A thank you to the “pay down the mortgage” folks...

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BostonButterfly
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A thank you to the “pay down the mortgage” folks...

Post by BostonButterfly »

About four years ago, spouse and I purchased what will likely be our forever home. We took a 15 year mortgage with a 2.625% rate. Spouse and I were on the same page that our goal was to pay the mortgage off early. We differed, though, on how to achieve that goal. I am the Boglehead forum reader, and felt strongly about paying extra principal on the mortgage monthly. Spouse tends to be much more of a risk taker, and wanted to instead invest the monthly extra principal and pay off the mortgage later with the much bigger pot of money down the road. “It’s a no brainer at 2.625%.....anyone can make more of a return than that!” My response was always “things are great......until they’re not!” I was not willing to risk failing to achieve our goal of paying off the mortgage ASAP by taking risk in the equity market. Unfortunately, the few people we did discuss this with all thought I was nuts, given the low interest rate. Fortunately, though, spouse and I agreed to disagree. I felt more strongly in my position, so we agreed that we would make monthly payments of extra principal. We now continue to be on track to achieve our goal in six years. I didn’t have to endure a crushing blow to the pot of money had we gone the other route of investing those extra principal payments. I didn’t have to deal with the stress of trying to decide to let that pot ride through the downturn, or sell at a loss.

Fortunately, both of our jobs are secure in this current environment. I am not counting my chickens before they hatch, but we intend to keep trudging along toward our goal of being mortgage free. Given what is happening in the world right now, and whatever economic ramifications that come of it, I feel even stronger about being mortgage free. I so look forward to that peace of mind! Until then, I need to focus on staying healthy, staying employed, and staying the course.

So thank you to all the folks who espouse the “pay off the mortgage” mantra! I listened, and continue to listen. And because of that, our goal continues to remain on track.

THANK YOU!
poker27
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Re: A thank you to the “pay down the mortgage” folks...

Post by poker27 »

I recently was on the fence about liquidating by taxable bonds, and some employer stock to pay off my 2.875% mortgage. My employer stock has been cut in half (oops), however even with the declines value of bonds, I’m happy I did not.

I feel much more comfortable having some liquid bonds in my taxable at this time, then I would having a paid off house. Just my .02
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BostonButterfly
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Re: A thank you to the “pay down the mortgage” folks...

Post by BostonButterfly »

I should add....this did not come at the expense of an emergency fund. We have quite a bit set aside for that. Enough so that, for now, I still sleep well. If things change for us financially, obviously, we will stop the extra mortgage payments.
MotoTrojan
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Re: A thank you to the “pay down the mortgage” folks...

Post by MotoTrojan »

If I were your spouse I would suddenly "feel more strongly" and insist on plowing that extra cash into the market. I think your spouse is right but there are several paths to Dublin.
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BostonButterfly
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Re: A thank you to the “pay down the mortgage” folks...

Post by BostonButterfly »

MotoTrojan wrote: Sat Mar 21, 2020 3:04 pm If I were your spouse I would suddenly "feel more strongly" and insist on plowing that extra cash into the market. I think your spouse is right but there are several paths to Dublin.
Been thinking about that. But I come back to the fact that I don’t know what the future holds. How quickly will the market rebound? How long will it take? How much further down will we go beforehand? I have no idea. No one does. At this point, the desire for peace of mind outweighs the desire to gamble on making more money in the market. I suppose I won’t know which path was the most advantageous until I reach the end......
Last edited by BostonButterfly on Sat Mar 21, 2020 3:20 pm, edited 1 time in total.
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willthrill81
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Re: A thank you to the “pay down the mortgage” folks...

Post by willthrill81 »

I'm very content with our decision to accelerate paying off our mortgage, which we did a few weeks ago. The guaranteed return turned out to be quite good, and even if I were to lose my job, which is very unlikely, we could meet all of our essential spending needs from unemployment benefits alone. If I remain employed, we'll be able to triple our retirement account contributions by May, which will hopefully roughly coincide with the market recovering. If it does, the current market downturn is likely to work out in our favor.

Many say that cash is king. If that's true, then cash flow is the queen. :D
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
The Broz
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Re: A thank you to the “pay down the mortgage” folks...

