retirement or pay off the house?

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Joined: 05/03/06
Posts: 12
retirement or pay off the house?

I have the oppoerunity to pay off my house 180K so I can stay home with my baby and have more. Or I could invest in the market/mutual fund and hopefully draw off the interest to supplement my DHs income so I can stay at home wuitht he kids.
If left in the market, I guess that could be my retirement and I wouldn't have to teach again. But not sure about the house paying off- what my retirement situation would be then.
What do you think is best???

Joined: 03/16/15
Posts: 53852

Wow, if you know any financial advisers I'd want to ask them about the pros and cons.

My thought is that if you paid off the house, for retirement the expectation would be that your DH would be setting aside money for retirement for both of you? Whatever the mortgage payment was could go into retirement, unless the point is to have lower cost of living by eliminating the mortgage.

Good luck with making the decision ... I don't know enough about investments to make a knowledgeable comment about that.

Joined: 03/16/15
Posts: 53852

Pay off the house!!!! Then you can use whatever money you were putting into a mortgage into savings and investments.

When you do end up selling your house, you will have every penny of the sale for your retirement Smile

Joined: 10/21/03
Posts: 172

You could also do both... you could pay a large chunk on the house, but also max out retirement for the year. A roth ira has a max contribution of 4k (might have gone up to 4.5k this year.. not sure) So if you contribute to 1 for you and 1 for dh, that's 8k out of your bulk sum. Then you only have 8k left on the mortgage which will then proceed to disappear in the next 1-2 years. Faster if you send any extra money you come by to it. Then you can send all the $ you were paying for the mortgage to retirement and max it out each year.

The other option to keep all of it and continue to pay on the mortgage also works.. so long as you put it into a secure fund. If you put 180k into a fund that's making 5% int (actually you can find savings act's that make that..) then you'll earn around $750 a month. Obviously a higher int return will make more than that each month. If the mortgage payment is around that, then you could use it to pay the mortgage and essentially live basically mortgage free. Or you could also accelerate your mort. payoff by making double payments, but you would still have that lump sum of 180k in the bank to fall back on in an emergency.

The other option would be to take the interest earned (around 9k for the year at 5%) and invest it each year into a roth act for yourself and dh. Then you still have the lump sum in the bank for an emergency (or for paying off the mortgage early at any point that you choose to), and you're also funding retirement. If dh is also putting away a portion of his paycheck (15% is commonly what's recommended if you can't start at that then work your way up to it by adding 1% at a time) into a 401k or other such act, then you'll be well on your way down the road to a comfortable retirement.

Gee that was helpful wasn't it... lol. If it were me.. I'd probably do the 2nd or 3rd options. That way we still would have the lump sum if anything were to happen to either of us. But we'd have a plan written down for the $ and what we are doing with it and not just fritter it away.