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Author: JLC Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 5069  
Subject: Re: Pay off Mortgage or Max 401 / IRA Date: 7/19/2007 11:26 AM
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While I generally agree with the previous posters, I'll give you my real life experience.

Eight years ago I changed jobs and had one year until being vested. I was maxing out all my tax advantaged investments, had no debt other than the mortgage, had an emergency fund. So what was I to do?

Mortgage at 6.5%, and $85k on a $100k house with 25 years to go and about 25 years till retirement. I decided to pay off the mortgage. I looked at it this way. Yes, 6.5% is below the average return of the S&P 500, T-bills at the time were a little under the mortgage rate, but the main thing, interest paid is money lost. Even though you get to "deduct" it on your tax returns, you are still money out of pocket.

Fast forward, send in the check, no mortgage, couple months later, market tanks.

In your case, you could find a guaranteed return that beats your mortgage, but does it still do so after taking into account taxes paid on dividends and the money still lost from you mortgage interest deduction?

JLC
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