Post by The Broz »

I think you are absolutely right to want to pay off the house as early as possible. Since you still have some time to go, it is probably not the end of the world to budget in a small amount of investment money given the situation - just don't do it thinking you are going to make a quick score (you may or you may not). If you were in the last year or so, I would say to just do everything you can to get it paid off and be done with it. This would leave you in a position with a fully paid house and all of the sudden your income doesn't have too much to do other than investing, and that money will pile in a hurry.
We will be in a position to look for a house in the coming months, and hoping to maybe score a little bit a of a deal on a house. The plan was to pay cash in full if at all possible. My hope now is that we will be able to get a slightly nicer house for what we have in cash. That leaves us a lot of options for how we proceed. Plus - if we completely lost full time jobs, we could still pick up work to meet monthly bills (property tax, electric bill, etc.) pretty easily, I would think.
Congrats and well done!
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BostonButterfly
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Re: A thank you to the “pay down the mortgage” folks...

Post by BostonButterfly »

willthrill81 wrote: Sat Mar 21, 2020 3:17 pm Many say that cash is king. If that's true, then cash flow is the queen. :D
:sharebeer
jsm1708
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Re: A thank you to the “pay down the mortgage” folks...

Post by jsm1708 »

My 3.875% mortgage had a balance of $101,000 on 01 Jan 18. My wife and I began to attack the mortgage very aggressively to the tune of $4K a month. Then we would also hit it with lump sum payments of $10K during bonus time. I must admit that on several occasions I wondered if we should be investing that money instead. Today I mailed the check to pay the balance off. The feeling of liberation of a mortgage is hard to put a value on. I am extremely proud of what we accomplished; $101K in a little over 2 years while still contributing 18% (total) to our 401K's. Did we do the right thing? I'm sure many will debate that.
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BostonButterfly
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Re: A thank you to the “pay down the mortgage” folks...

Post by BostonButterfly »

Congrats jsm1708!!
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Re: A thank you to the “pay down the mortgage” folks...

Post by j0nnyg1984 »

I paid mine off last year and never second guessed myself. It was a small mortgage, $125k, on a small condo, $165k (now ~$330k), so paying it off didn’t do much for my monthly “cash flow,” but I love the fact that it’s gone. While everyone else is in a state of panic, I’m sitting here stress free.
Sage16
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Re: A thank you to the “pay down the mortgage” folks...

Post by Sage16 »

During the great recession, I watched our investment account balances drop more that we owed on our house, but at the same time our mortgage balance and monthly payments didn't change even if it was only at 3%. I was kicking myself for not drawing down our investments before the recession to payoff the mortgage. We ended up paying it off about 4 years ago. I can't tell you how good it feels to not have any debt, especially today.
Bogle on investing: Diversify, focus on low costs, invest for the long term. Don't speculate and don't be distracted by volatility.
MotoTrojan
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Re: A thank you to the “pay down the mortgage” folks...

Post by MotoTrojan »

BostonButterfly wrote: Sat Mar 21, 2020 3:10 pm
MotoTrojan wrote: Sat Mar 21, 2020 3:04 pm If I were your spouse I would suddenly "feel more strongly" and insist on plowing that extra cash into the market. I think your spouse is right but there are several paths to Dublin.
Been thinking about that. But I come back to the fact that I don’t know what the future holds. How quickly will the market rebound? How long will it take? How much further down will we go beforehand? I have no idea. No one does. At this point, the desire for peace of mind outweighs the desire to gamble on making more money in the market. I suppose I won’t know which path was the most advantageous until I reach the end......
We know none of those things but we do know exactly how much better buying in at this price is than at prior ones, and that means something. For something as subjective as paying the mortgage cause it feels better even when expected return points to equity, I think relative equity valuations or outright prices can be subjectively evaluated too.
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BostonButterfly
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Re: A thank you to the “pay down the mortgage” folks...

Post by BostonButterfly »

MotoTrojan wrote: Sat Mar 21, 2020 4:10 pm
We know none of those things but we do know exactly how much better buying in at this price is than at prior ones, and that means something. For something as subjective as paying the mortgage cause it feels better even when expected return points to equity, I think relative equity valuations or outright prices can be subjectively evaluated too.
I get your point. EXPECTED returns is the key, though.
MotoTrojan
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Re: A thank you to the “pay down the mortgage” folks...

