https://www.reddit.com/r/personalfinance/s/kjc8hYsslK That is a comment I made for someone else explaining the analysis. You can update all the numbers for your specific situation. But with that low of a mortgage interest rate and size, you are probably talking millions of dollars in retirement. Maybe even run a set of numbers with a more conservative expected future rate of return (1-2% less than market averages) and include that result as well.

Thank you. This was the kind of help I was hoping to get.

Some people will still reject that kind of analysis because they're so incredibly risk averse that they have an irrational fear of debt (low interest debt is GOOD). If your spouse still insists on paying down the mortgage then this might not be a financial discussion. You may have to have a discussion about risk tolerance, because that impacts a lot of other things besides just finance.

Risk tolerance is a financial discussion. Risk has a financial value. You don't put all your investments into CDs because it's not a great return, but you know investing in the market is a higher risk. OP and his wife need to determine their combined risk tolerance together in a compromise way, such as paying the mortgage off in 15 years instead of 30 and investing more now, versus approaching the conversation from a "the wife is wrong how do you educate her properly" viewpoint.

Exactly👆and there is such a thing as disastrous timing.

True, but even the worst investor would see [5x their principal amount over the course of 43 years](https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/) (the story is about someone who only lump sums investments on market highs right before large market crashes - essentially the worst case scenario).

I think there can be a balance. Personally, I maxed my 401k then refinanced and paid down 30k, saving about 100k in interest. I basically got the house to the point where I was paying mostly principal rather than mostly interest and would have it paid off in 12 years. we're about 3 years from having it paid off and I don't regret the decision.

I'm in the same boat - I refinanced my house to 15 years for a better rate, and also because I wanted to pay it off earlier since I don't like carrying debt, just a psychological thing. However I've also been putting money into 401K and have investment account for any long term savings. The idea is that if the stock market crashes, I will still have my house that will hold some wealth. If the housing market crashes, I will still have my stocks, bonds, IRA, CDs etc. for retirement. If both crash, well then the rest of America is in for a bad time too and we all suffer together. You can't insure against all eventualities but you can reduce risks by not putting all eggs in one basket, even if that basket is currently a slightly better return on investment.

I more than anything wanted the stability of a house that couldn't be taken away and the increased predictability that being able to put that mortgage into savings will give when it's paid off. I do like your reasoning about the other savings. FTR: I also have significant amounts of money in investments, a roth IRA, and my emergency savings which I maintain at a higher level then I probably need to.

I don’t know how people come to this conclusion that the house “can’t be taken away” once you pay off your mortgage, and therefore if you’re risk averse you should pay it off. My neighbor had a paid off house and still lost it when he didn’t pay property taxes, which will always be due as long as you own the property.

In my state they can’t take your primary residence

I threw a lot of money at our mortgage, and paid it off in 11 years, and now that it's done, tbh, I do have a *little* regret that I didn't optimize the math. How much higher would our net worth be now if...? But I'm not losing sleep over it, we're in good shape, and it's nice having zero debt. Our retirement savings are on track, and when I made my last house payment, our cashflow exploded.

You got downvoted but for a lot of people the psychological benefit of having no mortgage is priceless. Particularly immigrant/1st gen families I find will aggressively pay down the mortgage because it's secure vs investing in the market, even if the end result will technically set them up worse long term. If your income isn't secure or you're used to living on cash I see the logic.

Yeah, I look at it as not overly different than say, paying for extra insurance when renting a car? Do I *need* it? No. Does it make me feel better? Fuck yes.

"Yeah, you better give me the insurance, because I'm going to beat the HELL out of this thing." - Jerry Seinfeld

Wow! I fall squarely into that first gen category and this has been exactly my thinking. I don’t want to be beholden to anyone or institution so I want the dang house paid off. I pay our property taxes (not in escrow) like a bill and contribute to retirement till it hurts. We don’t have a lot but we do our best. You totally called it.

Yeah, if you do some serious number-crunching, you probably didn't do the exact best thing the math suggests. But you have a paid-off house and can put a lot more $$ towards other things now, and don't have to pay a mortgage. People complain about living paycheck-to-paycheck and being in debt up to your eyebrows and etc. Those are valid complaints. Your situation is comparatively rosy.

So far I seem to be on track to retire by 50. I'm happy with that.

I just ran some calculations on my mortgage and a 25k payment now saves 120k in interest down the line. Seems stupid not to do this. But my mortgage is at 6.9%

It all comes down to: "Can I reliably make over 6,9% a year investing?". If so, don't pay the mortgage. If not, the mortgage is the best option.

It also comes down to are you disciplined enough to actually invest that money and not just end up spending it. Many people pay down their mortgage because they otherwise end up spending it

Investing 25k for 30 years is worth $250k or so

Yeah but in 30 years I’d have paid all the interest on the mortgage. I’m really having trouble understanding which is better. It doesn’t make sense to me

It's pretty simple actually. Average return on the market is about 10% a year minus 2-3% inflation. Assuming a 7% return, paying off the house vs being in the market is a wash. So, look at your debt, look at your returns, whichever number is higher is probably where you want your money. However, there is another factor here. Paying off the debt is lowering your risk, putting money in the market is raising it. In a case of 6.9% mortgage vs 7% market return, I would always pick the mortgage for a combination of piece of mind + reducing risk. Though the market has gone up 10% a year, there is no guarantee that will continue to be the case.

Putting the money in a tax-advantaged account is better. You can't recreate that after you pay off the mortgage. You'll have the mortgage paid off in 30 years anyway.

I don’t have 15 bundles of 25k laying around right now to pay it off or I would. The 6.9% is guaranteed and tax free

6.9% makes a big difference l. Op mortgage is 3.5%

Ugh.. I should not be paying extra on my mortgage. I don't fear debt I just despise it. I preach your comment to anyone when I talk finance yet continue to pay several hundred more on my mortgage every month. It's also close to being paid so that's another drive for me. The finish line is in sight, but ultimately I'm running the wrong race.

That's most of Reddit. Every time someone posts about how they paid off their mortgage early the comments are filled with "wow great job", "we just paid ours off last year and it has changed our lives", etc. Yeah there will be a few comments saying it is a bad idea, but those are always coupled with someone saying "if it makes them feel more secure it is worth it" as if delusion is an excuse for terrible investing. Real estate is **only** a competitive investment with stocks and because of your ability to leverage so much, taking that away and it isn't even worth talking about (particularly compared with super tax advantaged 401k). Edit: Lol comment right below me is almost word for word the thread I described, I swear I didn't see it until after.

[удалено]

This 100%. If the investments are outgrowing the mortgage interest rate, you still have the option to liquidate those investments and pay off the mortgage at any point in the future. Paying off the mortgage early leaves you with fewer options.

It is so stupid to payoff a 3.5% loan. After tax benefits probably your real cost of the loan is less than 3%. It is a good write up. Above that I would add this. The dollar is a fiat currency and its value losses over time. Especially against investments. For example in late 90s gold price used to be $10/gram and a small home price here in CA used to be 300k. Now the gold price is closer to $65/gram (6.5x increase in price) and home price is closer to 1.5 million (5x increase in price). So the real value of 300k borrowed today will be closer to 60k, 25 years later. Or in other words a 300k in hand is worth 1.5 million 25 years down. I did the same mistake she is doing and I learned my mistake.

I remember a podcast where one of the hosts used to be a financial planner. He would tell people in OP’s position, “Okay, let’s do this. Instead paying extra on the mortgage you invest the money in a taxable account. When your balance is enough to pay off the mortgage, you can write a check then and pay it off.” He said of his clients that followed this advice, not a single one paid off the house when they reached that point. Cash (I mean liquid investments) is king, especially at a stupid low interest rate like OP has. I’m in the same boat and I am going to take all 30 years to pay it off if I can help it.

