1 million in liquid assets or paid off mortgage by 40?

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TarHeel2002
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1 million in liquid assets or paid off mortgage by 40?

Post by TarHeel2002 » Tue Jul 16, 2019 1:41 pm

I just wanted to get a feel from the Boglehead community on what you all would prefer by age 40.

A. 1 million dollars in liquid assets

B. home mortgage paid off

FWIW I am 39 years old with 788k in liquid assets and 149k remaining on my home mortgage. I am always wrestling with the eternal question of paying off the mortgage early vs investing more. My 30 year fixed rate is 3.125%. Thank you for any/all responses. :sharebeer

daheld
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by daheld » Tue Jul 16, 2019 1:47 pm

Both. But if that not possible:

Option B, with $999,999.99 in liquid assets.

:D

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unclescrooge
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by unclescrooge » Tue Jul 16, 2019 1:58 pm

Option A.

We have a million dollars in home equity, but also a near-million mortgage, and slightly less in investable assets. We're in no hurry to pay down the 3.125% mortgage.

Zombies
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by Zombies » Tue Jul 16, 2019 1:59 pm

Although your numbers are arbitrary, I think the generalized answer lies in overall return and tax efficiency.

If your mortgage is at a low rate but allows you to itemize — thereby giving you 30%+ “back” for all your charitable donations - I think paying off the mortgage is suboptimal.

If you’re taking the standard deduction anyway because the mortgage isn’t big enough, there is a lot of value to reducing expenses and being debt free that may suggest pay it off.

With your mortgage you’re unlikely to be itemizing, so it just comes down to the standard “can I do better than that mortgage with investments” and I think the answer is fairly easily yes.

FootballFan5548
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by FootballFan5548 » Tue Jul 16, 2019 2:06 pm

Do we consider 401k/IRA to be liquid assets?

I'm exceeding $1M in investments… but it includes money that's not exactly liquid like 401k. My mortgage is very far from being paid off... $695k+

H-Town
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by H-Town » Tue Jul 16, 2019 2:14 pm

No wrong answer if you go with either A or B.

StandingRock
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by StandingRock » Tue Jul 16, 2019 2:18 pm

If I never planned to move ever it would be nice to have my living arrangements settled.

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marti038
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by marti038 » Tue Jul 16, 2019 2:27 pm

Personally, I'd value the liquid cash more than paying off a debt of 3.125%. I would go with option A.

I'm 38, and while I'm not close to $1M in liquid assets, I quit pushing extra cash into my mortgage several years ago. My rate is 3.25%.

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Sandtrap
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by Sandtrap » Tue Jul 16, 2019 2:30 pm

TarHeel2002 wrote:
Tue Jul 16, 2019 1:41 pm
I just wanted to get a feel from the Boglehead community on what you all would prefer by age 40.

A. 1 million dollars in liquid assets

B. home mortgage paid off

FWIW I am 39 years old with 788k in liquid assets and 149k remaining on my home mortgage. I am always wrestling with the eternal question of paying off the mortgage early vs investing more. My 30 year fixed rate is 3.125%. Thank you for any/all responses. :sharebeer
A. "If" and "only if" properly invested.

The deductions and depreciation on the home are an advantage.
The danger, is 1 million in liquid assets. Easy to "spring leaks" in that one.

j
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Grt2bOutdoors
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by Grt2bOutdoors » Tue Jul 16, 2019 2:43 pm

I opt for the liquid assets. Invested as $639K in normal allocation, $149K in short-intermediate term bonds.
Still liquid, can payoff mortgage anyway you'd like or not! But knowing you have the funds to pay it off at ANY time, as opposed to I'll sell shares at a 40% reduction in price and still have some assets left over. I like the - BAM! and still have my long term portfolio intact to ride the wave back up.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by Grt2bOutdoors » Tue Jul 16, 2019 2:44 pm

Sandtrap wrote:
Tue Jul 16, 2019 2:30 pm
TarHeel2002 wrote:
Tue Jul 16, 2019 1:41 pm
I just wanted to get a feel from the Boglehead community on what you all would prefer by age 40.

