Deciding to pay off house with retirement savings...

dreamingbig

Senior Member
Joined
Feb 29, 2012
Messages
3,068
Location
Washington
The peace of mind with no mortgage payment is worth more than the interest IMO. The amount you can put away in the next couple years with no house payment will make it up so fast.

As far as the deduction, I’m with you on the math, paying 12k to save 3k is not saving money. Say you make the avg of 7% on 260k in a reasonably safe fund, that’s 18k. So you’d make a bit more than you pay in interest, but the peace of mind would make me happier than the extra few 1000’s.


Sent from my iPhone using Tapatalk

Compound interest vs. simple interest.


Sent from my iPhone using Tapatalk
 

bozeman

Senior Member
Joined
Dec 5, 2016
Messages
1,579
Location
Alabama
Compound Interest vs Simple Interest is something to consider, but you also have to keep in mind investments all carry risk, so compounding is HIGHLY variable, simple interest is constant.
 

Outdoor Writer

Senior Member
Joined
Aug 23, 2020
Messages
593
Location
Glendale, AZ
You are absolutely spot on. I've thought about this A LOT! It would mean my full investments are now technically only in real estate. However, I did get a screaming deal on my home and its value has risen extensively in the last 6 years. It's also on 2 acres just outside of some big towns here in California and these properties are really getting more sought after and harder to come by. I'm really trying not to view it as an investment, because it quite honestly doesn't make sense as an "investment". I'm trying to justify it in my mind as just a purchase, that would make any future income catastrophes much more manageable without HAVING to make a payment. Like say I were to lose my job AND the market takes a shit. Now I need to withdraw money at a huge loss in order to make my mortgage, while looking for a job. If that makes sense?
Your house will appreciate whether it's paid for or not. So your gain, except for interest paid, would stay the same, so to speak, if you pay off the mortgage now or later.

I would look at one thing before I used my savings to pay off a mortgage, however, and that would be the interest rate. Thus, if I could invest my money and be pretty much be assured of a return that is better than the mortgage rate, I would go that route. Since last May, a modest mutual fund I have has gone from about $59K to $73K, or more than a 20% return. My mortgage interest is just under 4%. Even before this year, it had increased more than 4% annually except for one year with a minor loss. Over the LONG term, I doubt the markets will tank enough to make that investment bad news.
 

ScottRK

Senior Member
Joined
Jan 14, 2021
Messages
131
Not investment advise. Prenup?-If mentioned I missed it.You’ve got a pension? Talked to guys lost half of that.That’s fair game in addition to all your hard earned savings. Great money in pipe welding.
 
OP
huntnful

huntnful

Senior Member
Joined
Oct 10, 2020
Messages
345
Not investment advise. Prenup?-If mentioned I missed it.You’ve got a pension? Talked to guys lost half of that.That’s fair game in addition to all your hard earned savings. Great money in pipe welding.
Pre-nup for sure. Mentioned it the first day I even met my girlfriend. I'm not playing that game. Work with too many guys that have to work into their 60's because of divorces.
 

Middleofnowhere

Senior Member
Joined
Mar 11, 2017
Messages
664
Taxes are the devil. If you are only going to be paying taxes on the $50K gains, I say go for it. If you put the $210K in tax deferred accounts I say don’t take the money.
 

GHKYHunter

Junior Member
Joined
Jan 16, 2021
Messages
21
Many advisors that preach no debt strategies are still okay with a mortgage. But it’s very freeing to have absolutely zero debt. The key is making sure you have enough in a liquid savings fund to cover any emergencies that may happen.
 

RobertFerguson

Junior Member
Joined
Oct 8, 2020
Messages
13
I agree with the point of view that up to 60 y.o. it is pointless to work harming health for a full pension when there are such specialists like pension advisers. I am now 38 years old, and I actively use such services so that in 10 years, I can safely travel the world and not think that at any moment I can be left without money in the event of some crisis. The hensoncrisp.com specialists help me a lot in this; they explain everything in detail and help me be sure that I can fulfill my dream in retirement - a trip around the world. So I think that you are doing everything right, the main thing is to start investing in your peaceful future on time
 
Last edited:

def90

Senior Member
Joined
Aug 12, 2020
Messages
677
Location
Colorado
If your stocks are making more in interest than you were paying in interest on your home you probably should leave the money in the market but in the end you have to do what you feel is best for you.
 

rodney482

Senior Member
Joined
Feb 27, 2012
Messages
3,253
My pension comes w a 3 year drop which will net me a 90k check at retirement. My plan is to be payment free going into retirement at age 55.