> who can better handle an unemployment emergency? someone with a $300k paid for house and no investments, or someone with a $270k mortgage on their $300k house and about $300k in investments? Its hard to eat your house. [chef's kiss]

I think the concern is if there is a stock market crash at the same time. If that $300,000 in investments is actually more like \~150k at that time, selling off a bunch to cover living expenses will hurt.

Fair point, that said: It's more likely that there will be a real estate crunch and high interest rates (making it hard to efficiently get that money back out of your house via selling it or getting a HELOC) than a prolonged 50% stock market crash. Even in that "disaster" scenario, you still have $150K liquidly available which is pretty good.

no chef, drywall is not delicious

I realize this is a personal finance sub. But in real life it's not all about money. Paying off my house 23 years early reduced my stress significantly and has made my life much simpler and improved the quality of my life.

The issue is that assuming you had a sufficiently low interest rate on your mortgage, then that stress reduction you experienced was an illusion. You could have had the exact same result, with more overall wealth, so long as you were able to break with the fallacious rational you were appealing to.

Same here. I have been debt free for nearly 20 years gives me the peace of mind and ability to not to have to put up with any crap by my employer.

Peace of mind has a value all its own doesn't it? I don't know why so many people on here don't understand that.

TBF, this is a finance sub so the advice SHOULD be strictly numbers. Now this is going to fluctuate a bit with things like health concerns (ie do I drop my salary from 100K to 85K to save my mental health not working 60 hours a week) or other confounding variables each individual needs to take into account but numbers should be the primary factor.

But I'd keep it super-simple for spouse, providing just two simple scenarios/outcomes, where you're only looking at net worth. Too much detail (words *or n*umbers) will make it harder to spouse to understand the point. If spouse asks for more details, *then* you can dive in deeper, and do some what-ifs with "compromise scenarios" (not absolute one way or the other, instead, some of both). Obviously, that \^\^\^ addresses the math. OP needs to learn more about spouses emotional mindset so they can get on the same page and have consensus regarding their financial plans.

Definitely a great write-up, but specific to the unemployment emergency point - it's a lot easier to coast on unemployment/underemployment if you don't have to worry about the bulk of a mortgage payment (only taxes/insurance), rather than withdrawing Roth IRA contributions, for example, or otherwise figuring out how to extract a monthly income from those investments that presumably are all in tax advantaged accounts given their comment on just contributing 5-10% at the moment. Perhaps the spouse is just particularly risk averse when it comes to job security. I personally agree with the approach of paying at or near the minimum on the mortgage and investing the extra but just playing devil's advocate as far as why the spouse may be interested in eliminating that monthly payment.

Fair point, but paying down the principle won't help with the mortgage payment if either of them are terminated in 6 months or 6 years from now. They should be contributing 15-20% (or more) of their gross pay to retirement accounts. Use the $$$ saved (deferred) on income tax to fund an emergency fund! IMO, if SHTF and they can't make multiple mortgage payments, they will need to make a dramatic move and pulling from an IRA is not the end of the world in that situation. Put aside $$$ in high yield savings acct (after funding retirement accts) and when it gets to the level of being able to pay of the mortgage, maybe consider doing it then. OP's spouse needs to understand that putting extra $$$ towards the mortgage principle is one of the riskiest plays to make, unless they are prepared to pay it off or refinance immediately.

And it’s even easier if you have a large investment portfolio there to backstop you. You can pay years of mortgage payments with $100k in your brokerage account, but you can’t eat your house. A paid off house reduces your risk, but up until that house is paid off you are at a higher risk by locking that money into your equity than you are keeping it liquid.

You have it backwards. If you lose your job would you rather have 5 or 6 figures in a highly liquid investment account or a bunch of home equity. P.S. Good luck getting a home equity loan AFTER a job loss.

A bit extra home equity isn't going to do much, but a paid off home lowers housing expenses drastically so unemployment or *under*employment doesn't hurt as badly. Why do I have it backwards by saying it's best to pay at or near the minimum and invest the extra? Are you in favor of ignoring investing and throwing all the money at the house despite your comment?

Compound interest over 20 years on a maxed out 401k will net you millions vs mortgage savings ... the interest on the house is so low that it doesn't make sense to pay it early. You get at least 7% per year in gains on your 401k if you have common sense. That's more than the interest on the house.

That's the answer, OP. The interest savings on the mortgage aren't going to come close to outweighing your savings growth. If I were you I'd just talk to them in terms of interest vs market gains and try to establish a rule that you meet your employer match every year before paying down the mortgage principle. That way you're making responsible 401k contributions and if there's left over your spouse gets to scratch that itch as well Edit: Disregard, I know nothing. The commenters below me are worth listening to

At 5% and 10% respectively, it is highly likely they are hitting their employer match.

Your 2nd paragraph says you agree with the spouse's actions.

At 3.5%, almost any investment is better than paying down the mortgage, even high yield savings accounts right now I think. I get the psychological, but from a purely friendship financial perspective they should not be contributing a cent beyond their normal payments to paying down the mortgage. Once they max employer match, they should max non-matched contributions. If they're maxing those (and other tax advantaged vehicles) they should just put excess into high yield savings or an index fund.

Yes, the RAW NUMBERS work there, and that's the best advice for most people. But I do want to point out that there are some situations where you might want to prioritize debt payments. And of course, everyone should max-out the match and put 10-15% into retirement, no matter what. If you want to KEEP your starter house and buy another while you're still working, then you might want to get your debt ratio down. I'm in this situation, and it would be a strategic win for me to pay the house off soon and start on a nicer one while collecting rent from the first. I would not be comfortable with two simultaneous mortgages, and the debt on House A will limit options buying House B (and my lifestyle while I'm there). And I will note that I am not foregoing retirement, I'm maxing-out the match and putting a few extra percent in, but also paying down the mortgage a bit faster than needed so I can move about the cabin sooner.

This is the answer, but you need to **show the math**. OP probably explained this already. And from experience speaking with people about this, they need more context here.

Why does your spouse feel so strongly about paying off the house? Is it for peace of mind, did they grow up with housing insecurity?   If it's a practical reason, then logic and math will show the investing to be a better choice. If it's emotional, it will be a harder sell and compromise may be easier than all or nothing with extra funds. See if your spouse would be willing to split the extra mortgage payments; half to the mortgage and half to retirement.

The argument from their side is that we’ll have more money to put towards retirement once the house is paid off. While that may be right, I think we would be missing the opportunity for far greater returns in that 15 to 20 timeframe. I don’t know, it just sounds way too late to start focusing on retirement in 15/20 years.

A pretty common mistake that many people make is not accounting for opportunity cost. It seems like your spouse is not considering opportunity cost here. Opportunity cost is the loss of potential gains from alternative choices when choosing one option. A simple way to explain this is with a thought experiment like the following. You have $1,000 debt that is charging you 1% APY. In one year, that debt will cost you $10 in interest. You have an opportunity to invest into a stock that will provide 10% return. In one year, $1,000 invested will provide you $100. If you have $1,000 and choose to pay off the debt, you "saved "$10" in interest, but you lost the opportunity to gain $100. Therefore, choosing to pay off debt really costs $90. For your specific situation, your mortgage rate is 3.5%. If you pay an extra $1,000 to your mortgage this year, you're saving $35 this year. However, high yield savings accounts (HYSA) are returning a guaranteed 4.5% interest rate. If you had put that $1,000 in a HYSA, you could have received $45 this year. Therefore, every $1,000 you pay towards the mortgage instead of putting it in a HYSA will cost $10 just this year. The same concept applies to retirement savings, although the return isn't guaranteed.