A. 1 million dollars in liquid assets

B. home mortgage paid off

FWIW I am 39 years old with 788k in liquid assets and 149k remaining on my home mortgage. I am always wrestling with the eternal question of paying off the mortgage early vs investing more. My 30 year fixed rate is 3.125%. Thank you for any/all responses. :sharebeer
A. "If" and "only if" properly invested.

The deductions and depreciation on the home are an advantage.
The danger, is 1 million in liquid assets. Easy to "spring leaks" in that one.

j
With discipline, one can stay the course. No leak sprung!
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Quirkz
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by Quirkz » Tue Jul 16, 2019 2:50 pm

A. With a million in cash I could buy a house outright. I live someplace med-high for housing, but a decent house still doesn't come anywhere near a million.

alfaspider
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by alfaspider » Tue Jul 16, 2019 2:52 pm

Depends on how much the mortgage is. Within reason, I want the highest net worth possible. How it's allocated is only relevant to the extent I need liquidity and diversification.

rj342
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by rj342 » Tue Jul 16, 2019 2:59 pm

Grt2bOutdoors wrote:
Tue Jul 16, 2019 2:43 pm
I opt for the liquid assets. Invested as $639K in normal allocation, $149K in short-intermediate term bonds.
Still liquid, can payoff mortgage anyway you'd like or not! But knowing you have the funds to pay it off at ANY time, as opposed to I'll sell shares at a 40% reduction in price and still have some assets left over. I like the - BAM! and still have my long term portfolio intact to ride the wave back up.
I lean toward A, and I think this above is a decent compromise.

Other relevant factors you don't mention are likelihood of staying put there long term (maybe until Assisted Living, Nursing home or cemetery), or some employment/income level uncertainty. If both of those yes, then a payoff, or even a partial payoff to fast forward much closer to he final payment, might be worth considering.

Decent chance of moving next few years for career? DON'T pay it off early.

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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by stoptothink » Tue Jul 16, 2019 3:09 pm

TarHeel2002 wrote:
Tue Jul 16, 2019 1:41 pm
I just wanted to get a feel from the Boglehead community on what you all would prefer by age 40.

A. 1 million dollars in liquid assets

B. home mortgage paid off

FWIW I am 39 years old with 788k in liquid assets and 149k remaining on my home mortgage. I am always wrestling with the eternal question of paying off the mortgage early vs investing more. My 30 year fixed rate is 3.125%. Thank you for any/all responses. :sharebeer
Our situations are remarkably similar. I'm 38 (wife is 33), we have ~$60k left on the mortgage and ~$650k in liquid assets. We even have the same mortgage rate. We're not putting anything in taxable until the mortgage is paid off, so I guess we chose the mortgage (not necessarily on purpose). Mortgage will be done in ~2yrs, the $1M liquid should be a year or two later.

soccerrules
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by soccerrules » Tue Jul 16, 2019 3:32 pm

I would have taken $1M assets.
I could have reduced future investment dollars and balanced our AA for a easier, less volatile guide path.
I would have been set to "win the game".
Don't let your outflow exceed your income or your upkeep will be your downfall.

orhkaf
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by orhkaf » Tue Jul 16, 2019 3:34 pm

I personally prefer liquidity. A million dollars in investments is more valuable to me than a million dollars in home equity.

jnet2000
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by jnet2000 » Tue Jul 16, 2019 3:54 pm

Paid off mortgage! Did it years ago and it was the best decision for my wife and I. In your situation, I would pay off your mortgage. You'll still have plenty in liquid assets.
"You really don't need leverage in this world much. If you're smart, you're going to make a lot of money without borrowing" Warren Buffet

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whodidntante
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by whodidntante » Tue Jul 16, 2019 4:01 pm

Some people think having a paid off mortgage provides financial security. I think having a valuable pile of securities provides financial security. You can sell those securities to provide hamburgers. Try converting your fully paid off guest room to hamburgers.

