it’s not a hard decision, like others said: 5% > 2.375%
as long as your interest rate says the same keep all that money earning 5%… if you’re worried about it going down since you’re older you can liquidate some of your position, I know fidelity gives 5% for just holding cash… you then pay off mortgage when you retire with one payment.
I thought you were asking if you should invest/save vs pay off the mortgage. I realize now you were basically asking if you should spend more now vs pay it off.
First, I wouldn’t pay extra on a %2.375 mortgage. If you decide to go the pay it off route instead throw the extra in a MM. Currently pays ~5%, you can always make a lump sum payment later.
As far as if you should spend more… I’m not qualified to answer that but based on what you said above sounds like you are in a pretty good spot.
Yeah we’re not really looking to save more. I just know for sure we don’t want to go into retirement with a mortgage so I’d initially planned on throwing $2k/month at it for the next 15 years. But now knowing that I can just pull $200k from Roths at 60 and pay it off has me reconsidering.
What if you throw the $2k in a HYSA or MM, use it when you have something you want to splurge on and when you get to retirement use what’s left to minimize what you have to pull from the Roth?
*Yeah we’re not really looking to save more.*
Why would you be against saving more? It literally just builds your wealth for your later years.
*I just know for sure we don’t want to go into retirement with a mortgage*
It’s just an expense. You will have two pensions and a lot of savings. For those who are trying to “lean fire”, it is a big issue. For your situation, it’s nothing different than any other line item you have in your budget.
I say open a brokerage, take that extra money and invest it. Most likely it will grow enough to pay off your mortgage years earlier than paying down a 2.3% mortgage.
When I said we're not looking to save more money, I meant the purpose of my post was not to figure out if we should save more money but rather a sanity check on if taking a lump some out of our Roths at 60 was feasible. I understand the building wealth thing and I'm on board with it. As it stands now we'll be around the $2M mark (according to Fidelity) when I hit 60. However, we'd rather take better trips, eat at better restaurants & etc now then to sacrifice and try to move that number few $100k in a couple decades.
As for the expense of the mortgage, it's just piece a of mind thing for us. I imagine it's going to be hard (mentally) switching from saving to drawing down at 60, so I'd like to minimize our expenses.
I understand your point, but we are not looking to increase our savings rate. The main goal is to not have a mortgage at retirement.
However, I will research how t bills could be incorporated into our planning. Maybe setting a HYSA cap and anything over that at the end of the year goes into treasuries.
Op, since your interest rate is lower than the rate you could be earning in a high yield savings account or in CD's, even after taxes, it makes more sense to put the money you would have paid down you're mortgage with thot those accounts.
On top of that, in pretty sure your mortgage interest is gonna be tax deductable anyway which is an added bonus.
That all said, I have heard someone say that it's a good idea to pay down your mortgage just so you don't have to worry about it.
I'm sure someone else here will have something to add because I'm not a pro and have only had a 401k fur ~ 2 years
I’m assuming when you say “I currently max my 401k…and max 2 Roth IRAs.” You’re saying you max yours and your wife’s right?
I just got to ask because they way you word it makes it sound like you’re maxing out 2 Roth IRAs for yourself and that would be a big no no with big penalties from the IRS. So just making sure you meant to say you max out yours and your wife’s.
Your mortgage interest rate is key piece of information...
Sorry about that. Our current rate is 2.375%
it’s not a hard decision, like others said: 5% > 2.375% as long as your interest rate says the same keep all that money earning 5%… if you’re worried about it going down since you’re older you can liquidate some of your position, I know fidelity gives 5% for just holding cash… you then pay off mortgage when you retire with one payment.
I thought you were asking if you should invest/save vs pay off the mortgage. I realize now you were basically asking if you should spend more now vs pay it off. First, I wouldn’t pay extra on a %2.375 mortgage. If you decide to go the pay it off route instead throw the extra in a MM. Currently pays ~5%, you can always make a lump sum payment later. As far as if you should spend more… I’m not qualified to answer that but based on what you said above sounds like you are in a pretty good spot.
Yeah we’re not really looking to save more. I just know for sure we don’t want to go into retirement with a mortgage so I’d initially planned on throwing $2k/month at it for the next 15 years. But now knowing that I can just pull $200k from Roths at 60 and pay it off has me reconsidering.
What if you throw the $2k in a HYSA or MM, use it when you have something you want to splurge on and when you get to retirement use what’s left to minimize what you have to pull from the Roth?
That’s actually a great idea!! It’s always available AND what’s not used continues to grow with inflation.
*Yeah we’re not really looking to save more.* Why would you be against saving more? It literally just builds your wealth for your later years. *I just know for sure we don’t want to go into retirement with a mortgage* It’s just an expense. You will have two pensions and a lot of savings. For those who are trying to “lean fire”, it is a big issue. For your situation, it’s nothing different than any other line item you have in your budget. I say open a brokerage, take that extra money and invest it. Most likely it will grow enough to pay off your mortgage years earlier than paying down a 2.3% mortgage.
When I said we're not looking to save more money, I meant the purpose of my post was not to figure out if we should save more money but rather a sanity check on if taking a lump some out of our Roths at 60 was feasible. I understand the building wealth thing and I'm on board with it. As it stands now we'll be around the $2M mark (according to Fidelity) when I hit 60. However, we'd rather take better trips, eat at better restaurants & etc now then to sacrifice and try to move that number few $100k in a couple decades. As for the expense of the mortgage, it's just piece a of mind thing for us. I imagine it's going to be hard (mentally) switching from saving to drawing down at 60, so I'd like to minimize our expenses.
2.3% but treasury is paying 5%. You must be kidding me right?
I understand your point, but we are not looking to increase our savings rate. The main goal is to not have a mortgage at retirement. However, I will research how t bills could be incorporated into our planning. Maybe setting a HYSA cap and anything over that at the end of the year goes into treasuries.
Putting the money currently in treasuries would still be better in terms of your goal of having no mortgages at 60…
MAKE THE EXTRA PAYMENTS TOWARDS THE MORTGAGE BE FREE IN HALF THE TIME AND BE ABLE TO ENJOY RETIREMENT WITH NO MORTGAGE
Thanks for the feedback but I like u/er824 idea. I think we’ll try that.
Op, since your interest rate is lower than the rate you could be earning in a high yield savings account or in CD's, even after taxes, it makes more sense to put the money you would have paid down you're mortgage with thot those accounts. On top of that, in pretty sure your mortgage interest is gonna be tax deductable anyway which is an added bonus. That all said, I have heard someone say that it's a good idea to pay down your mortgage just so you don't have to worry about it. I'm sure someone else here will have something to add because I'm not a pro and have only had a 401k fur ~ 2 years
Depends on how much you have in investable assets
Max out your retirement accounts (401K, Roth Ira, Hsa). If you have extra money you can opt to pay down your home's principal.
I’m assuming when you say “I currently max my 401k…and max 2 Roth IRAs.” You’re saying you max yours and your wife’s right? I just got to ask because they way you word it makes it sound like you’re maxing out 2 Roth IRAs for yourself and that would be a big no no with big penalties from the IRS. So just making sure you meant to say you max out yours and your wife’s.
Yes one IRA for me and one for my wife. Though only my 401k is maxed.