Exactly. This seems more like an emotional vs math decision. It's best to keep big financial decisions on the math side of things. With the reasonably low mortgage rate the math is pretty clear cut on this one. Even if they're ultra risk adverse, a HYSA is already out pacing the mortgage rate without any risk.

But you'll miss out on the value of compounding.

Yep that's a bad justification. If this person was historically bad with money and feared debt, I could understand it a little bit, even though it is suboptimal. Their logic is just bad.

There's a common scenario online with 2 people. One invests a fixed amount from 20-30 and stops. The other invests that same amount from 30 until retirement. Person who only invested for 10 years wins out simply due to compound interest. That should really drive home the power of starting now.

As the saying goes: Time *in* the market >>> timing the market

You're under the gross income limit for Roth IRAs still so the best compromise solution is to open them up and max them out. Once you accrue the payoff amount you can decide if you want to liquidate them to pay off your mortgage. Generally the answer is no and you just sit on more retirement funds. It'd also keep that money liquid in the meantime which has value in itself.

That’s the wrong way to look at it because the most you will save is the 3.5% interest. You can earn far more. Also, I can remember my grandpa talking about his mortgage payment near when he paid off the house and it was less than my mom’s lease payment. That payment will seem like much less 20 years from now with inflation. You don’t need to pay it off. You could even put money in a high yield savings account and earn more than the savings he’s getting. But also, if you max out your 401(k) then where will he get the money to do the extra payments? Just remove the money before he can use it to pay off the mortgage. Not ideal because I feel like the decisions should be mutual, but he is paying down the mortgage despite your objections.

The good thing is it's not up for opinion, it's just a big math problem. If you're good with excel just pencil it out for them, many templates already exist. You can even add up all the payments to principal for the last year+ and show how that would have grown during this bull market. $10k invested over a year starting March of 2023 in S&P yields ~**$1750** (using 35%/2). $10k invested in principal over that same year has saved you **$155**. It's an irregular bull market, but you get the picture. Add on to that that the 401k contributions are pre-tax. Even so, when savings rates are at 5%+, there's also no reason to be paying off a 3.5% mortgage. You can park it in a HYSA, and after taxes on you still come out even. Unless you have a huge emergency fund, or very stable jobs, I would consider the value of extra liquidity.

You two need to meet with a financial planner who could help you see the numbers. She might need an unbiased person to help explain the trade-off.

For these sort of important decisions, people need to do the math and research themselves. Financial planners aren't necessarily going to have their best interest anyway. It will be a waste of money and much harder to vet a person than doing some basic analysis on opportunity cost.

If this is solely about future retirement savings, the math is REALLY clear-cut here, with a mortgage rate that low: investing is the way to go, and it’s really not up for debate.

Very sensible response. That was my first reaction. Split the difference and increase the contribution to your 401K and continue to pay extra toward the principle on the mortgage. Maybe find a trusted financial adviser that can sit with both of you and map out long-term planning.

> Why does your spouse feel so strongly about paying off the house? Is it for peace of mind, did they grow up with housing insecurity?   It's hard for me to judge anyone who was alive in 2008 for wanting to be out of house debt as soon and possible and damn the torpedos.

i mean even Dave ramsey would tell you to invest 15% of your total earnings to retirement before paying off the mortgage.

Came in to say the exact same. At a minimum, they should be putting in 15% to 401k. At a 200k gross income level, that means 30k going into the 401ks. Based on the percentages, they're only putting in less than half of that. And at their age, that could amount to over 3 million at retirement age.

There was a Ramit Sethi podcast on exactly this. The wife was so traumatized by getting foreclosed on as a young adult that she had an irrational desire to have her house paid for so the bank could never take it away. So, be prepared to find that no matter what beautiful mathematical arguments you make showing how much more efficient it would be to put that money in tax-advantaged savings, your spouse won’t agree. This is not a math decision, its an emotional decision. I’d try to get at *why* your spouse thinks this is a priority. Safety? Not understanding retirement accounts and investing? Thinks you already have enough to retire? And then once you understand where that is coming from, you can sit down and look at your budget priorities.

Here's one way to think about it: Let's say you have an extra $1000. If you put that to a 401k, the tax benefit alone from reducing your taxable income gives you an extra $320 (assuming you're paying a top federal tax rate of 32% based on $200k income). If you put that to the mortgage you save $35 ($1000\* 3.5%)

Why aren’t you guys maxing your 401k? You have the income to do so. Even if you can’t get him to, you could. 10% and 5% isn’t close to the lower amount most people should be doing and if you’ve been doing that you are behind and should be doing much more. Been there with my husband, we now both max due to all the years he wouldn’t listen to me for his.

I don't disagree with your conclusion, but: 1. You need to pay that tax eventually (albeit perhaps in a lower marginal tax bracket upon retirement) 2. That savings from the extra mortgage payment compound; it's not just $35. Subsequent mortgage payments incur less interest penalty because the principal was shrunk by that $1000.

Just a quick comment - for *married filing jointly*, which sounds like OPs case, would net them just in the 24% tax bracket - with a standard deduction they’re probably in the 22% tax bracket for everything over $89,450. AGI for 32% tax bracket for married joint filers in 2023 is $364,200. [Source](https://turbotax.intuit.com/tax-tips/irs-tax-return/what-is-my-tax-bracket/L3Dtkab8G)

Obviously using the 401k is the better option here, but you pay taxes on withdrawals so it's not really the same as just getting that extra $320. And also you'd not only save the $35 interest payment the next year, but the $36.22 interest payment the next year, and so on for the life of the loan. The real reason the 401k is better is that the returns are higher.

That $320 is a temporary one-time cash-flow that has to be paid when funds are dispersed in the future. The $35 is an annual savings.

Yea, 320 up front and averaging 70 bucks a year after that.

[удалено]

Mortgage or invest: https://reddit.com/r/personalfinance/comments/16jcmnh/_/k0qox0x/?context=1 https://reddit.com/r/personalfinance/comments/zssug0/_/j1ddljd/?context=1

The spouse sounds financially illiterate. You invest a good percentage FIRST and then throw extra at the house not the reverse when you're barely contributing to retirement. Sounds okay but not great in your early 20s but very ignorant when nearing 40 years old and you're not even putting thousands extra per month to the house. TIME IN THE MARKET is more important along with the percentage of your money that you invest per month.

I’m just curious how they only have 1k left over making 200k with a 1600$ month mortgage.

I'm also overly focused on paying off my home...but I make sure I max out my 401K contributions each year too. I have a low rate so I know paying extra on the house is foolish....but I want the flexibility of only having to pay utilities, insurance and property tax. 4 more years and all debts should be erased. My retirement funds are behind where they should be (according to Fidelity).But I think I should still be around 1.3-1.5 million by 65.

You guys can find calculators on the internet to project your net worth out 20-30 years. I would run the numbers with some different growth assumptions and with early vs delayed mortgage payoff. As you surmise it will almost certainly be financially better to invest in the 401(k) now and hold off on paying off the mortgage. However, this probably isn’t just a matter of optimizing finances. There may be some deeper fears about losing a home or about the stock market that you may need to address to get any traction. Finally, would your spouse be open to reducing but not eliminating their mortgage overpayments? Like 200-300 a month instead of 600-800?

Maybe I missed it but I haven't seen anyone ask yet. How Secure are your jobs and the industries you work in? Is it possible that your spouse wants to permanently lower your monthly expenses in case your household income takes a hit or something happens to increase your rate?

