Should we pay off our mortgage?

[disneysteve]

Our financial situation has changed quite a bit over the past couple of years. My income is up, I now have a 401k, and we are no longer eligible to contribute to our Roths. Also, with our daughter now finished college, our expenses have dropped considerably.

I will be maxing the 401k this year. We had always maxed the Roths but can't do that anymore. So I need to decide where to invest about another 12-15K/year.

I'm considering paying off the mortgage by paying an extra $1,000/month. If I do that, it will be paid off in about 16 months, and probably less because when the balance gets low enough, I know I will just want to send in one big payment and get rid of it, but no more than 16 months.

The rate is 4% which isn't a bad guaranteed return. Sure I could probably earn more in the market, but we could also finally see the end of the bull market and I could lose 30-40% instead. The appeal of the guaranteed 4% and being mortgage-free is significant at this point.

Does that make sense? I know there is also the backdoor Roth available, though honestly I don't know exactly how that works. It's also possible that we could manage to do both. What do you all think?

[corn18]

Do you have a lot of tIRA savings? If so, the backdoor Roth will not be smart. But a you could roll your entire tIRA savings into your 401k and that would eliminate the pro rata rule.

That being said, I would just pay off the mortgage and be done with it.

[Jluke]

Pay it off this week.

Why drag it out?

PS time to update your second bullet in the signature line.

[scfr]

Paying it off sounds like a great idea.

Then prepare to pay any bills that are currently escrowed directly (property tax, homeowner's insurance). Make sure you get the bills, not the mortgage company.

And speaking of homeowner's insurance, once you are in control and get to decide the amount of coverage and not the mortgage company, study up and decide if the coverage is appropriate/necessary. You may decide you want to raise the deductible.

I've never for a moment regretted paying off my mortgage early.

[kork13]

Payoff the mortgage ASAP. Knock that sucker out... I'm aiming for the same thing right now, and greatly look forward to it.

If you don't have any tIRAs, definitely do the backdoor Roth IRAs every year. In any case, ask your tax-man brother (cousin? uncle?) how the process works, and what limitations you might run into. I personally don't understand the pro-rata rule, but if it's a factor, all him to explain what it means for your situation.

At this point, your prime objective is to build wealth. Not having a mortgage (or any other debts) and packing as much into tax advantaged accounts as possible (btw.... Is an HSA available to you?) will be your best strategy for building your wealth in the years before you hang up your stethoscope.

[Keshet]

We paid off our mortgage about 2 yrs ago and have not regretted it.









At all!

[disneysteve]

Thanks everyone. Sounds like my plan is a good one.

We have to make one more payment on the HELOC which I'll do in July. After that is paid off, I'll move on to the mortgage. That will have us paid off in October 2019 at the latest.

I also just upped my 401k contribution from 11% to 13% because I wasn't quite going to be maxed out if I left it at 11.

We do both have traditional IRAs as well as a couple of rollover IRAs. I'll still explore the backdoor Roth though just to see what it's all about.

[Jluke]

I also just upped my 401k contribution from 11% to 13% because I wasn't quite going to be maxed out if I left it at 11.

18,500? or 24,500 if over 50?

you don't have to answer; just wanted to be sure you are targeting your true max available.

also check to see if there are spillover elections within your 401k. you will probably want to turn them off (have we had this specific discussion before? deja vu).

[disneysteve]

18,500? or 24,500 if over 50?

you don't have to answer; just wanted to be sure you are targeting your true max available.

also check to see if there are spillover elections within your 401k. you will probably want to turn them off (have we had this specific discussion before? deja vu).

24.5K

No spillover. When I hit the max, they stop taking money out. I did check on that.

[Like2Plan]

We do both have traditional IRAs as well as a couple of rollover IRAs. I'll still explore the backdoor Roth though just to see what it's all about.

Your rollover IRAs and tIRAs would have to be dealt with before you do the conversions, but here is a link that goes into excruciating detail on the topic.

https://thefinancebuff.com/the-backdoor-roth-ira-a-complete-how-to.html

If you do decide to go ahead with it, it is a good idea to discuss this with your CPA. One key part of this is file a form 8606. (This form is how you track the basis for the nondeductible IRA)

[PierceFerdy]

As others have suggested, kick that mortage to the curb. And congrats on that achievement, too! Hopefully that'll be me one day, too

[LivingAlmostLarge]

let it be gone. come here and burn it online!