Deciding to pay off house with retirement savings...

[tdhanses]

Yeah my APR is 4.5%. I'm currently paying $12k in interest per year. After writing it off, its costing me $9k annually. Which is less than what I made in the stock market for sure. I also hate throwing $9k in the trash every year too hahaha.

Are you really throwing $9kin the trash if the funds you are using to get rid of throwing $9k are making more? Aren’t you really now throwing the higher earnings you are getting in the trash? Also why pay it off now? Is there a one time withdraw penalty and tax free? Since you have the investment funds why not sit on them and let them grow, shit hits the fan it’s still there right? If you wait a few years maybe you’ll have $300k and a mortgage at $220k. Also what will you get to take home when you pull your investment, have you calculated your est tax burden it will create, might do it this year as Biden will take 50%

If you do pull it all out and pay your mortgage off, I’d consider it a loan and pay yourself your monthly mortgage payment in an investment fund.

 

[WhatToHunt]

The financial advisor is not to select funds. It’s to make sure he understands the returns and tax consequences of each decision (because they are enormous).

Understandable yes and a good idea in that case. But I would hire an advisor only for this one instance then and not have them manage my funds over time.

 

[huntnful]

Are you really throwing $9kin the trash if the funds you are using to get rid of throwing $9k are making more? Aren’t you really now throwing the higher earnings you are getting in the trash? Also why pay it off now? Is there a one time withdraw penalty and tax free? Since you have the investment funds why not sit on them and let them grow, shit hits the fan it’s still there right? If you wait a few years maybe you’ll have $300k and a mortgage at $220k. Also what will you get to take home when you pull your investment, have you calculated your est tax burden it will create, might do it this year as Biden will take 50%

If you do pull it all out and pay your mortgage off, I’d consider it a loan and pay yourself your monthly mortgage payment in an investment fund.

Oh I would 100% turn around just start investing the money saved from my mortgage. No 10% fees, it’s my personal investment account. But I did take into consideration the tax bracket. I’d have to not work any OT in order to keep the income in the 24% bracket. But after researching the refinance option a little more, it’s clear what the smart decision is. I’ll refi and then wait for a small dip in the market and stuff my funds back in there

 

[Billy Goat]

I'm no money manager so my advice ain't worth much, but everyone talking about if the housing market craps out, I don't get it. Granted last time the government stepped in and backed the stock market, so it didn't crash, but sounds like a lot have faith in the stock market. Like it's guaranteed. Unfortunately it probably is anymore, too many are invested in it.

I'm just a dumb redneck, but I'll gladly have my money sitting in land and houses that will always have some sort of value. Even if relative to where it was on paper is lower, you don't loose money til you sell. I know this bucks convention and goes against the grain of what a lot recommend. I guess I'll just miss out. I'd rather own stuff outright and worry about my tax payment rather than a mortgage. I'm sure all those guys in the early 20's were laughing at everyone who was investing in land. The family of those land holders have been pretty fortunate. And history tends to repeat. I don't know if we are in a repeat of the '19 flu, but maybe we are. Might be we will have a repeat of the late 20's in the next 10 years. I hope not, but I'd be prepared.

My point is make sure you are diverse in your investments. I see a permanent roof over my head as a pretty good investment, but you also won't get ahead if you don't play a little. Make sure your mortgage payments won't be a struggle, even if you lost most of your investments.

Being land rich and dirt poor ain't too bad.

 

[elkyinzer]

Hahaha I know, I know . It was in order to bring my monthly bills down to $1500. Knowing I could make that much money in any given circumstance. But I could also probably make $3500 in any given circumstances given my trade also lol

You could always hedge it by paying off additional principle over however many years you want to. Retire your debt sooner without totally depleting your income producing assets.

 

[Squincher]

Get professional advice, not internet advice. Eveyone in this thread might be dead-ass broke as far you know.

 

[Kilboars]

IMO. Cash is King. At 30 you’re a babe and have plenty of time and youth to pay off a mortgage.

$250k in real stocks at age 30 can make you a multi millionaire by age 50-60+

With mortgage rates for your residence below 3% now it is a blessing you cannot overlook. When I was your age I was bragging because about 9 1/2% mortgage rate on my home.

Put that money into the top best 20 companies you like and let her ride.

