Message Font: Serif | Sans-Serif
UnThreaded | Threaded | Whole Thread (10) | Ignore Thread Prev | Next
Author: warrl Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 5086  
Subject: Re: Pay off Mortgage or Max 401 / IRA Date: 7/19/2007 1:13 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 2
Does it makes sense to pay down or even pay off my mortgage instead of maxing my 401k and IRA the following scenario:

My take on your situation:

(1) Max out deductible and fully-qualifying contributions to your IRA(s) and 401K. In particular, max out any employer matching on the 401K. However, money that isn't fully qualifying, you have a better place for.

(2) DON'T pay down your mortgage NOW; instead put the money in non-tax-sheltered investment accounts and invest them in such a manner that you are pretty confident of getting more than 4.5% CAGR pretax (or equivalent, probably 3%, on tax-exempt investments) until the interest rate bump. At the moment 3-month Treasuries qualify (CAGR 4.94% per Bloomberg), so this doesn't look difficult.

(3) In 2010 when you see what the interest rate on your mortgage bumps up to, reconsider #2. It may make sense to pay off the mortgage faster, or even to take a wad of cash out of non-sheltered investments and pay down/off your mortgage.
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (10) | Ignore Thread Prev | Next


Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Berkshire Hathaway

Reconsidering IBM's Moat
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.