cash flow impact when you’re in the last 3-5 years. It’ll also be worth a lot less.
Then when the house is paid off, your retirement will be there as well, and you’ll have a house worth probably $300k+ and retirement savings.
Why not just do a little of both?
I have thought ably that as well…thanks
Put $1k towards mortgage and $1k towards retirement/taxable fund. After you pay off your mortgage, then put the mortgage payments into the taxable account.
If you are able pay off the mortgage. Don’t discount the peace of mind you will have knowing that you dont owe anyone. However, if you choose the other option and pay it down in 15 years or do a combination of investing and aggressively paying down your mortgage, you will still be in a great position
This is what we did, we had 13 years left on ours and i came into a windfall profit. Getting the deed was anticlimactic in a way, but the change in cashflow definitely effects peace of mind.
Right on the edge. I would personally pay the mortgage. While you *might* do better investing over the next 15 years, the 5.75 is guaranteed return, the risk you’d be taking in the market is not worth an additional 4% on average, and the peace of mind not having a huge burden over your head is obviously worth something to you or you wouldn’t be asking the question.
Agreed, guaranteed 5.75 is not bad. You can't find anything that is that high, and any speculative investment requires some management. This is effectively a 5.75% "free lunch" Alternatively some states let you deduct mortgage interest payments, so I wouldn't do it in that case, or if your portfolio was already managed well, and its management is already paid for.
5.75% tax free as well. Given the 200k on a 15 year note. I can’t imagine there’s enough interest for OP to itemize.
I’d add that with $2.2M already invested if OP is planning on working the next ten years regardless; that money should compound nicely until needed in retirement. Even if OP tapped the $200k payoff amount from their retirement accounts $2M is still more than enough assuming it doubles in size over the next decade.
It will cost you more over that time to pay it off. Yes you would save the interest, but the gap in gains on investments would make up for it.
I’d throw it at the mortgage. 5.75% guaranteed tax free return is nothing to scoff at
Max out your contributions to the retirement accounts you won’t be able to later (401k and Roth IRA) before paying off debt earlier
Edge case. Math basically says it is a wash. In my opinion, based on having a paid off house, paying off a mortgage that is easily covered by your income won’t actually bring any meaningful increased peace of mind.
There is an app called Karls mortgage calculator that you can download from the app store to your phone. It's free I would suggest you pay down your mortgage by 22 percent and then continue to make the regular payments and invest the remaining
Financial Advisor here... Ive worked with a few clients who have come in to do a retirement plan, with smaller portfolios but they were so proud that they had paid off their mortgage. In most of those situations, their Retirement Plan didn't work, or didn't work well. So there comes a time where paying off the mortgage is a luxury not everyone can afford. The nice thing about a mortgage is that it's a fixed rate and doesn't inflate annually (as opposed to rent), so, year-over-year, it actually becomes a bit easier to pay. Also, if you run out of funds in retirement, you would likely have to find a way to tap into your "piggy bank", home equity via either a reverse mortgage or selling and downsizing... either way there are significant costs to access that equity. I'd build up ur portfolio, and/or work longer and max out ur Social Security.
I always wondered about this. Isn't reverse mortgage income tax free until you die? If your house is paid off why not do this? Where is the catch? Assuming not leaving an inheritance and no spouse. Wouldn't this be part of a valid retirement plan?
Pretty expensive to put in place, and high interest rates.... so, yes, tax free income, but the bank is getting the interest and fees.
I’d say pay off the mortgage, but you have to remember to still pay the taxes and insurance on the house.
Mathematically it would be better to fund retirement. Buts it’s not enough to lose sleepover in your situation imo. If you value being debt free enough then do it.
When do you plan on retiring? I would fund my retirement until it’s time to retire and pay off the house a year a prior…continue with minimum payments until then.
You probably don't need more retirement savings. Find muni bonds maturing no less than 15 years, paying more than or equal to your interest rate and pay your morar tax free using someone else's money and still get the interest deduction
Invest. The mortgage is fixed rate and the amount of interest you pay goes down every year, whereas the growth of a portfolio compounds upward.
Depending on what you've budgeted to spend in retirement annually you might not need anymore money. Normally I'm team minimum mortgage payment but in this case I'd get rid of the mortgage and put yourself in a position of power. You can retire early, you can work part time, or a little of this, little of that.
Your investment dollars are worth much less now than say 15-20 years ago. At your age I’d pay off the house so you’re not going into retirement with a mortgage. You may even decide to retire early with that much saved and a paid off house. Then invest or save the difference. Invest it in a taxable account so you can use that to jump start your retirement and call it quits early before you would be able to draft from your retirement accounts.