J295
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by J295 » Tue Jul 16, 2019 4:03 pm

Personal preference. Ours was to have no debt.

Consider that the keep the debt responses might have been different if this question was being asked in 2008 or early 2009.

eldinero
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by eldinero » Tue Jul 16, 2019 4:14 pm

unclescrooge wrote:
Tue Jul 16, 2019 1:58 pm
Option A.

We have a million dollars in home equity, but also a near-million mortgage, and slightly less in investable assets. We're in no hurry to pay down the 3.125% mortgage.
If you have 30y mortgage at 3.125% when 30y treasury is 2.63%, you would be losing money on typical 70/30 stock/bond portfolio. Unless you have 100% in stocks and take the risk. This used to make more sense when interest on mortgage was fully tax deductible. But now, I am not sure.

What am I missing?

SleepKing
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by SleepKing » Tue Jul 16, 2019 4:15 pm

Which option would allow you to feel more secure and financially independent? Choose that one. We're leaning towards paid off mortgage and 0 debt.

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unclescrooge
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by unclescrooge » Tue Jul 16, 2019 5:01 pm

eldinero wrote:
Tue Jul 16, 2019 4:14 pm
unclescrooge wrote:
Tue Jul 16, 2019 1:58 pm
Option A.

We have a million dollars in home equity, but also a near-million mortgage, and slightly less in investable assets. We're in no hurry to pay down the 3.125% mortgage.
If you have 30y mortgage at 3.125% when 30y treasury is 2.63%, you would be losing money on typical 70/30 stock/bond portfolio. Unless you have 100% in stocks and take the risk. This used to make more sense when interest on mortgage was fully tax deductible. But now, I am not sure.

What am I missing?
You're missing a few things:
1. I'm in 80/20, and part of my bond allocation is in junk bonds (which returned 20% this year) and EM bonds which have about 4 or 5% yield.
2. The total portfolio is expected to grow 6% a year which handily beats 3.125%, regardless of tax breaks on mortgage. The interest in a million dollar mortgage is about $30k. Add the $10k in SALT deductions and I'm deducting $16k more than the standard deduction. At 43% marginal tax bracket, that's about $7k subsidy, so my interest rate is more like 2.6%(hopefully I did that math right).
3. Unless real estate is leveraged, the returns aren't very exciting :mrgreen:

eldinero
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by eldinero » Tue Jul 16, 2019 5:26 pm

[/quote]
You're missing a few things:
1. I'm in 80/20, and part of my bond allocation is in junk bonds (which returned 20% this year) and EM bonds which have about 4 or 5% yield.
2. The total portfolio is expected to grow 6% a year which handily beats 3.125%, regardless of tax breaks on mortgage. The interest in a million dollar mortgage is about $30k. Add the $10k in SALT deductions and I'm deducting $16k more than the standard deduction. At 43% marginal tax bracket, that's about $7k subsidy, so my interest rate is more like 2.6%(hopefully I did that math right).
3. Unless real estate is leveraged, the returns aren't very exciting :mrgreen:
[/quote]

Thanks
1. Chasing yield is fine but very difficult. This forum many times asks can you beat Warren Buffet (or Index) on stocks. Probably not. Now the equivalent question would be, can you beat Bill Gross (or Index) by selecting those bonds for next 30 years. I would most likely not
2. The portfolio is likely to return that because of certain allocation to stock % (+ potentially REIT). I was asking why fix mortgage payments at 3.125% when your 30y ‘non risk’ bond yield is 2.63%. Of course you could achieve more like in topic 1, but that’s kind of timing the market/ or adding risk
3. True. That’s why I paid my mortgaged as fast as possible and invested all in VTI/VTSAX