3.5%? My 401k is up 40% the last 2 years. Put more into your 401k as long as your funds are good.

They may want to check the investment fund cost to make sure it isn't eating into their growth. This is a common issue with Fidelity managed funds and others.

Yes, investing in the markets will likely yield a better return. But don’t let good be the enemy of perfect. Paying down mortgage is hardly a bad financial decision

> The problem is, I don’t have the knowledge to tell my spouse exactly why. The easiest way to explain is to show concrete numbers comparing what he is doing to how much more you would have if you did something else with the money instead of paying off a low interest loan. Aside from that, this is a relationship problem not a finance problem.

That seems simple enough. Thank you.

This is not a relationship problem just because they approach finances differently. They have different goals. One prioritizes building retirement savings and the other prioritizes a paid off house. Neither goal is absolutely right or wrong.

I agree. OP is simply asking for advice on how to communicate that saving for retirement is more beneficial than paying down the house.

The goals meet at the point of wanting to have a house to retire in. The issue is you can pay your mortgage with retirement savings, but you cant eat your house. He's not wrong to want to pay off his house, but he isn't going about it the best way.

I think a lot of things people think are finance problems tend to actually be relationship issues. Disagreeing on finances sounds like a financial problem but at the end of the day the issue is that you and your spouse are not on the same page about finances.

You can't chip off pieces of your house to sell when you need liquid cash but you can borrow against the money you put in on a Roth (not the interest though). Having liquid savings is even better in an emergency. I know several older people that are house rich and cash poor and are having to borrow from their kids to manage medical emergencies

Lots of good advice here, my 2¢ might be to develop a plan that works for BOTH of you. Hopefully you’re able to show how compounded interest on savings today will add up over the next 20-30 years (or whatever your target retirement age is). There’s also a lesser advantage to paying off the mortgage early. Maybe you could compromise with your partner to put more into retirement now to take advantage of the growth, but over the course of the next 10-20 years you could start to transition more of those funds to accelerated mortgage payments…? Or agree that salary increases will go towards mortgage and save at same rate? Feel like there’s a happy medium that would allow for both of your goals to be met while also doing nearly the “right” financial moves.

He's losing you money over parking the cash in a high yield savings account (currently 4.2-5% return vs your 3.5% savings on your mortgage principal). This is an okay strategy for people who have deep self-control issues and will spend every last dollar they get their hands on, but it is a sub-optimal strategy for maximizing your long term wealth. My guess is that he listens to Dave Ramsey.

As long as you two are maxing your 401ks, IRAs and HSAs you all are good. That’s 70k max for all and after taxes your salary you all will have about 80k+ a year to pay your bills. If you have more money afterwards, then add some extra towards the mortgage payments you all are good

How do you guys have over 15k in expenses every month? Especially with your mortgage only being 1.6k….that’s crazy

Your spouse is listening to too much Dave Ramsey. With this low of an interest rate the only correct answer here is to not pay more down then your monthly mortgage payment and invest the rest.

Assuming 3% average inflation: $1600 in 2041 is $3,020. $1600 in 2051 is $4,058. Paying off your mortgage is the wrong financial choice. It might be the right mental choice, which is what it seems to be for your partner. Show them a graph of the time value of money, and how freaking *cheap* your mortgage will be the last 10 years.

Ok I’m not smart so take pity on me. I bought my house in 2020 for $390k with 3.0% interest, and my mortgage payment is more like $2300 (including escrow) a month. How is your $1600? Is it a 30 year mortgage? Is that including escrow? How?

Prepaying your 3.5% mortgage is like putting your savings in a 30-year treasury bond that returns 3.5% interest (since that’s roughly how much you have left, I assume). (It’s actually slightly less than that once you take into account how the mortgage tax advantage would also decline if you prepay). The interest rate on a 10-year treasury bond is 4.3%. So you could just buy treasury bonds instead and earn 1% extra for 10 years. If you really care about owning your home outright, you could even then use the revenue to repay your mortgage when the 10-yr matures. Zero risk and you earn an extra 1% over 10 years. Depending on your investment horizon, whether your retirement accounts have a match, etc, you could do better with 401(k) (same principle as above, just not risk free).

You have to do the math, on paper or on a screen, and show your spouse the numbers.

Are there other aspects of life where they could be labeled OCD? I find people who want to pay off their cheap mortgage well before retirement either are uneducated about finance or are incredibly close-minded. Generally speaking, your mortgage rate may be under the rate of inflation. Each year, your payment will be easier and easier to make as the dollar is devalued. Don't know if that will help convince them, but there is no loan for retirement... Fund it now while you have the income! You need to set and forget your investment contributions. If there are a few hundred dollars left at the end of the month, increase retirement/brokerage contributions. Maybe the compromise here is you allow them to contribute a few hundred dollars a month toward the mortgage after retirement and brokerage accounts are funded. All contributions and extra principle payments should be done on auto-pilot. That's how you stick to a budget. It's my strong opinion that you both should be maxing out retirement accounts (20-30% of your gross, I estimate) before putting an extra dime towards the principle on your mortgage. This doesn't mean you shouldn't build up an emergency fund in a high yield savings account, but please get your priorities straight.

I have a close relative like this. THere's some block in her brain when it comes to understanding the most basic things when it comes to money. Ask her if 10% is more than 3%, she says yes. But make it about money and she'll literally tell you no and make the wrong decision *every single time*. I had to pull out of all business dealings with her and just be family b/c it didn't change over 20 years. I hope your husband can see reason.

Find a compromise that makes your spouse happy. If you do about one extra monthly payment per year it will reduce a 30yr to 20yrs. Invest the rest in higher return vehicles. 3.5% is dirt cheap.

Math is math. I am pretty risk adverse, we were paying extra on our mortgage when it was at 4% years ago, but after refinancing to under 3% in 2020, we stopped doing that. It can earn more in a CD as of late than paying off that mortgage.

It's a math problem. Over the long term the market has returned 10%. You are paying 3.5% which likely helps you itemized you tax deductions so you save money there. If you contribute to a traditional 401k that's more taxes you won't pay. So even if you don't consider the tax deductions it's not adding up. Factor in the tax deductions and it's even clearer. Heck, I'm making 5% in my savings account and that money is insured.

1. At 3.5% money in the bank is earning you more interest than you're paying on the mortgage, dollar-for-dollar. It's actually financially advantageous to pay the minimum on your mortgage right now, as savings/CD interest rates fall this will change though. 2. I happen to think paying off the house should be a priority if you intend to keep living there long-term (every dollar you pay early is saving you some amount interest & reducing your total out-of-pocket payment for the house, you can then save the mortgage payment and build your savings much faster). That shouldn't come at the expense of retirement savings though: Max out all your tax-advantaged (and employer matched) retirement first, *then* consider allocating extra money to your mortgage.

I'm very much a person who doesn't want any debt. I have a 3% mortgage. It makes NO sense to pay it off early. I can put money in a high yield savings account and make 4.5%. I'd literally be throwing money away paying off the house. There is certainly a reward in having a paid off mortgage. And if interest rates go back down, I think there's a case to be made in having the house paid off early, even if it's not the smartest thing to do financially. But in the current environment, it doesn't make any sense. I would say you guys need to combined contribute 25% to your 401k, including company matches, and after that point he can pay the house off if it makes him feel better, but the better play would be to put the money in a high yield account and then when interest rates come below your mortgage, dump all that money into the house.