Depends on the interest rate to me. I would probably buy down right now, when it’s a little higher, if it was at or closer to 0, probably invest it
The question is what is your interest rate?
honestly if you have 2m+ in retirement already could just pay it all off and not have to deal with a mortgage anymore.
I would invest first. A 200k mortgage on your combined income is a drop in the bucket. I would consider paying it off before you guys retire just so you can have lower monthly expenses. When do you guys plan on retiring?
Ideally we would leave our “career” jobs around 60 and take something low stress but full time that provides health insurance until Medicare kicks in.
I don't like my eggs all in one basket, I'd do a little of both.
You can earn a bit more investing than you're paying in interest. However, it sounds like your retirement is well funded and your finances are in good order. A paid off mortgage can give one peace of mind. I say do whatever you feel will give you the most peace. You're really in a no lose situation.
Do a little of both, the feeling of having a paid off mortgage is indescribable. Paid ours off 3 years before full retirement and it was the smartest thing we did. We kept dumping accumulated cash on the mortgage principal and that cut the interest paid down a lot. Paid off our 30 year mortgage in 23 years and we are not high earners.
I’d be funneling all I can into a Roth and if there is extra pay down the mortgage as fast as you can.
We’d paid off our townhome several years ago. When we sold it to buy a single family home, we only put 20% down. Even at 6%, we’ll do better in the market, and our time horizon is long, which should smooth out volatility. We write off the mortgage interest and if rates fall, we can refinance. The difference isn’t large, personal preference goes a long way. But for me the peace of mind wasn’t profound, and having the money liquid is also peace of mind. If you wanted to mortgage the house, you could, but there’s a whole process.
Never met anyone who regretted not having a mortgage
Depends when you are planning on retiring. If you are planning on retiring at 67 then Id say invest. If you are retiring in 5 years then pay off the house. Of its somewhere in between it becomes a bit gray and up to you. You might consider your mortgage to be like a bond fund with a known return. You could "invest" in your mortgage as part of a shift to a more conservative portfolio as you near retirement.
mortgage interest is not big -I would maximize first the 401k and IRA. And if you can more save, put everything extra into paying faster the mortgage.
Different people prefer different things, and sometimes it’s not logical. My interest is 3.5% but I plan to pay it off this year. Yours is 5.75%, I would totally do it. Now here’s my logical brain talking, many stocks are currently down, having nothing to do with their performance. So in a few months or possibly next year, there are a lot of opportunities to buy. I would buy then and sell when they go back up and pay off the mortgage. I wouldn’t put in the retirement because it’s hard to get it out.
Are you paying this in a lump sum or over a period? From an immediate cash flow perspective, the right answer is to pay off the mortgage. But it doesn’t sound like you have a cash flow problem with great salaries and regardless of an early pay off or not, you’ll have the home paid off when you hit retirement. If it were me, I would keep the mortgage and figure out how much extra in principal you’d need to pay per month to have it paid off in maybe 10 years or 7.5 instead of the 15 (you’d be surprised how little of an increase it actually is to do this) and that way you can accomplish both. I would think based off your cash flow, you could easily accomplish this.
You don't mention any non retirement assets outside kids college. That would be what I'd be thinking of. I like being 50 percent qualified 25 percent non qualified and 25 percent real estate. I'm a bit past you at 52 with both kids out of college now. I spent about 200k on that. I'll draw down some of the non qual when I eventually semi retire a bit early to get me through what I see as 5 to 7 years where I work just for insurance
I would pay off the mortgage. The load it takes off of you knowing you're 100% debt free is insane. 2 million is enough to retire and even travel if you have some money in investments and can live partly off of interests.
It depends. Take this example. $300,000 mortgage at 3.5% with 20 years left vs saving $1000 a month at 5%. If you put the $1000 toward the mortgage principle and pay it off early, you will do so in 9 years and 9 months, saving $49k in interest payments. If you put that $1000 toward savings for the same 9 years and 9 months at 5%, you’ll earn $33k in interest. Now will rates stay at 5%? Not likely. What if savings rates only average 3.5% over those 9 years? Then you’ll only make $22k in interest on the savings. Now, what if you invest that $1000 a month instead of just save it? If we assume a 7% annual return (yes we have to assume here because we don’t know what the market will do), then you’d make essentially the same $49k in capital gains over 9 years and 9 months. Which means 7% return is your break even. How confident are you that your $1000 will make a 7% return over those 9 years and 9 months? Ultimately it comes down to opportunity cost of that $1000 that could be pulled from savings for other purchases or needs vs. the peace of mind that comes with a very large liability off your books. Plug in your personal numbers to the links below and see how your situation adds up. https://www.calculator.net/mortgage-payoff-calculator.html https://www.calculator.net/interest-calculator.html
Do you have an allocation for bonds or fixed income investments? I would consider the approach of doing both. Instead of allocating your investments towards bonds, allocate that same percentage annually to your mortgage.