Post by MotoTrojan »

BostonButterfly wrote: Sat Mar 21, 2020 4:40 pm
MotoTrojan wrote: Sat Mar 21, 2020 4:10 pm
We know none of those things but we do know exactly how much better buying in at this price is than at prior ones, and that means something. For something as subjective as paying the mortgage cause it feels better even when expected return points to equity, I think relative equity valuations or outright prices can be subjectively evaluated too.
I get your point. EXPECTED returns is the key, though.
Absolutely. It’s not a guaranteed win, which is why I said it was subjective (emotionally driven really).
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Re: A thank you to the “pay down the mortgage” folks...

Post by Monsterflockster »

BostonButterfly wrote: Sat Mar 21, 2020 2:48 pm About four years ago, spouse and I purchased what will likely be our forever home. We took a 15 year mortgage with a 2.625% rate. Spouse and I were on the same page that our goal was to pay the mortgage off early. We differed, though, on how to achieve that goal. I am the Boglehead forum reader, and felt strongly about paying extra principal on the mortgage monthly. Spouse tends to be much more of a risk taker, and wanted to instead invest the monthly extra principal and pay off the mortgage later with the much bigger pot of money down the road. “It’s a no brainer at 2.625%.....anyone can make more of a return than that!” My response was always “things are great......until they’re not!” I was not willing to risk failing to achieve our goal of paying off the mortgage ASAP by taking risk in the equity market. Unfortunately, the few people we did discuss this with all thought I was nuts, given the low interest rate. Fortunately, though, spouse and I agreed to disagree. I felt more strongly in my position, so we agreed that we would make monthly payments of extra principal. We now continue to be on track to achieve our goal in six years. I didn’t have to endure a crushing blow to the pot of money had we gone the other route of investing those extra principal payments. I didn’t have to deal with the stress of trying to decide to let that pot ride through the downturn, or sell at a loss.

Fortunately, both of our jobs are secure in this current environment. I am not counting my chickens before they hatch, but we intend to keep trudging along toward our goal of being mortgage free. Given what is happening in the world right now, and whatever economic ramifications that come of it, I feel even stronger about being mortgage free. I so look forward to that peace of mind! Until then, I need to focus on staying healthy, staying employed, and staying the course.

So thank you to all the folks who espouse the “pay off the mortgage” mantra! I listened, and continue to listen. And because of that, our goal continues to remain on track.

THANK YOU!
Did you feel the same way on February 20th? Hindsight is a wonderful thing. :happy
BuckyBadger
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Re: A thank you to the “pay down the mortgage” folks...

Post by BuckyBadger »

Excellent hindsight! One might even say that it's 2020!!
Rudedog
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Re: A thank you to the “pay down the mortgage” folks...

Post by Rudedog »

Congrats! I have never regretted paying off our mortgage, now debt free. Its a great feeling.
mortfree
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Re: A thank you to the “pay down the mortgage” folks...

Post by mortfree »

15 year mortgage

4 years ago

6 years to go

So it will take you 10 years of extra monthly payments to payoff a 15-year mortgage?

And at year 4 you are claiming victory with this decision?

More details so we can figure out if this is truly the final call that your decision was better than your wife’s idea.

Were you going to go 100% stocks or were you going to put the extra payments in a bond type fund?

I am intrigued with the mortgage payoff so I am genuinely interested in your details. I had paid off a 200k home in under 10 years so I’ve been there, done that
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Re: A thank you to the “pay down the mortgage” folks...

Post by Dottie57 »

I paid in 30 yr off in 17 yrs. Not a big earner, but still got rid of 13 years of payments. Really glad I did. Never looked back.
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Re: A thank you to the “pay down the mortgage” folks...

Post by coastalhiker »

willthrill81 wrote: Sat Mar 21, 2020 3:17 pm
Many say that cash is king. If that's true, then cash flow is the queen. :D
And in chess, the queen is the real power. :happy

We sold some assets and paid off our mortgage late last year, having received some good counsel from Watty on the sequence of returns risk given our particular situation. He saved our bacon. Without that payment, we are now able to live (well) on what we've got coming in, and can afford not to sweat about the crazy market or think about dusting off our resumes.
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willthrill81
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Re: A thank you to the “pay down the mortgage” folks...