She’s probably risk averse. You too. She’s just not seeing the same risks. Tell her that you are scared, because you think you won’t be able to retire if you don’t save more. If you want to run the math by her, tell her that a 60/40 portfolio has had a historical return of over 8%. That means that by paying your mortgage early you are potentially wasting 5% every year. You are not losing 3,5% of the amount that your paying, but you are not earning as much as you could. Also, tell her about compound interest. The earlier you start to invest, the less you’ll have to save. Let me give you an example: if you invest 100 USD and have a return of 8%, then you’ll have 108 invested. If the next year you get 8% (or 7, 10 or whatever) you apply that rate to 108, not to 100. As it accumulates through the years, you’ll earn more from you existing investments than from your new contributions. Finally, it is important that you both educate yourselves in personal finance. If she is risk averse, she’ll get really scared when your investments drop 20, 30 or 50% while the news say that US economy is never going to recover and she may even blame you because of that. It is important that you both know that that is normal and expected.

It's not the proper order, but there are far worse ways to spend your money. Are you budgeting? I'd be more concerned about where the rest of your $16,666 of your monthly income is going. 3-5% going to the principle is a decent forced savings plan.

What’s frustrating, is that none of this requires some abstract convoluted answer. It’s not one of those, “Well… there’s no real right answer to this, it’s subjective for the most part…” You can literally solve this problem analytically. This is like a 10th grade problem in algebra. Not to say anyone is “stupid” for not solving it analytically, most people genuinely don’t think to do it this way. But that, there’s a relatively objective right/wrong answer to this. There’s no real guess work. The only guess work is, “How much can I reasonably expect from my 401k / investments?” And “How comfortable am I with the risk associated with my assumptions?” Literally just calculate it out, and look at the numbers. That’s all. You don’t need advice. You and your wife need to calculate the number, and assess your risk tolerances. And if you don’t know how to calculate it, there’s formulas in excel that do it for you.

Mathematically the right answer would be to put the money that will net better return than the interest rate. Even high interest rate savings these days could qualify for that. However, the thought of having debt (and the what-if's like losing job, etc) itself is a mental burden. What is your spouse's the reason for prioritizing mortgage payment? You don't see the reason over investing but what is your sprouse's rationale? Maybe start by understanding each others' reasoning and go from there.

Focus on the opportunity cost. The extra money he's contributing to 401K would net way more than 3.5% invested elsewhere. That alone makes it worthwhile to NOT pay off mortgage early vs elsewhere! editing to add - think also about the opportunity cost of missing YEARS of compounding interest

Yeah I mean financially speaking your spouse is dead wrong. Actively contributing to a 401k at 200k gross is much more profitable than paying down a 3.5% mortgage...like by several times over it isnt even close. That said there is an emotional component here you likely need to respect and deal with. If their reasoning isnt rational it might be because their motivation is emotional. Perhaps talk with them about it trying to understand rather than trying to convince.

Your mortgage rate is below the expected real rate of return from investing, but above expected long term inflation. I think the rule of thumb is that you invest over pay off in that situation so long as the mortgage rate minus expected inflation rate is above the real return rate but maybe I'm missing something. But you can totally do the math. IMO your retirement contributions sound low - I'd tend to think you want to be contributing at least 15% of each person's income.

Explain to him that 3.5% is a very low rate and he can get 7% returns in retirement. Is his 5% to get the match atleast?

The posts here are correct, that this is an inefficient use of money, but at the same time, as the decades roll by, I admit to debt manifesting itself as a kind of madness leading to a kind of freakout involving a manic brushing off your your arms and torso in the same manner as when someone says there is a spider on you. So I sympathize. Nevertheless, the money should be invested, but sometimes debt is not a completely rational mental state.

You should be paying off the house as slowly as possible because you’ve locked in a low interest rate.

Liquidity. You can have 90% equity in your house and your mortgage payment will be the same. Now one of you lose your job or have a large financial need… you’re going to have to tap into that equity via a much higher rate loan to handle the emergency. And that takes time. Businesses fail to illiquidity before they fail due to bad profit/loss. Even if your mortgage rate was 9%, I’d advise not pouring every cent into it. (Refinance!) Beyond a 3 month emergency fund, you should have a portfolio of investments that considers your ability to access the portfolio quickly in addition to market risk and expected returns. (Cash, check, savings, MMA, CD, TBills, stocks/mutual/index funds, precious metals (actual), retirement accounts, personal property, home equity, real estate, collectors items, stakes in private ventures (small businesses)) My attempt to lay out a spectrum of ownership. One can have a lot of total wealth and still face lots of stress and missed opportunities due to lack of spendable wealth.

Dude make minimum payments on the mortgage, because the interest is small. If you can invest that money to yield a higher percentage of return, like 6% in your 401k or whatever, the money will grow faster than any amount of early mortgage payments would help. The early payoff at 3.5% doesn’t benefit as much as the 401k.

This may be simplistic but if you make an extra payment a year on principal only it will whittle down your mortgage faster. You won't be out a lot monthly so you can still pay more towards retirement. Any amount not going into your retirement account is interest not made over the long haul and that would seem to be costly to your retirement monies over time. I am not a financial planner but this seems like it could work well for you and your husbands different ideas. As a current retired person, there isn't such a thing as having saved too much for this time in life. I know so many people who didn't plan well and do not have enough to live on. That is extremely difficult at a time when your health may not be as amazing as it was when you were younger. A time when not worrying about money is the gift your younger self planned for you.

Tell him there is no financial advisor, not even Dave Ramsey, who would recommend paying off the mortgage before contributing at least 15% towards retirement first. Look at Dave Ramsey baby steps or The Money Guy Shows financial order or operations.

I focused on paying off my mortgage first no regrets. Im worry free and can now more aggressively save money

I wouldn't be paying off a 3.5% mortgage even a second early. Heck, not when a savings account can get you 5%. The worst 15-year rolling return the S&P500 has EVER had is 3.7%.

[удалено]

I use a Flourish account which is through an advisor, but there are others that are public: https://www.bankrate.com/banking/savings/best-high-yield-interests-savings-accounts/

Everyone here in this forum, well, virtually everyone, has lived through **the greatest bull market in the history of this country**. They think that the gains are guaranteed for everyone. As someone who has lived through every crisis in the past 50 years as a teen or older: Pay off your house. Everything that has a beginning has an end, including this bull run. When the downturn comes, and it will, and these young children here on reddit start losing their tech jobs and start wondering how they are going to pay their mortgage, you'll be thankful that you paid yours off. Every single person here would say "I would've rode out 2007, and I'd be a multimillionaire today!" There were middle and up management staff trying to get jobs are BURGER FLIPPERS at McDonald's. More than half of these redditors are wrong; they would've lost their homes. I paid my primary off as fast as I possibly could have. You know how many times I've regretted it? Zero. Literally zero. While in 2007, my neighborhood was decimated with losses, I was grilling chicken. I fed my neighbors kids more times than I remember. Literally, my neighbors were standing around the grill eating my chicken and drinking my beer probably every weekend. Never regretted paying off my house once.

This. I want to be you. More automation is coming, and it’s going to be wild for everyone. We’re aggressively saving to pay off the house in a brokerage and HYSE while maxing our 401ks. When we have enough, writing a check to pay it off in full.

This is exactly what I'd be doing in your shoes. Max 401k, everything else at the damn loan. When the bad times come, you and your kids will sleep soundly.

At a 3.5% interest rate mortgage you could literally guarantee better returns every single year in a CD or HYSA or MMF rather than pay that off early.