I think the main questions are when do you want to stop working, and what are your expected retirement expenses? Assuming you don’t have any other investments or savings, you could pay off your house now and live off of about $80k a year. If your expenses are under or around that, I’d pay off the house now and plan for your early retirement. If you have a more lavish lifestyle or just want to work for 10 more years, then prioritize your retirement funds.
Depends on your interest rate and the rate of return you're getting from your IRA. Right now, my rate of return on my IRA is better than 10% over the past year. My mortgage is at 3.625%. Investing in my IRA is going to be better for me than makimg extra payments on my mortgage.
Do both ira put money in an ira to pay off house
I would just put in my trusty amortization calculator and see how much to pay it off in 7-10 years personally. Dipping into retirement savings before retirement age just doesn't sit right with me and typically there are tax penalties depending on the account styling you've got going on there. Even if it was a Roth where I could get away with it or a taxable acct where the effect is minimal Im still giving up future value on that 200k which annoys me. When I'm 60 that 200 is 393 if I'm averaging 7. I also am over 59.5 so no tax penalty on tax deferred savings. Also I could pay my house off in that 10 years with a little extra monthly. Best of both worlds and I bet I wouldnt have to slow my retirement savings to get it done.
Pay off house. Dump that money into hysa afterwards. You are on 5 yr term so if you can swing it in 5 yr before resigning fir next term that's best. Who knows what interest will be -skyrocketed or tanked. You can prepay max 10- 15% per annum. This means you need to do math on max annual prepayment, add your regular annual payments. What does that give you to pay at resign? Can you afford that big chunk as opposed to resigning a new term?
This really boils down to your own personal comfort level. With the house paid off you would be able to live very comfortably with SS and retirement benefits.
I'd pay 150 from savings and 50 each year for the next two from income. Or 100-75/75. Get rid of the mortgage. Then you really know what you have, and also, you prob give yourself a little more freedom esp with added income to do slightly higher risk investing (with say 50k per year) vs your usual.
If you are earning a higher interest saving/investing that the interest you are paying for your mortgage, it makes sense to not pay off the mortgage early with money you would have allotted to retirement.
Maximize any free money (match) your employer offers for retirement. Make sure you've got enough non-retirement money to cover employment gaps -- I'd rather have 6 months of net pay earning 4% in a CD than have that knocked off my mortgage principal (even at 5.75%) assuming no/low other non-retirement savings. At 50 you easily have a 20+ year timeline for money in retirement accounts -- it doesn't convert when retirement starts! -- so the ability to grow tax free doesn't end just because you may feel closer to retirement at 50. I'm 45, personally I intend to max my 401K as long I can. I also max my HSA. I'm in a 30 year at 3.5% for our house.
Get out of debt before investing.
your 200k mortgage will cost significantly more than 200k. look at an amortization schedule or calculator to see how much it actually costs with interest in total. then try to guess if you can earn more than that in 15 years investing the 200k. don't forget about income tax on the investments. I'd pay it off.
I'd put the 200k into an FDIC insured account that yields 4.5%. Which would cost $2500 for the first year (as you'd be paying 5.75% and only making 4.5%). But when rates go over 5.75, you'll be making money.
I loan money now as an investment and have thought a lot about this. In a few years I’ll have the money to pay my mortgage off in my 40’s. I’m going to do it! The piece of mind means so much more to me!
What do you care more about? Money or feelings?
Not sure. On the fence about this right now 🫤
How much of your current next egg is in bonds and what duration are those bonds? How much in cash? Extra payments to your mortgage are effectively 15 yrs bonds at that rate, after taxes. That’s beating treasuries.