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Toons
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by Toons » Tue Jul 16, 2019 5:36 pm

Pay Off
Tomorrow




:mrgreen:
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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unclescrooge
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by unclescrooge » Tue Jul 16, 2019 5:42 pm

eldinero wrote:
Tue Jul 16, 2019 5:26 pm
You're missing a few things:
1. I'm in 80/20, and part of my bond allocation is in junk bonds (which returned 20% this year) and EM bonds which have about 4 or 5% yield.
2. The total portfolio is expected to grow 6% a year which handily beats 3.125%, regardless of tax breaks on mortgage. The interest in a million dollar mortgage is about $30k. Add the $10k in SALT deductions and I'm deducting $16k more than the standard deduction. At 43% marginal tax bracket, that's about $7k subsidy, so my interest rate is more like 2.6%(hopefully I did that math right).
3. Unless real estate is leveraged, the returns aren't very exciting :mrgreen:
Thanks
1. Chasing yield is fine but very difficult. This forum many times asks can you beat Warren Buffet (or Index) on stocks. Probably not. Now the equivalent question would be, can you beat Bill Gross (or Index) by selecting those bonds for next 30 years. I would most likely not
2. The portfolio is likely to return that because of certain allocation to stock % (+ potentially REIT). I was asking why fix mortgage payments at 3.125% when your 30y ‘non risk’ bond yield is 2.63%. Of course you could achieve more like in topic 1, but that’s kind of timing the market/ or adding risk
3. True. That’s why I paid my mortgaged as fast as possible and invested all in VTI/VTSAX
3. That's why I'm paying down my mortgage as slow as possible.... Rational people can look at the same problem and have completely different answers, both of which can be correct.
2. I look at my stock portfolio in aggregate. It's the composition of different asset classes along with periodic rebalancing that generate the returns.
1. I don't disagree, but that doesn't mean you can't take advantage of a good opportunity when you see it.

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Nate79
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by Nate79 » Tue Jul 16, 2019 5:56 pm

There is not enough information but I choose B, a paid off mortgage on a $10m home (OP didn't specify value of the home). Then I sell the house, buy a much cheaper home and pocket the difference.

mortfree
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by mortfree » Tue Jul 16, 2019 6:08 pm

788k in liquid assets.

Age 39

Of the amount above, how much is in retirement accounts? If any I wouldn’t call that liquid.

I opted to payoff my mortgage at age 39 (225k home). The balance was down to 94k when I went full on payoff mode.

Now I have a 185k mortgage balance after moving to a different home (400k).

Your balance isn’t low enough yet for paying off.

Also what is the payment amount for just Principal and interest?

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TarHeel2002
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by TarHeel2002 » Tue Jul 16, 2019 6:15 pm

House value is 350k. I wish it was 10M. :D

650k in retirement accounts.

50k taxable and online savings

88k 529 funds

788k total

I am saving 50k per year in retirement accounts. 18k per year 529 accounts. I could add another 40-50k per year in taxable (or pay down the mortgage faster). Mortgage payment is $750 per month. Income 260k.
Last edited by TarHeel2002 on Tue Jul 16, 2019 6:29 pm, edited 1 time in total.

eldinero
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by eldinero » Tue Jul 16, 2019 6:24 pm

T
[/quote]
3. That's why I'm paying down my mortgage as slow as possible.... Rational people can look at the same problem and have completely different answers, both of which can be correct.
2. I look at my stock portfolio in aggregate. It's the composition of different asset classes along with periodic rebalancing that generate the returns.
1. I don't disagree, but that doesn't mean you can't take advantage of a good opportunity when you see it.
[/quote]


For me, I agree to pay 3.125% mortgage and invest the rest in SP&500 assuming investment horizon is 30 years. But investing that money in bonds, while 30y treasury is paying 2.63% seems risky (you assume you can pick better yield/risk bonds)

Dottie57
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by Dottie57 » Tue Jul 16, 2019 6:47 pm

daheld wrote:
Tue Jul 16, 2019 1:47 pm
Both. But if that not possible:

Option B, with $999,999.99 in liquid assets.