Post by willthrill81 »

coastalhiker wrote: Sat Mar 21, 2020 7:18 pm
willthrill81 wrote: Sat Mar 21, 2020 3:17 pm
Many say that cash is king. If that's true, then cash flow is the queen. :D
And in chess, the queen is the real power. :happy

We sold some assets and paid off our mortgage late last year, having received some good counsel from Watty on the sequence of returns risk given our particular situation. He saved our bacon. Without that payment, we are now able to live (well) on what we've got coming in, and can afford not to sweat about the crazy market or think about dusting off our resumes.
Now, I think about all the retirees who still have mortgages, leveraging themselves into stocks, and have to make that payment come April 1st from a portfolio that could be down substantially.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: A thank you to the “pay down the mortgage” folks...

Post by BrownEyedGirl_27 »

Congratulations! I had the same thought, especially after watching a video about a couple who paid off their mortgage in 4 years. When you put your mind to it and have the means, I don’t see why not. Once this is out of your life you can funnel that money into investing and be the millionaire next door we’re always reading about. You can do it! :moneybag :greedy
"Your mind has a mind of its own. At the very moment when you are most convinced of your own rationality, you may be feeling rather than thinking your way toward a decision.” | Jason Zweig
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Re: A thank you to the “pay down the mortgage” folks...

Post by BrownEyedGirl_27 »

jsm1708 wrote: Sat Mar 21, 2020 3:35 pm My 3.875% mortgage had a balance of $101,000 on 01 Jan 18. My wife and I began to attack the mortgage very aggressively to the tune of $4K a month. Then we would also hit it with lump sum payments of $10K during bonus time. I must admit that on several occasions I wondered if we should be investing that money instead. Today I mailed the check to pay the balance off. The feeling of liberation of a mortgage is hard to put a value on. I am extremely proud of what we accomplished; $101K in a little over 2 years while still contributing 18% (total) to our 401K's. Did we do the right thing? I'm sure many will debate that.
Congratulations are in order!! That is very impressive. I like your quote “The feeling of liberation of a mortgage is hard to put a value on.” Even the word “mortgage” sounds awful, doesn’t it?? What is your next financial goal?
"Your mind has a mind of its own. At the very moment when you are most convinced of your own rationality, you may be feeling rather than thinking your way toward a decision.” | Jason Zweig
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Re: A thank you to the “pay down the mortgage” folks...

Post by stoptothink »

BrownEyedGirl_27 wrote: Sat Mar 21, 2020 7:33 pm Congratulations! I had the same thought, especially after watching a video about a couple who paid off their mortgage in 4 years. When you put your mind to it and have the means, I don’t see why not. Once this is out of your life you can funnel that money into investing and be the millionaire next door we’re always reading about. You can do it! :moneybag :greedy
We're 4yrs and 3 months into our mortgage, could have the remaining balance ($14k) paid off in the next ~3 months but we're going to increase liquidity...for now. We've done this while maxing out 401ks, IRAs, family HSA, pair of 529s to state max the last 4yrs.
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Re: A thank you to the “pay down the mortgage” folks...

Post by stoptothink »

BrownEyedGirl_27 wrote: Sat Mar 21, 2020 7:33 pm Congratulations! I had the same thought, especially after watching a video about a couple who paid off their mortgage in 4 years. When you put your mind to it and have the means, I don’t see why not. Once this is out of your life you can funnel that money into investing and be the millionaire next door we’re always reading about. You can do it! :moneybag :greedy
We're 4yrs and 3 months into our mortgage, could have the remaining balance ($14k) paid off in the next ~3 months but we're going to increase liquidity...for now. We've done this while maxing out 401ks, IRAs, family HSA, pair of 529s to state max the last 4yrs.
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Re: A thank you to the “pay down the mortgage” folks...

Post by willthrill81 »

BrownEyedGirl_27 wrote: Sat Mar 21, 2020 7:39 pmEven the word “mortgage” sounds awful, doesn’t it??
It literally means 'dead pledge'.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: A thank you to the “pay down the mortgage” folks...

Post by milktoast »

I was paying down mortgage very very aggressively from Feb 2019 - Feb 2020. It felt like the market was high and I should be investing somewhere safer.

I've now switched back to putting extra money into the markets. But the extra money is down a lot - since my annual comp has now dropped by 20%.

From my perspective, now is a good time to buy stocks and maybe let that mortgage ride a little while.
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BostonButterfly
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Re: A thank you to the “pay down the mortgage” folks...

