Quote:
Originally Posted by maat55
Here's two things to think about.
One: Will your MMF earn more than the interest rate on your home?
Two: Would you borrow on your house to invest money in the MMF?
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Just because I invest instead of paying off my house early does not mean I would borrow money to invest once my house is paid off.
If A implies B, that does not mean B implis A. (Basic Logic).
Meaning that borrowing from house to invest in MMA is NOT the same thing and setting aside extra cash in MMA while paying down mortgage.
It's not the same to me anyways, here is why. It is about a financial plan which has a stated goal and timeline to complete goals with most efficient use of monies available. My goal is to retire when I am 53 (kids start college that year). I have a check list for retirement at 53.
1) Must have 25X expenses invested in various accounts. This is toughest part of that goal, it takes first priority when looking at any money and cost/benefit analysis.
2) Must have a plan for mortgage payoff. Our mortgage would be in year 20 of a 30 year payment schedule. There is more than one way to solve this problem (extra payments to pay off, taxable account to invest extra payments, combination of both).
3) Must have health care accounted for.
If 1) is not completed, then no need to do 2) at age 53. So if I went with a plan which paid off mortgage sooner (say age 48), but fell short of the 25X goal at 53, that does not work.
So I do the following
Invest aggressively to get 25X. Invest moderately to have a fund to pay off mortgage. It might turn out that 55 is a better age because 2 more years of compounding in both accounts gave enough to meet goal. It might turn out I hit 25X earlier in life (maybe I reach that goal in 10 years), in which case I would then reduce my risk and start paying off the mortgage sooner (instead of investing the difference).
Those are my big 3 issues for early retirement. Just because I invest to pay off my house early does not mean I would borrow money once my house is paid off.