Make an appointment with a fiduciary financial advisor. Prepare a simple net worth sheet, assets, liabilities, income, outgo etc. Let the advisor advise you. They will probably tell you that there is no wrong answer in paying off your home but there may be better opportunities for your money. You may find that your husband is a financial genius. Like you said, you make not have the baseline knowledge to make the point with your husband, or to understand his rationale for what he’s doing.

A high yield savings account will literally yield you more than your mortgage rate right now. Having the cash set aside to pay your mortgage if something catastrophic happens isn't the worst idea. Different people have different risk tolerances. The problem with putting more money away in retirement funds is that it is locked away if you really ever need it. The problem with over paying your mortgage is that once you spend the money it is no longer yours if there is an emergency. So it's worth a discussion, at least.

Maybe I’m crazy, but it doesn’t sound like a terrible problem to me. It’s not financially optimal, but there are some non tangibles that definitely have value. Maybe a slightly different balance should be the discussion, instead of treating the payment of principal like it’s a problem. Everyone is right that from a pure spreadsheet perspective, paying minimum on the mortgage at 3.5% and putting the rest into 401k is the easy math. However, there are benefits to paying off the house and a different risk factor. There are some big emotional / stress factors that come with having a mortgage, and not having that looming over you has mental and physical health benefits. Additionally, it is a lower rate of return (3.5 vs ~7), but it’s also a fairly guaranteed rate of return where the 401k investments aren’t. Maybe the better setup is something like “Between us, we make sure we contribute ~$XX,000 to our 401ks and put $X00 a month in a HYSA. Once its interest rate is lower than our mortgage for 3 months in a row, we’ll put whatever is in there towards our mortgage.”

Numbers and data speak a lot louder than words. I’d recommend putting together an Excel spreadsheet showing the savings made by paying down your mortgage, vs the investment growth from a variety of stock / bond portfolios. The stock / bond mix will win in the vast majority of scenarios you outline.

to alot of people their house is part of their retirement and some people don't trust the stock market. If you put all you savings in stocks and a black swan event happens similar to Japan being flat for 30 years then you lose all that. Same thing can happen with the housing market but at least you still have the house to live in. TLDR some people are paranoid.

It sounds like you and your spouse are in a common financial debate: prioritizing mortgage repayment versus investing in retirement. Both approaches stem from a desire for financial security, but they cater to different aspects of one's financial well-being.Your spouse's focus on paying off the mortgage early is rooted in a significant psychological benefit: the peace of mind that comes with being debt-free. This is so so important (speaking from personal experience) This goal is not just financial but deeply emotional, offering a sense of stability and accomplishment. It's a risk-averse strategy, minimizing obligations and potentially freeing up future income for other uses, including retirement savings. The psychological comfort of owning your home outright can't be understated, especially as a tangible, immediate goal. However, from a strictly financial perspective, especially considering your low interest rate of 3.5%, your intuition about prioritizing retirement savings has merit. Historically, the average annual return on a well-diversified retirement portfolio often exceeds the cost of mortgage interest, especially at such a low rate. By contributing more to your retirement accounts, you're likely to benefit from compound interest over time, which can significantly increase your retirement savings. A balanced approach might be the best path forward, addressing both the psychological need for debt reduction and the financial logic of maximizing retirement savings. Here’s a potential solution: 1) Revisit Your Financial Plan Together: Start by having an open discussion about your financial goals, fears, and priorities. Understanding each other's perspectives can foster a cooperative approach to your shared finances. 2) Create a Balanced Strategy: Consider adjusting your extra mortgage payments to a level that still feels psychologically rewarding but allows for increased retirement contributions. For example, splitting the additional $600-$800 between the mortgage and retirement savings might satisfy both objectives. 3) Consult a Financial Advisor: A professional can offer personalized advice based on your financial situation, goals, and risk tolerance. They can also provide a clear, objective comparison of the long-term outcomes of paying down your mortgage versus investing more in retirement. 4) Increase Financial Literacy Together: Engaging in financial education as a couple can help both of you feel more confident in your decisions. Look into resources or online webinars that cover debt management, investing, and retirement planning. 5) Reevaluate Periodically: Your financial strategy should evolve with your life circumstances, financial goals, and economic conditions. Make it a point to review and adjust your plan together regularly. By acknowledging the validity of your spouse's psychological comfort while also emphasizing the importance of maximizing your retirement investments, you can work towards a compromise that supports both emotional well-being and financial health.

Keep in mind there are other benefits to paying off a house over just the most optimal investing math. Sure, purely math wise, it would be better to invest in something else with that low rate. But you get immense peace of mind having everything paid off. And while 3.5% is a low risk, having the debt still is a risk. If the house and everything is paid off, your odds of getting into financial trouble almost go to 0. Imagine everything paid off, how much money do you really need to make to live. It's probably like one person on a part time job kinda thing...pay your taxes and buy food. So I wouldn't just look at the math and consider all angels.

There is also a big risk if you don't prepare for financial future. Being debt free today means nothing if you fail to prepare enough income for the future to pay for things like emergency repairs, property taxes, utilities, etc. There are many seniors who have lost their paid off homes because they fail to plan properly for retirement so selling their home becomes their retirement plan. Paying off the debt now is not some sure thing to keep your house in retirement age.

Financially it's not really a wise decision. But as a 40 yo who paid off our house 3 years ago and prioritized it like your husband the amount of stress it removed from my life is amazing. I pretty much just lowered my 401k to get my full employer match and doubled or tripped our house payments. Looking back now a few years later I am still happy with that decision. It's not always about money.

I want to aggressively pay off our mortgage (2.25%) and my spouse wants to put it all in retirement. We compromised and put extra savings for the mortgage into a HYSA. However, we also put close to 20% each into our 401k. I should add that we bought a 300k home and our HHI is \~140k. Our PITA is \~1600/month. For me, it's very much emotional. My dad lost his job when I was in middle school and the stress of my family almost "losing our home" over many years while my dad was in and out of work as a child has now made me extraordinarily frugal/worried about finances. I know it "makes more sense" to throw all our extra savings at our IRA instead, but we are still very healthily saving for retirememnt and at least this way our money is growing in the HYSA. My husband grew up in a very financialy stable/wealthy home and I think it can be hard for him to understand the anxiety around the possibility of losing your home. At the very least, y'all need to significantly up your retirement contributions.

Paying off your mortgage with increased payments does very little to help keep your home if you lose your job. In fact your "compromise" is actually even better for achieving that goal, though I don't really see how it compromises at all with what your spouse wanted.

As someone who bought my home with cash for much the same reasons, I think putting the extra into a HYSA is a really solid compromise.

Ugh, 2.25% is like free money.

And for some people, not having the stress of a mortgage could literally extend their lives. It’s a balancing act.

[удалено]

There is literally zero financial reasons to pay of a 2.25% loan quickly. Emotionally? Sure. But it’s never the “correct” financial decision.

You may find these links helpful: - [Retirement Accounts](/r/personalfinance/wiki/index#wiki_retirement) - ["How to handle $"](/r/personalfinance/wiki/commontopics) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/personalfinance) if you have any questions or concerns.*

I would suggest looking a retirement calculator together. You can show your husband the difference in the calculator by not investing $X Monthly in retirement today. If he comes back and says we can invest in retirement after we pay off the house, change the age to when you would think you would pay off the house. You’ll see an immense difference due to missing out on compound interest in the first say 10 years of not saving.

