Simple trade

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Batousai
Posts: 47
Joined: Mon Jul 30, 2012 11:21 am

Simple trade

Post by Batousai » Tue Feb 16, 2016 10:44 pm

I'm looking to put away around 15K pretax this year. My investment choices come down to a SARSEP with vanguard investment choices (at 75% stocks/25% bonds) or paydown of principle on my mortgage which is 3% APR on a 5/5 ARM that will adjust in about 18 months. I do not itemize deductions (I actually do, but I'm only about 100$ over the breakeven point) so there is no effective tax benefit for me from the mortgage. I can easily handle the cash flow of a worst case mortgage ARM adjustment. Given all of this, my estimation is that I'm coming out about 1% ahead by putting the cash into the SARSEP rather than into the mortgage. Is that correct? if not, what's the real expected return (long term, not short term, don't give a crap about money now, looking 30+ year money) difference and is the SARSEP the right move?

Thanks in advanced.

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FiveK
Posts: 3849
Joined: Sun Mar 16, 2014 2:43 pm

Re: Simple trade

Post by FiveK » Wed Feb 17, 2016 12:19 am

Your estimation seems not unreasonable.

Plenty of discussion in this forum and the world at large about what returns to expect. In short, nobody knows.

For historical data (that may or may not be predictive), see http://dqydj.net/investments-and-returns/ for one perspective.

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