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I'm a big fan of having no mortgage, the peace of mind is worth a lot. But from a simple dollars and cents perspective your mortgage rate is probably sub 4% and you should do better over the long term by investing that money.
From may 2000-2020 the s&p 500 with dividends reinvested returned 5.5%. 50k turns into 145k under those terms
while that is "true", the money would be replenished back into Roth IRA over a 4 year span, as well as investing the mortgage difference of $18,000/ year.
So while I take a step backward and withdraw the Roth, I immediately move forward with replenishing the Roth (principal amount) $11,000/year and have an extra $18,000/year to invest.
Do I still lose out ?
while that is "true", the money would be replenished back into Roth IRA over a 4 year span, as well as investing the mortgage difference of $18,000/ year.
So while I take a step backward and withdraw the Roth, I immediately move forward with replenishing the Roth (principal amount) $11,000/year and have an extra $18,000/year to invest.
Do I still lose out ?
mortgage rate is 3.25%
I would not pull money out of the Roth IRA. You can only contribute $6000 a year, $7000 if you are 50 or older. It would take a long time to just get back to where you are right now.
And with the market where it is right now, wouldn't you being selling low? Buying high and selling low is not a successful investment strategy.
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Quote:
Originally Posted by grouse789
while that is "true", the money would be replenished back into Roth IRA over a 4 year span, as well as investing the mortgage difference of $18,000/ year.
So while I take a step backward and withdraw the Roth, I immediately move forward with replenishing the Roth (principal amount) $11,000/year and have an extra $18,000/year to invest. Do I still lose out ?
mortgage rate is 3.25%
Yes, you lose, because... You have that bulk amount of $$ in (tax free) Roth WORKING for you now and during the next 4 yrs. If you pay off the bank, they will be very happy as they will now have that bulk amount to reinvest in what may be the most opportune bargain of the decade of the 2020's.
Monthly mortgage payments are trivial and just part of the daily grind. If you were not paying a mortgage, you would need to be paying rent.
Advantage of paying off a mortgage is usually as you change cash flow models (retire early, change jobs...)
Look at it as incremental (if you pay off the mortgage) vs aggregate (If you allow the bulk $$ to keep working)... SIZE (of portfolio working for you) matters!
I would not pull money out of the Roth IRA. You can only contribute $6000 a year, $7000 if you are 50 or older. We file jointly, have been putting 11,000/year, though single income here. It would take a long time to just get back to where you are right now.
And with the market where it is right now, wouldn't you being selling low? Buying high and selling low is not a successful investment strategy.
Looks like I will have to up it to 12,000/ a year now.
I’m not sure I’m running numbers correctly but if you could replace the withdrawal into the Roth because of the covid deal the numbers might make sense given the short timeframe to close out the mortgage. It comes down to a cashflow issue towards the end of a 30 year mortgage of 350k+/-
Simple savings calculator say
45k @ 5.5% for 3 years would grow to 52,840
1500 a month invested @ 5.5% for 3 years grows to 58,549
I’m not sure I’m running numbers correctly but if you could replace the withdrawal into the Roth because of the covid deal the numbers might make sense given the short timeframe to close out the mortgage. It comes down to a cashflow issue towards the end of a 30 year mortgage of 350k+/-
Simple savings calculator say
45k @ 5.5% for 3 years would grow to 52,840
1500 a month invested @ 5.5% for 3 years grows to 58,549
YES! were getting traction i think.
I used money chimps compound interest calculator
A) ---- so in real time now, 11,000 for three years at 5.5% gives me $36,764. If I continue doing what we are currently doing, this is where I land.
OR
B)---- in theory, I pay the mortgage now this month (deduct the 45,000 from roth principle), then next month resume my ROTH contributions as normal $11,000/year, putting me at to 36,764 in 36 months.
Meanwhile now investing the $18,000/year former mortgage money at 5.5% puts me at $60,160. in theory of course.
I guess the thing is the 45,000 subtracted from the pot. 45,000 at 20 years 5.5% comes to 131,000.
So, if that is correct, then I should not, (i think??)
Your Roth is a gold mine. I've set mine like a annuity. Right now at 67 I can take out $2000 a month tax free for 20 years....At 70 My SS will be $2100 that in 4000 a month with low tax. I can take out of my Ira up to the top 12%. Right now my plan is to move my Ira over to Roth up to 22% tax bracket for the next 2 years. Just put and extra 1000 a month on the loan and in 2 years it will be paid off. Do not touch the Roth.
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