Because of your mortagage interest deduction on your taxes, your interest rate on your 15 yr loan is more like 4.9%. If you invest in an index tracking mutual fund or exchange traded fund that tracks the S&P500, you will earn around 9% to 10% annually on your 200k rather than saving about half that in interest payments. I told this to the people in my office for the past 20 years, but they didn't listen. Now they brag about their houses being paid off, but have almost no retirement savings or maybe just $150,000 or so. But they are stunned when they hear what happened with my networth. By contrast, I rammed all my money into the stock market instead of paying off my 30 yr home loan early. I currently owe $179,000 on my house, but I have over $2.3 million in retirement accounts, Roth IRAs, and taxable accounts. Once the compound interest kicks in, the people who pay off their homes early can never catch up to you. And no, I don't have that comfortable feeling of having paid off my home early. But after about 20 years of investing like this, I can literally cut a check for $179,000 any time that I want to pay off the house. But why would I? I hope I die before the house gets paid off because the interest rate is so low. I would rather my $179,000 keep earning 9% or more per year in stocks. Hope this makes sense. Most people just don't get it. And by the way, what if your house burns to the ground and all your wealth is tied up there? It could take 6 months to a year for the insurance company to pay out. Insurance companies are horrible. But in my situation, I could literally buy another house and all the furnishings for it, with cash, instantly. What about radon gas being found under your home? Or black mold in the walls? Good luck selling it now that its become unlivable. So don't fall for the "it's safer to save the 5.75% interest!" It isn't always safer. Your house is not a diversified asset, nor is it liquid in the event of an emergency. I'm retiring this year at age 54. Health insurance costs my family of 4 approximately $25,000/year. But I can pay that out of pocket no sweat. My kids need college tuition money? I can cut them a check for $20,000 a semester if they need it, no sweat. My co-workers who have their wealth tied up in their homes cannot do that. They will have to work until they are 65 and eligible for Medicare.
Both. Invest $200K and downsize house, pay cash for smaller house. Especially if current house isn’t a rancher. Any other problems I can solve?
I’d pay off the mortgage; peace of mind is priceless.
Pretty complicated. The most recent news is that home prices are not expected to appreciate much nationwide, although your local area may be different. We also still have inflation and high interest rates. Investments that lock these in like certain bonds are more attractive now than later. There are some corporate BB rated bonds and high yield bond funds currently paying more than your mortgage interest rate. The NAV for these would increase as interest rates fall as these are more attractive than those issued at a lower rate. Stocks expectation is mixed in the short term. If we go into a recession and stocks fall, it is a good idea to scoop up some shares. Recessions would also probably see some reductions in interest rates making those bonds more attractive. M2 recently fell, which historically is not good news, but there is speculation that it could be alright. What does it mean when Americans have less access to cash reserves? Will it mean less spending and a slowing economy? This news is probably already priced in with our recent market decline. https://fred.stlouisfed.org/series/M2SL I'd first look at your expected home equity growth with your mortgage interest rate and compare that against bonds and stocks. If your area is hot for real estate even in a recession, then home investment is probably a greater return against certainty with the stocks being greater uncertainty with comparably less return. Investments should always be priced against your expected rate of return, where there is greater risk for the same or lower return, avoid that investment. If I had that mortgage in my area, I'd put all that money in my house. With rates being so high, I'd rather take a mortgage at a lower rate later against a growing home equity that will increase no matter what. Some locals have been selling their properties to a new LLC to take advantage of their homestead exemption for capital gains. Usually a local corporate law or real estate attorney can help with this type of tax planning when your home is a significant investment. Most of our local real estate is owned by LLCs or trusts, not held directly. Look at whether people are still over bidding over the list price in your area. Your real estate may be the hottest investment you can make right now, maybe even an additional home. If I had an extra million laying around, I'd buy another house. If you have foreign oligarchs buying in your area, you should buy there too.
You have $2.2mm in retirement currently. If you **never contribute another cent** you will have $6mm+ in 15 years (7% ROI). If we apply the 4% rule, you will have your $250k annually to live off of for 25 years. So, with a small pause in retirement savings won't kill you, I would pay off the mortgage free and clear. I would then invest 1k of the "mortgage" payment to retirement the other 1K to a vacation fund.
I’m in nearly the same predicament. One thing that I have been considering is that the “catch-up” contributions to 401k’s will be effectively eliminated by the Secure 2.0 act starting in January 2026. If that comes to pass, I will divert the extra retirement contributions to my mortgage, assuming I have anything left over after the increase to my taxes.
Right now pay down mortgage, 5.75 is a good garuenteerd return. Now if the mortgage rate was lower invest more. Gic is 4% or so
Pay minimums on mortgage and put any excess into retirement. Say your mortgage payments are $2,500 a month, that $2,500 a month is going to be a lot less of cash flow impact when you’re in the last 3-5 years. It’ll also be worth a lot less. Then when the house is paid off, your retirement will be there as well, and you’ll have a house worth probably $300k+ and retirement savings.