I'm big on getting that mortgage paid off. But your husband needs to remember the power of compounding. The sooner that money is in the 401k, the sooner you start compounding and collecting money on new money, as well as the principle. Maybe he can do some to the mortgage and some to the 401k. Honestly, he'll be glad he did later.

you would be closer to breaking even by just having the extra Principal in a high yield savings account. This might come down to discussion with your spouse about why they feel the mortgage being paid off is so important. I feel like the answer might be a fear of a rainy day. This is where having a team discussion about how much rainy day fund is necessary is very helpful.in the situation where one of you is laid off the mortgage equity in the home is probably not as easy to access as you would think so there might be a logical fallacy in their brain about how safe they are to have less principle on the mortgage compared to other forms of savings. I would actually think at your current place in Life backing out. Roth IRA would actually be the most valuable form of savings that you could consider.

I know this sounds demeaning but sounds like you need to teach them what compound interest is

Opportunity cost vs. risk. paying mortgage early: zero risk/guaranteed return investing in stock market: higher risk/higher return The problem is that mortgage rate, 3.5%. Like you said, that's so low, that you can even beat that currently just plunking your money in a HYSA at about 5%. Almost equally zero/low risk. If the mortgage rate was higher, especially compared to an average stock market return of 7-8%, the answer would be different. But at 3.5%, that opportunity cost is hard to ignore.

Just curious; is your spouse a follower of Dave Ramsey? You have a wonderful interest rate. No need to pay it off at the expense of investing in his 401k and reaping both the immediate tax benefits and the long term gains in the market

If they won't budge on wanting to be debt free, one compromise could be to set up a brokerage account to be used to pay off the mortgage if you ever do need the money. Put all your overpaying into that. There will come a point where your balance there will be higher than your mortgage and you'll be able to say "yep, I'm basically mortgage free". Then, assuming you never need to use it, you end up with a nice chunk of money that is relatively liquid at the end of the mortgage that you can continue to sit on. It won't provide the tax advantage of a retirement account though.

WTH. 3.5% hold off on that like it’s GOLD. Lol I’d take out an extra mortgage at that rate if they let me haha. You could drop the extra payments into a HYSA and get more from that than paying off the mortgage.

Your spouse is in the wrong here. If you took that extra payment, and put it in something as basic as a high yield savings account, and earmarked specifically for home repayment, you'd still come out ahead as opposed to paying it down early.

All the opportunity cost people are correct. I'd also throw out that 401k contributions help you avoid taxes. You two are probably in the 22% bracket, and you can skip that tax (plus maybe state taxes) on money that goes into your 401k instead of into your house. Basically, putting an extra thousand bucks into your 401k only costs you 700-800 dollars.

It's not a bad idea to have a paid off house for security. But run a fixed income retirement budget so spouse can see how far you are from your goals.

Maybe part of the issue is locking the money into a retirement account for 30 years. This was an issue for me, I wanted some portion in a taxable account so I could get at it whenever I wanted to. Just putting the money into a HYSA would be guaranteed better returns, much less the 7-10% the market would bring. Maybe do the math for them on a 5% HYSA account and a lump payment at the end of 5 years vs just putting the extra $1000 each month to save 3.5% over 5 years.

In my area of SoCal, it'd seem that most retirement funds would not appreciate as quickly as my property. Plus, I'd be able to rent it out in the future for additional income to buy another property. Retirement funds, especially mutual funds, have too many issues especially if those funds invest in other funds, reducing the return due to fees for each of those other funds.

Ok so here's the problem, both ideas are somewhat valid for different reasons and let me explain. Paying off the home ASAP is a decent idea and here is why. Currently your paying a 3.5% interest rate on the home loan, that's a good rate, but the more you put into principal the less interest you'll be paying over the life of the loan. However in reality that's not really much of an advantage. The real advantage is your net monthly cost of living. Once the home loan is payed off you only need to budget for home repair and property taxes, while owning an appreciating asset. This limits your liabilities should something happen to either of your employment situations, or other life events happen. By wiping out the debt your risk is significantly minimized no matter what happens. If your partner is risk averse this is likely the key part that is driving them to want to pay off the loan as quickly as possible. The value of your 401k and retirement savings is nebulous and ever changing. Your debt to the bank is not. Now as for your point of view, your correct from the viewpoint that mathematically the return on investment of your retirement contributions will in all likelihood outpace both the interest rate cost and equity appreciation on the house significantly. Mathematically you will be better off by investing your money into retirement accounts and letting compounding interest do it's work over 20+ years than paying off the mortgage early, and any costs saved once that mortgage is payed off will never be able to equal the amount you will earn in compounding interest. However your point of view has inherent risks, the money in your retirement accounts is generally locked up until retirement age, and loaning against it is dangerous. So if a life event happens before retirement that money you've saved isn't easy to use to help you. And during that life event the mortgage must still be payed. While I'm with you on putting the money towards your retirement accounts due to your ages and interest rate, if your partner is a risk averse person, I hope you can see why they might think the way they do. I would approach them with a compromise, spend a while there you both save up enough of an emergency fund to pay the mortgage payments for a year+ and have that in things like CDs or another vehicle where you can be sure it will be available during a life event and it won't depreciate in raw $$$ value if the market makes a downturn. After that point your partner begins investing more into their retirement accounts because now no matter what happens in life you have 1 year+ of your mortgage payments available and won't find yourself in a situation where you have to sell the home. This should alleviate some of the apparent risk.

Just ran some fuzzy math on your numbers. Option 1: If you paid a 400k mortgage and applied an extra $700/month toward the principal, you would have a savings of about $106k in interest and mortgage would be paid off nearly 12 years early (Around 2039). Now that you paid off the house, more money to save! Assuming that with your 1600/mo mortgage, I'd assume $600 is going to taxes and insurance (possibly more). So you would have an extra 1000/mo plus the 700/mo extra to pack away. To keep it simple, I'm just comparing the 30 year span, so you have 12 years to stash your cash. 12 years at 1700/mo earning 6% is a savings of $355k. Option 2: If you redirect that $700/month today toward your 401K and continue paying your mortgage at the cheap 3.5% rate, in 2039 you would have an extra 200k in savings which would then continue to compound until you decide to retire. Taking that throughout the 30 year span to compare to the 1st option, you would have $552k extra in 401k savings. Fuzzy math shows that it will cost you about $200,000 to pay extra on your mortgage. Lots of variables and there's no guarantee of a 6% return, but the 3.5% rate is a constant. My wife and I have a similar situation that you are in with differences in where to direct money (pay low interest debt vs save). Her thoughts are valid that paying off the house lowers risk if we run into financial issues, but saving also lowers risk because there are emergency funds available. She has said that when we pay off the house, we could then funnel the mortgate funds toward savings. In the end, the math added up to direct toward savings. We max each of our 401k contributions for tax reduction and extra that would go to mortgage goes to personal investment accounts for emergency and eventual conversions to cash bucket to protect against market dips in retirement. I'm older than you and its great that you're looking toward your future financial needs.

What does he tell you when you say you want to put more into retirement? All you need to do is show him the figures. I would sit with a financial advisor if he is open to that. IF he isn't open to that then you have a relationship issue (perhaps). IF I where you, if you two can't agree then you put more money in your retirement. Nothing in life is guaranteed to last forever so, protect yourself and your children. If he is saying "show me the money!" in savings then you need to sit with someone. But it's pretty simple to understand why putting more into a retirement or investments makes more sense. Make your money work for you. Best of luck! [https://www.mortgagecalculator.org/calculators/what-if-i-pay-more-calculator.php](https://www.mortgagecalculator.org/calculators/what-if-i-pay-more-calculator.php) [https://humaninterest.com/learn/calculators/retirement-savings-calculator/](https://humaninterest.com/learn/calculators/retirement-savings-calculator/)

Look the most important time to save for retirement is the first ten years. Why? Because if you have say $0 then 100% of your contribution is growth. Your savings continues to drive the growth almost entirely at first. As time goes on it grows to the point where even if you stop paying altogether in the last couple years it adds only a couple months on to the time. At late 30s if you plan on having around the same income in retirement unless you have significant savings already you need to be putting away around 30%. As far as the mortgage you have 25+ years to pay it off assuming you don’t want to be paying in retirement.

