TransWorld

About 10-15% of that 8%. So, net about 7% return. Add back in the tax deduction for mortgage interest rate, about 10-15%. So, net bottom line about 8% return.

Round Luggage

In addition to paying more our lender allows paying months in advance, there isn’t a financial advantage but for pilots if we find ourselves on furlough in the future you have months before becoming delinquent.

TiredSoul

That’s almost the same as saving yourself though, one small difference. They’re the ones drawing the interest. That’s what you have an emergency fund for, 6-12 months of expenses.

Round Luggage

Sure, in theory.

135tankerdriver

I think a good middle ground is to invest and then when that investment is enough to pay off your mortgage after taxes then pay off your mortgage. In this scenario you want to time that investment so that it’s on an upswing in regards to returns of course so your timing/time frame has to be flexible.

TiredSoul

Not not in theory.
Thats exactly what we have, 9-12 months of expenses including mortgage payments.
We could stretch it to 12 if we go back to basic cable, stop eating out and sell my $2000 car.

Round Luggage

Everyone has a plan until they get hit in the mouth.-Tyson I think.

TransWorld

If one does a rigorous economic analysis of their options, the “compromise” middle ground you are suggesting is not the best financial decision. It will cost them tens of thousands of dollars.

Armyguy

kinda like banking on 8% returns.

My thoughts:
My 401k is invested in the stock market. With that said, the USA has gone thru some events that have given a tailwind to the stock market and this pushed it along to record highs. First, the loss of pensions and the invention of 401K's for retirement savings. Second, the big bubble of Baby Boomers saving for retirement.

Baby Boomers are now starting to have take out assets from their 401K's. There is a demographic shift involving the country getting older by the year. Just ask yourself if older people will stay invested in stocks as they hit 70? 75? 80? This graying of America will be a tailwind to the stock market.

Just my thoughts on it but after maxing out retirement accounts I feel paying off all debt is a good move and it diversifies your assets.

Your 8% number isnt a bad planning number but here is the range of returns for 20yr periods since way back in the 1800's till now:

• 20-year: From 0.5% to 13.2%

The worst 20yr periods for the stock market was

• 1928: the return was about 2.5% for the next 20 years
• 1958, 59 & 61: about 5-5.5% annual return

This is a good discussion, just trying to provide an alternative point of view.

135tankerdriver

Is it not a middle ground between paying extra principal on your mortgage and investing extra in retirement funds? If it’s not a middle ground please enlighten us on what is…