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My wife and I are torn about what we should do. Ill try to give all the pertinent details and maybe you guys can give us some good insight so we can make a decision.
We're in our early 40's and planning to retire in about 11 yrs. Income is around 140k. We have 415K invested in various stocks and mutual funds, 130K of that is in our Roth IRAs, which we max every year. I belong to a union and have approximately 250K invested with them in an annuity and will receive a pension of about 6k a month when I retire. We stand to inherit low to mid six figures but I don't like to factor that into my decision making.
We recently refinanced our home for 30 yrs at 3.875 %. We owe 195K on a house that's worth 250K. We also have a rental property with a mortgage balance of 150K and approximately 50K in equity. 22 years left on the mortgage at 6%. Cars are paid off and the credit card bill gets paid in full every month. No other debt.
When retirement comes, and depending on my parents' health, we plan on selling our primary residence and moving to a state with a lower cost of living. We'll probably sell the rental property around this time as well. We'd rather not have a mortgage when retired, so when we do move, we'll most likely pay cash for our next home.
After paying all bills and funding our Roths each month, we have around $2500 to invest. Which strategy makes the most sense:
1)- Invest the $2500 in the stock market each month
2)- Aggressively payoff the mortgage
3)- Contribute some to the stock market and some towards the mortgage
I feel I know what is the best decision, unfortunately my wife does not agree. What are your thoughts?
I paid off my mortgage. It is a good feeling. The tax benefit was not much of a benefit to me. Seems you have the resources to be debt free. As for the market, I have stayed away from it for many years now. I know many will disagree with me and have different philosophies and faith in Wall Street. For my part, WS is run by thieves given a pass by the congress and the government in general. The big guys win and the small guys lose in the long run as well as the short run. Just my opinion but I read nothing to make me confident in the long term regarding the stock market. I prefer debt free.
As for a long term outlook on selling your primary residence, I wonder who will be able to buy the real estate in 10 or 20 years. The middle class is shrinking big time. Millennials are living with parents and making minimum wage if that. That is another subject but my feeling is and has always been that real estate is best when you own rentals as you already do. Houses are black holes into which you put a lot of money. I will grant you that some markets are sound and seem to ride out the ups and downs of the economy but there are many areas that are in big trouble already.
ask yourself if you would ever borrow money to buy stocks on margin . in effect that is what you would be doing if you keep the morgage and put the money in the markets .
my vote is with such low rates and the outlook for the next 5-10 years at these market valuations being below average i would get rid of the mortgage as long as i didn't need that cash .
6% mortgage rate is high, I would refinancing that. The problem with paying off mortgage, if you need cash for whatever reason, you will pay higher rate.
which may be a better deal if markets fall . so that is something the op really has to consider for themselves . i don't see enough gain potential at this point in time with the op retiring in just 11 years to be worth the difference in risk .
if this is money they will not be keeping heavily invested at retirement paying that mortgage off may be the best choice . having only 11 years and high valuations going in has never produced anything but below average results , never in history .
That was my suggestion to OP. But I keep mine because it's in good location and I have a reasonably property manager. Plus I don't need the money, only the income. I have to figure out how to invest that money if I do sell it. But I did mention to my husband, if one of my kids becomes billionaire then all bets are off. I'm selling the rental house and live the high life.
6% mortgage rate is high, I would refinancing that. The problem with paying off mortgage, if you need cash for whatever reason, you will pay higher rate.
We are thinking about doing this, although rates for rentals are higher so it may not be worth it. We're also on the cusp pf having enough equity in the property, being there are 3 units in the building, 25% equity is required. The triplex next to ours is for sale, so I'm anxious to see what it goes for and then we may pursue it further.
i know i would . last thing we wanted to be is landlords in retirement .
I don't want to sell now as we net $500 per month but I definitely don't want to be bothered with it in retirement..especially if we move half way across the country.
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