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Old 01-28-2010, 06:36 PM
 
745 posts, read 1,144,226 times
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Quote:
Originally Posted by Kleenex View Post
if you had 0 debt (except mortgage), and 6 months of emergency fund, and 12% contribution to 401k and another 4% company match, would you:

B. pay all of 3k towards principle?
I would suggest going with B.

Better yet, cut down the 12% 401K to 4%(so you get the company match) and contribute the remaining 8% towards paying down your mortgage.


.
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Old 01-28-2010, 06:44 PM
 
454 posts, read 733,364 times
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Quote:
Originally Posted by Gandalara View Post
My situation is basically the same as yours (zero debt except for mortgage, satisfactory 'Oh gods what now' fund, retirement funding, etc, etc)

After everything is paid for, usually by the 20th of the month --- whatever is left, I send 2/3 to the mortgage as a principle-only payment and 1/3 to another saving vehicle. I leave $100 in my checking account and then start all over again on the 1st. It works for me

I really get a kick out watching the principle balance plummet.
that's awesome.
good for you! :-)
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Old 01-28-2010, 06:46 PM
 
454 posts, read 733,364 times
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Quote:
Originally Posted by Tampaite View Post
I would suggest going with B.

Better yet, cut down the 12% 401K to 4%(so you get the company match) and contribute the remaining 8% towards paying down your mortgage.


.
interesting.....
really? would you do that?
the tax credit of a 401k should count for something...no?
also, markets are relatively low right now......over the next 30 years or so, wouldn't it be better off having a good chunk in 401k...no?
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Old 01-28-2010, 07:24 PM
 
649 posts, read 777,932 times
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Quote:
Originally Posted by Kleenex View Post
......over the next 30 years or so, wouldn't it be better off having a good chunk in 401k...no?
Yes!!! You're thinking logically now. Think about it. If you didn't put the $$ in your 401k, but instead put it all (or almost all) into the house that you don't plan on selling, what would you use to live off of in retirement? What about the opportunity cost you would have lost for all those years that you sacrificed the 401k for the house?

I know people who say that they feel more secure in having a paid off house, but actually that is the more risky move in my opinion. It works well if everything goes according to plan and you are able to pay the house off and then have time to rebuild your retirement with the money you were previously paying on your mortgage. However, how often do things go according to plan? You could very easily end up with all of your money tied up in a house and no way to access it, plus no other savings.

I feel more comfortable with a balanced approach. Pay extra on the house, but also make sure you are putting money away in other places as a contingency - a six month emergency find does not cut it. In my case, I figure that if I get closer to retirement and want to pay my house off, I can always cash in some of my non-retirment investments and do so as a lump sum then (in 10 years or so), rather than putting all my discretionary money into the house now and hoping nothing like a job loss, illness, or death of a spouse occurs before then.

Anyway, that's just my way of looking at the world, and proof of why personal finance is just that - personal.
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Old 01-28-2010, 08:11 PM
 
2,038 posts, read 2,358,087 times
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Quote:
Originally Posted by Kleenex View Post
if you had 0 debt (except mortgage), and 6 months of emergency fund, and 12% contribution to 401k and another 4% company match, would you:

A: save up the 3k cash left over monthly (after expenses) to increase emergency fund

or

B. pay all of 3k towards principle?
Right now, cash is king. I don't know what defines your comfort zone, but for me, I would feel pretty horrible knowing if I had a 100K mortgage, paid it down to 20K, lost my job and the house foreclosed because I didnt have as much in savings. Oh, I don't even want to think about that right now!

Depending on factors such as your age, income potential, demographics and the availability/security of jobs in your area, I would save maybe a few more months of emergency funds in a CD ladder. Maybe one or two year CD's spread out where one matures every six months or so. This makes the money somewhat liquid while getting a better return on your funds.

I would also send every bit I could to pay off the mortgage while doing that. If your timeline affords it and you haven't already done it, I would consider a 15 year mortgage. This at least guarantees good results if your best laid plans go sour.
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Old 01-29-2010, 06:47 AM
 
Location: Southwest Missouri
1,921 posts, read 4,013,781 times
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Quote:
Originally Posted by zendrive View Post
Right now, cash is king. I don't know what defines your comfort zone, but for me, I would feel pretty horrible knowing if I had a 100K mortgage, paid it down to 20K, lost my job and the house foreclosed because I didnt have as much in savings. Oh, I don't even want to think about that right now!
That scenario will never happen because there is a lot of equity in the house. No one would eat a foreclosure under the circumstances that you have described.
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Old 01-29-2010, 09:31 AM
 
Location: Denver, CO
1,206 posts, read 2,640,611 times
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Quote:
Originally Posted by Kleenex View Post
interesting.....
really? would you do that?
the tax credit of a 401k should count for something...no?
also, markets are relatively low right now......over the next 30 years or so, wouldn't it be better off having a good chunk in 401k...no?
You don't get a tax credit. 401k is a tax-deferred vehicle, whatever you put in it is not counted as your income. However you'll pay taxes on it when you start taking distributions later.

So yeah, you definitely want to max it out to at least the amount your employer will fully match, and then look at all your options for the rest of the money whether it's more 401k, Roth IRA, mortgage principle, under bed cushion, etc.
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Old 01-29-2010, 09:44 AM
 
Location: Vermont
4,652 posts, read 8,717,455 times
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Another favorite calculator of mine is the mortgage-x calculator.

Mortgage Calculators: Amortization Tables, Accelerated Payments, Biweekly Payments
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Old 01-29-2010, 10:23 AM
 
454 posts, read 733,364 times
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Quote:
Originally Posted by Moonwalkr View Post
You don't get a tax credit. 401k is a tax-deferred vehicle, whatever you put in it is not counted as your income. However you'll pay taxes on it when you start taking distributions later.

So yeah, you definitely want to max it out to at least the amount your employer will fully match, and then look at all your options for the rest of the money whether it's more 401k, Roth IRA, mortgage principle, under bed cushion, etc.
yes, of course. that's what i meant. i just didn't state it properly.
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Old 01-29-2010, 10:47 AM
 
Location: Denver, CO
1,206 posts, read 2,640,611 times
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Quote:
Originally Posted by Kleenex View Post
yes, of course. that's what i meant. i just didn't state it properly.
I misspoke, you can possibly get a tax credit for 401k, but only if you are a lower income earner (AGI of $27750 or lower for single filer).
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