Post by BostonButterfly »

willthrill81 wrote: Sat Mar 21, 2020 7:24 pm
Now, I think about all the retirees who still have mortgages, leveraging themselves into stocks, and have to make that payment come April 1st from a portfolio that could be down substantially.
I am saddened and stunned by the enormity of the damage this pandemic will leave in its wake. I remain hopeful that some of the brilliant minds among us will find the solution to not only stop this one, but prevent future ones.

I don’t want to derail this topic, so I’ll just leave it at that.
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Re: A thank you to the “pay down the mortgage” folks...

Post by tdmp »

BostonButterfly wrote: Sat Mar 21, 2020 2:48 pm I didn’t have to deal with the stress of trying to decide to let that pot ride through the downturn, or sell at a loss.

This was the very reason I also paid off mortgage as soon as possible. However, I did max out 401K. This makes downturn a lot less stressful. Having invested through the 2008-2009 downturn gave me a valuable experience. I was young then and didn't have a house. I knew what my risk tolerance was. During market downturn, unemployment rises; and one day my wife told me: "even if you lose your job, we at least have a roof over our heads." Is my 30 year return going to be better than 100% Stock fund with Mortgage as leverage? Probably not. However, my family won't be able to tolerate that much volatility in between those years. I disagree with Dave Ramsey on his investment choices: ie. high expense ratio mutual funds and basically 100% stock funds; however, I agree with his baby step 6 of paying off mortgage before investment outside of retirement.
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Re: A thank you to the “pay down the mortgage” folks...

Post by jsm1708 »

BrownEyedGirl_27 wrote: Sat Mar 21, 2020 7:39 pm
jsm1708 wrote: Sat Mar 21, 2020 3:35 pm My 3.875% mortgage had a balance of $101,000 on 01 Jan 18. My wife and I began to attack the mortgage very aggressively to the tune of $4K a month. Then we would also hit it with lump sum payments of $10K during bonus time. I must admit that on several occasions I wondered if we should be investing that money instead. Today I mailed the check to pay the balance off. The feeling of liberation of a mortgage is hard to put a value on. I am extremely proud of what we accomplished; $101K in a little over 2 years while still contributing 18% (total) to our 401K's. Did we do the right thing? I'm sure many will debate that.
Congratulations are in order!! That is very impressive. I like your quote “The feeling of liberation of a mortgage is hard to put a value on.” Even the word “mortgage” sounds awful, doesn’t it?? What is your next financial goal?
We are both 50 years old and have aspirations of retiring at, or around, 56 years old. Therefore, we need to build up what I refer to as our "Bridge to 59 1/2" Account. We have a plan that we will try to stick to, but we will have to see what happens during these volatile times.
BrownEyedGirl_27
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Re: A thank you to the “pay down the mortgage” folks...

Post by BrownEyedGirl_27 »

jsm1708 wrote: Sun Mar 22, 2020 6:31 pm
BrownEyedGirl_27 wrote: Sat Mar 21, 2020 7:39 pm
jsm1708 wrote: Sat Mar 21, 2020 3:35 pm My 3.875% mortgage had a balance of $101,000 on 01 Jan 18. My wife and I began to attack the mortgage very aggressively to the tune of $4K a month. Then we would also hit it with lump sum payments of $10K during bonus time. I must admit that on several occasions I wondered if we should be investing that money instead. Today I mailed the check to pay the balance off. The feeling of liberation of a mortgage is hard to put a value on. I am extremely proud of what we accomplished; $101K in a little over 2 years while still contributing 18% (total) to our 401K's. Did we do the right thing? I'm sure many will debate that.
Congratulations are in order!! That is very impressive. I like your quote “The feeling of liberation of a mortgage is hard to put a value on.” Even the word “mortgage” sounds awful, doesn’t it?? What is your next financial goal?
We are both 50 years old and have aspirations of retiring at, or around, 56 years old. Therefore, we need to build up what I refer to as our "Bridge to 59 1/2" Account. We have a plan that we will try to stick to, but we will have to see what happens during these volatile times.
Please keep us updated with your progress.
"Your mind has a mind of its own. At the very moment when you are most convinced of your own rationality, you may be feeling rather than thinking your way toward a decision.” | Jason Zweig
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