(I will also receive 35k a year the rest of my life) <~ pension

We also have other monies put back into 401s and IRA’s
 

rayporter

Senior Member
Joined
Jul 3, 2014
Messages
3,379
Location
arkansas or ohio
i basically did what you are proposing when i was in my mid 30's.
i had 3 accounts and used one to pay off my house.

the 401k was not to be touched and the slush fund was for fun and emergencies.

i was debit free at 39 and the slush fund grew at a fast rate because i was now putting what was the house and truck payment into it.

i was out the door at 51 and no regrets. that slush fund turned out to be important because i lived off of it during the crash [ in 08 ?] which meant my 401k was not diminished and when the market came back i was setting purty. living off the slush fund account was part of my plan to reach 62 and get on the tit.

good luck either way. it is quite exhilarating to make that last payment.














' f
 
OP
huntnful

huntnful

Senior Member
Joined
Oct 10, 2020
Messages
345
Guess I should give an update since this thread resurfaced.

I ended up refinancing my house with a 15 year loan 2.25% interest rate. $1750 per month, and making it an even $2000 to pay it off in 13 years.

I put my lump sum back into my index fund and continued adding to it. Sitting at $289k in my personal investment acct now and $426k in the 401k. Just turned 31 three days ago. I'm happy with my decision, but lost a little sleep over not sticking with my original plan haha. Moved on from the whole situation and continuing to save, invest, and just hunt a bunch and love life along the way!
 

Ingo

Member
Joined
Jul 13, 2015
Messages
91
Guess I should give an update since this thread resurfaced.

I ended up refinancing my house with a 15 year loan 2.25% interest rate. $1750 per month, and making it an even $2000 to pay it off in 13 years.

I put my lump sum back into my index fund and continued adding to it. Sitting at $289k in my personal investment acct now and $426k in the 401k. Just turned 31 three days ago. I'm happy with my decision, but lost a little sleep over not sticking with my original plan haha. Moved on from the whole situation and continuing to save, invest, and just hunt a bunch and love life along the way!
Amazing stuff, man. I thought I was doing pretty good having a quarter in my 401k by 35. Luckily my other half does pretty well, too. I envy your free time, more than anything!

My dad and his wife changed their fortunes with good investing and paying off all their debts. Hopefully I'm on that path, as well.

Sent from my SM-G996U using Tapatalk
 

awasome

Member
Joined
Apr 29, 2021
Messages
78
I wish when I was 31 I was in the position you are in. You are smart to save as much as you can and have a plan to exit the rat race.

Luckily when I met my now wife, she opened my eyes to personal finance and investing. The only debt we have is our house and we are heavily investing to make up for lost time since I started when I was 38.
 

Slowlerner

Junior Member
Joined
Mar 11, 2021
Messages
13
I’m 42 and married with 2 young kids. I too want out of the rat race. Thankfully my dad convinced me to focus on retirement investing early such that my debt to equity is about 0.25 (3 times more equity than debt). I’ve been thinking about something similar - taking my equity in the market and using it to either payoff or purchase real assets such as land, rental properties, etc. I’m just scared of the tax hit I’ll take by doing so since almost all of it is in a 401K.
 

sasquatch

Senior Member
Joined
Jul 26, 2015
Messages
558
I’m 42 and married with 2 young kids. I too want out of the rat race. Thankfully my dad convinced me to focus on retirement investing early such that my debt to equity is about 0.25 (3 times more equity than debt). I’ve been thinking about something similar - taking my equity in the market and using it to either payoff or purchase real assets such as land, rental properties, etc. I’m just scared of the tax hit I’ll take by doing so since almost all of it is in a 401K.

No need to take the hit. Interests rates are cheap. But with 20% down and try to make 10% or more return on what you put in, (the 20% amount)

Reap full appreciation while only be vested for 20% of the cost, while also getting a little cash flow.


Sent from my iPhone using Tapatalk Pro
 
Top