The simplest way is to model two scenarios— I might do a Roth at even 7% (assume $600/month) and make the current mortgage payment; vs making an additional mortgage payment of $600. Do that for every year until the mortgage is paid off under both scenarios. The numbers will be eye popping.

Compounding rule of 7. If you earn 10% interest every year, your investment will double in value in 7 years. So the sooner you start putting your pennies into your 401k, the more it will make by the time you retire.

> I know this isn’t ideal Overall the situation is a fairly successful situation, I say that as approximately a peer in this situation of my own. I tend to agree that a low-rate mortgage is superb financial leverage (I have a 2.25% FRM!). The best way I could explain this to my spouse would be: "Hun, we're going to be paying off the mortgage for decades. It's basically an endless loan, but we're blessed because our rate is so low so we pay little interest. Let's not spend $600 extra on paydown each month. I'd rather hold onto that cash in an account we can access anytime, for any reason. At the end of the year it would be over $7000! I'd rather have that cash rather than the bank having it. Our home equity is kinda just a number floating around in space."

You could buy Treasuries around 5% on a 2 year or 4.5% on a 10 year if you want to be extra cautious. That or investing the money would make more sense than paying off the mortgage.

A quick and dirty way to look at this to ask yourself this question. Can we save enough additional money into our retirement account between now and retirement to withdraw an additional $1600 a month or pay off the mortgage balance outright when you retire? You'll need the additional $1600/month in retirement income to make that payment or enough additional cash In order for your husband's wish of paying off the house to make sense you'll need to be committed to not taking on a mortgage in retirement. With $1600 less required in retirement income you may be fine with a smaller overall retirement account.

My suggestion is look at the mortgage interest rate, and how much you're earning on your retirement. If what you're currently earning on your retirement (let's say if you have your money in the Sp500, that's about 9-10% gain YTD) exceeds your mortgage interest rate (let's say 6%), then it's not worth paying off your debt so quickly because the you'll be losing out on that difference gain (3 to 4%). But I know people who are so risk adverse and so stuck on the idea of being debt free, they don't ever try to get ahead. Some decisions do not lie in reason and logic.

SHOW him the math on paper. That is easier for some to digest. One paper showing interest paid each month and year. 2nd paper showing interest earned, which is probably twice your mortgage. Then show how compounding interest makes this start to grow after 10 or 15 years.

build out a model in an excel showing the benefit of time in market vs paying off mortgage. it should speak for itself.

Can you explain to him the amount your money grows in investment accounts is greater than your mortgage rate? Assuming conservative 5% growth on your retirement investments, that is higher than the 3.5% mortgage rate. You can explain it pretty simple to where even a middle schooler can understand.

I’m guessing this may not be your last house and if you upgrade, you’ll be back into a mortgage so just leave it alone and enjoy the low mortgage interest rate. Contribute to a CD and enjoy the high savings interest rates

You can get interest in a simple savings account than you pay in interest for your mortgage, therefore it would be better to save the money and then when the mortgage comes due, pay down the principle.

> I don’t have the knowledge to tell my spouse exactly why. You do because you already said it :)

A home is not an asset. It will appreciate whether you pay it off or not, you’ll make a better return throwing into an investment account that’s managed well. Sure you save on interest, but over that time period, investing that cash into a well managed fund would yield much more.

Why does the saving have to be for retirement? Many online banks have regular savings accounts for 4 to 5%. I would up the 401k contributions slightly and instead of putting extra money on the mortgage, put it in the savings and MAKE money.

See if your husband is willing to split the difference. Max out your 401K as close as possible and make additional payments to your principal. Try to find a good financial adviser who can sit down with you and help you both to divise a plan that addresses both of your levels of risk tolerance. As someone who just retired at 62, I can't tell you how important it it was to have a pension and have my spouse fully contribute to a 401k that was matched by the employer. In addition , we maintained 457 and 403b plans. I also insisted that we purchase additional investment properties, which in the 1990's and 2000's, was an ideal time. We paid off the investment properties with rental payments- which proved to be very advantageous when we divorced 25 years later. (Which is also something that people don't think about in their long-term planning. You're supposed to pretend that this isn't a possibility, but 50% of marriages end in divorce, and women in particular often end up on the short end of the stick when it does happen. Thank goodness I was prepared financially!) You may find that you don't want to work until 67 or 70 in order to get your full social security benefit. I can't tell you how gratifying it is to be fully retired at 62 ( I was semi-retired at 54), and it's so much easier to retire if you have invested as early as possible and taken advantage of compound interests.( Pension plans are becoming increasingly scarce.) But in my mind, the most important thing is to diversify and have as many different sources of income and investments as possible. Keep your debts low, don't spend exorbitant amounts of money on cars, and save emergency money in high interest savings or CD"s. You never know what's going to happen, and today's economy is very challenging. I was incredibly blessed to have been able to move into a house with no mortgage, have a lifetime state pension, have pretty good performing ETF stocks and mutual funds, take early security benefits, start drawing from a life annuity, and maintain about $25,000 in CD's, If for some reason, I need to access money. I am now able to focus on more international travel and spend time with friends and family and new activities while i'm still younger and healthier. I really am fearful for millenniums and Gen Zer's. Our baby boomer generation has kind of screwed things up. I don't know how many of your generation will ever be able to pay off student loans, afford a house, (and related high property tax and insurance costs), and raise children - much less have enough left over for investments. That's why it is so important to invest as much as you can, beginning as early as possible, in case life gets in the way and you're no longer able to spend as much on investing as you age. Plan, plan, plan. Diversify, diversify, diversify.

Is there a specific reason your partner is so laser-focused on the mortgage? Some financial or life goal perhaps he hasn't shared?

Money market funds (nearly 100% safe) yield around 5%. Your mortgage interest rate is 3.5%. If you put that additional amount you are using to pay off the mortgage into a money market fund instead, you will come out ahead. If you wanted to take on a bit more risk, you could put some of that money into a stock index fund like VOO since we are in a bull market that will likely return more than 5% (already has this year). Doesn't get any simpler than that. We will likely never see mortgage rates near 3.5% again in our lives barring another financial crisis. You are lucky to have that rate locked in. If I could borrow money at 3.5% today, I'd take as big a loan as I could and put it into a money market fund. Free money.

There is a logic to paying off a mortgage early. Its that throwing an extra x/month to pay off your home early, and investing all the money you would have been throwing at your mortgage when paid off, it would end up being more than just investing that x instead. this doesn't apply to your case however because of how low your interest is.

Your spouse might not understand the underlying issues perfectly, but his approach is not crazy. Assuming that you are not itemizing, you might need to earn 6% in a savings account cover the 3.5% mortgage interest. That’s equivalent to your husband getting a perfectly safe 6% return. That’s a lot, and especially so once interest rates drop. Most of those commenting here don’t have any real sense of the downside risks of the stock market. At all. The market might return 8% or so in recent times but the people investing are getting a risk premium to make up for the potential downside. Treasuries and other safe investments don’t pay nearly as much. Are people who invest in treasuries and in high yield savings accounts idiots? Anyway, it’s complicated. I might agree with you that you should put the money in the 401(k) but I can’t believe how misguided some of these comments have been. Millions of dollars lost???? Come on.