Look up an amortization schedule and see how much more you need to add the principal for the next 10 years to have your home paid off by age 40 and just do that.

Win-win

I paid extra into the principal to have my house paid off by age50 and it is a great feeling but I’m 57 now and I bought into the stocks each year since age 25 and now I own some great companies with zero dept.


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[wind gypsy]

For the guys saying "talk to a financial advisor" - how do you recommend finding the right financial advisor?

Every person I can think of that could be considered a financial advisor really just wants to invest your $$ and take a cut rather than holistically creating a financial plan. Early in my career i got referred to the "finance guy" that a lot of people in my company use. He is the son and brother of others in the company. So I scheduled an appointment and learned that he works for Northwestern Mutual and 90% of his gig is pushing you to contribute aggressively to a whole life insurance plan.. He seemed downright slimey and still spams me 8 or so years later. I consulted google after leaving his office and ended up on bogleheads and read a book on index investing that has served me well.

So how would you go about finding someone who charges for their time and helps with strategy that you can execute on your own? I think lots of folks can do math. Can understand interest rates. Can understand how tax advantaged vehicles like 401k/IRA work, but tax strategy and more detailed risk analysis or mitigation beyond that would be helpful.

Example: I just got married - my wife and I each owned our own places prior to me buying one for us to move into together. We decided to keep her townhome as a rental property. We could benefit greatly from someone explaining the best way to leverage this new "business" as a means to reduce our tax burden, how different scenarios of filing jointly vs separately would benefit us, etc.

 

[wind gypsy]

Oh - and if someone has a link to "the idiots guide" on buying mixed ag/woodland/wetland property for hunting while also using it to minimize tax burden as an Ag or timber business - please send it my way That's what i really want a financial advisor for..

 

[WhatToHunt]

For the guys saying "talk to a financial advisor" - how do you recommend finding the right financial advisor?

Every person I can think of that could be considered a financial advisor really just wants to invest your $$ and take a cut rather than holistically creating a financial plan. Early in my career i got referred to the "finance guy" that a lot of people in my company use. He is the son and brother of others in the company. So I scheduled an appointment and learned that he works for Northwestern Mutual and 90% of his gig is pushing you to contribute aggressively to a whole life insurance plan.. He seemed downright slimey and still spams me 8 or so years later. I consulted google after leaving his office and ended up on bogleheads and read a book on index investing that has served me well.

So how would you go about finding someone who charges for their time and helps with strategy that you can execute on your own? I think lots of folks can do math. Can understand interest rates. Can understand how tax advantaged vehicles like 401k/IRA work, but tax strategy and more detailed risk analysis or mitigation beyond that would be helpful.

Example: I just got married - my wife and I each owned our own places prior to me buying one for us to move into together. We decided to keep her townhome as a rental property. We could benefit greatly from someone explaining the best way to leverage this new "business" as a means to reduce our tax burden, how different scenarios of filing jointly vs separately would benefit us, etc

For the guys saying "talk to a financial advisor" - how do you recommend finding the right financial advisor?

Every person I can think of that could be considered a financial advisor really just wants to invest your $$ and take a cut rather than holistically creating a financial plan. Early in my career i got referred to the "finance guy" that a lot of people in my company use. He is the son and brother of others in the company. So I scheduled an appointment and learned that he works for Northwestern Mutual and 90% of his gig is pushing you to contribute aggressively to a whole life insurance plan.. He seemed downright slimey and still spams me 8 or so years later. I consulted google after leaving his office and ended up on bogleheads and read a book on index investing that has served me well.

So how would you go about finding someone who charges for their time and helps with strategy that you can execute on your own? I think lots of folks can do math. Can understand interest rates. Can understand how tax advantaged vehicles like 401k/IRA work, but tax strategy and more detailed risk analysis or mitigation beyond that would be helpful.

Example: I just got married - my wife and I each owned our own places prior to me buying one for us to move into together. We decided to keep her townhome as a rental property. We could benefit greatly from someone explaining the best way to leverage this new "business" as a means to reduce our tax burden, how different scenarios of filing jointly vs separately would benefit us, etc.

Agreed. Only way I could see using an advisor would be to be up front immediately and ask for short term help and outline exactly what guidance you want from them. A one-time transaction.

 

[GotDraw?]

I spent over 25 years as a Financial Consultant, including working at three of the largest and most well respected investment firms in the world.