:D
This.

Nissanzx1
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by Nissanzx1 » Tue Jul 16, 2019 10:38 pm

Either of them are great financial goals. We paid off the home at 39. 41 now, Not millionaires yet be we can see it on the horizon hopefully in the next few years.

I do have to say that these are kinda arbitrary goals and honestly I wouldn’t let either consume me. Gotta live life too :). 60 years from now neither will be meaningless to me ;)

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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by sf_tech_saver » Tue Jul 16, 2019 10:57 pm

Well managed after-tax portfolios are powerful life tools.....
VTI is a modern marvel

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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by investingdad » Wed Jul 17, 2019 7:30 am

Interesting.

Our 30 year mortgage is 3.375% and we hit $1 million at 39, so similarities to you.

We did not pay off our mortgage even though we could. We are now 46 and a few grand short of $3 million. I don't think that happens if we paid off the mortgage. We owe about 190k.

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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by MikeG62 » Wed Jul 17, 2019 7:36 am

TarHeel2002 wrote:
Tue Jul 16, 2019 6:15 pm
House value is 350k. I wish it was 10M. :D

650k in retirement accounts.

50k taxable and online savings

88k 529 funds

788k total

I am saving 50k per year in retirement accounts. 18k per year 529 accounts. I could add another 40-50k per year in taxable (or pay down the mortgage faster). Mortgage payment is $750 per month. Income 260k.
If you could either save $40K-$50K per year in taxable or pay down your mortgage faster, then why is it that you only have $50K in taxable savings now? Did you recently get a huge raise that changed your saving dynamic?

I would not consider myself as having $788K in liquid assets when over 80% of that amount ($650K/$788K) is in retirement accounts. While I have a personal bias toward paying off one's mortgage early (especially if one is no longer itemizing deductions), I would not do that with only $50K in taxable accounts. I'd be building my taxable account first. In addition, most on these boards recommend having an emergency fund of at least 6 months salary. You've got a ways to go before getting to that point.
Real Knowledge Comes Only From Experience

cashboy
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by cashboy » Wed Jul 17, 2019 10:18 am

TarHeel2002 wrote:
Tue Jul 16, 2019 1:41 pm
I just wanted to get a feel from the Boglehead community on what you all would prefer by age 40.

A. 1 million dollars in liquid assets

B. home mortgage paid off

FWIW I am 39 years old with 788k in liquid assets and 149k remaining on my home mortgage. I am always wrestling with the eternal question of paying off the mortgage early vs investing more. My 30 year fixed rate is 3.125%. Thank you for any/all responses. :sharebeer

i can speak from personal experience.

i was in a similar situation when i was around 45.

i used liquid assets to pay off the mortgage and to this day i am convinced it was the right decision for me. i did this for multiple reasons - some of which are mentioned in this thread. being a saver, i quickly worked to replace the assets that i used to pay off the mortgage.

now, if a person DID NOT have as much liquid assets as you listed (or i had at the time), and they only had enough to pay off the mortgage, i would NOT suggest paying off the mortgage.

it is a great feeling owning your own home and not having debt.
Last edited by cashboy on Wed Jul 17, 2019 10:21 am, edited 1 time in total.

bradpevans
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by bradpevans » Wed Jul 17, 2019 10:20 am

TarHeel2002 wrote:
Tue Jul 16, 2019 1:41 pm
I just wanted to get a feel from the Boglehead community on what you all would prefer by age 40.

A. 1 million dollars in liquid assets

B. home mortgage paid off

FWIW I am 39 years old with 788k in liquid assets and 149k remaining on my home mortgage. I am always wrestling with the eternal question of paying off the mortgage early vs investing more. My 30 year fixed rate is 3.125%. