Getting rid of our mortgage will net us $450 each month after it is paid off, and that will all go towards our Roth IRAs.
Great post, as usual!
]]>3 reasons.
1. Paying off the mortgage means significantly less expenses each month. This means that it would take less money to retire. I don’t plan on waiting until I’m 60, and the lower our expenses are the less money I’ll need to retire.
2. If I pay off the mortgage I have about 1k a month, or 12k a year extra that could fund retirement. If you start 5 years later, but put 12k instead of 1k, I’m pretty sure you come out ahead by waiting.
3. Peace of mind. I want to have as few obligations as possible. If you have the house paid off it isn’t going to get foreclosed if you lose a job or have some big medical expenses. Having a place to live with no payments means much less stress.
]]>Oops! This next part is going to be long, but hopefully worth it.
Two very important things I wish I’d known then: First, (I’m paraphrasing and run-on here, but please bear with me.) if a 20- something person saves 1K/year for each of 10 years in a tax protected account and leaves it to compound until age 65, he/she will have more money in the end than a person who waits for ten years (until they’re 30-something) and puts 1K a year away in the same type account EVERY SINGLE YEAR until they turn 65!!!! Compound interest is a wonderful thing. Just ask Einstein.
Next, before you prepay a penny, read and understand Ric Edelman’s fine discourse on why and how a big, long mortgage can not only be an excellent investment tool, it can save your hide if/when you hit one of life’s rough patches. You can find it on his web site or read the first chapter of “Ordinary People, Extraordinary Wealth”. You are free to handle your mortgage any way you wish (I love this country!), but do yourself a favor and study both sides of the coin before you call the toss. That way, you’ll have nothing to regret later.