In my entire career, I NEVER had a single client that regretted paying off their home- no matter how low the mortgage rate was. NOT ONE.

Some folks will tell you you're better off investing in the market since interest rates are so low. Others will tell you to hoard cash in difficult times. Forget it.

KISS method wins every time. Keep It Stupid Simple.

Pay off the house and don't look back. There is nothing to debate on this.

JL

 

[wind gypsy]

Agreed. Only way I could see using an advisor would be to be up front immediately and ask for short term help and outline exactly what guidance you want from them. A one-time transaction.

Even if it is ongoing but you only pay for the time you schedule. Schedule a review if your income/assets/liabilities change notably, laws change, goals change, strategy isn't working, kids change things, etc.

 

[Billy Goat]

Oh - and if someone has a link to "the idiots guide" on buying mixed ag/woodland/wetland property for hunting while also using it to minimize tax burden as an Ag or timber business - please send it my way That's what i really want a financial advisor for..

I don't think it's idiots guide, it's being an idiot to farm.

 

[Rob5589]

There needs to be more 30 year olds that think like you.

 

[NDGuy]

Is anyone else wondering how in the fu$# a 30 year old has saved 500k for retirement? lol

Good on you man, I thought I was doing good having 1x my salary before 30 married with 2 kids and a house.

 

[MattB]

I'll give you my perspective as an MBA, banker, and real estate investor. Mortgage rates are at historic lows right now, so there is a solid argument to leave your mortgage in place or refinance and invest as much as you can in the meanwhile. A dollar repaid 10 years from now is worth much less a dollar, and you should be able to achieve a better yield on average over that timeframe than what you are paying as an interest rate.

Having said all that, I paid off my 2.50% mortgage this past summer with proceeds from the sale of a rental property. I only did that because my wife just retired and I am preparing to so and did not want the monthly payment.

If I was in your shoes and was your age, I would keep the mortgage/refinance into a lower rate and potentially shorter am rather than rob from savings to pay off the mortgage.

 

[Kilboars]

As far as a financial advisor he needs to be or she needs to be a fiduciary and not a broker.

They’re hard to find. Maybe five or 10% of financial advisors are truthfully fiduciaries. Meaning by law they have to invest in your best interest only.

I’ve always invested on my own buying into solid companies the low PE rating.


Here’s the best book I’ve read on investing.

The 5 Mistakes Every Investor Makes and How to Avoid Them

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[Tahoe1305]

Think I may be with the minority here but will echo what a few have said.

Highly recommend not paying off your house. I’d run the numbers on a no cash out refinance and lower your payment (just refi what you owe and maybe cost of refi ~4K). Likely only worth it if you can save >1% APR and plan for keep it for at least a few more years (assuming so based on what you are saying). I’d stick with a 30 year as well. You can always pay more principal and make it into a 15 year. The difference in rates between 15 and 30 is maybe .5%. To me it’s worth the flexibility.

Like many have said this does a few things. Frees up cash for investing and places the risk on the bank. Yes the market is very high. Having cash is perfect! What do you want? The market to CRASH (so you can buy lower) can’t do that without cash.

When it does start walking down to -10% or maybe even -20% start dumping in good junks if cash. Be disciplined. If it has a -3% day buy a few $k. Another -5% day a few $k more. Do that as much as your comfortable.

History has shown it will come back. If it doesn’t your cash likely won’t be any good and you’ll wish you had bullets anyway. Again it always has.

I did this same thing earlier this year when the market went down about ~12% (can’t recall exact drop). It happens over a few months. Was scary but when it came back up it ended up very well.

Cash is king but you need to use it wisely. Paying off a 4.5% loan when the market is 8% average and ~15% average for last 5 years i would say is possibly too conservative for a 30 year old (I’m just a few years older FWIW).

100% agree the piece of mind of not having a payment is great. But let the math work for you. 260k making 15% is pushing out almost $40k a year (way more than 9k).

My 2 cents. Best of luck either way!

 

[hodgeman]

if you've got $350k in your 401k and another $250k in a taxable account at 30. Pay that mortgage off and never look back. It's not the optimum move mathematically, but math aside...your trajectory is enviable and ends up with a lot of zeroes in retirement.

 

[Kilboars]

Another option for the $250k would be lending it out through Hard Loans at 12-16% but that another thread.


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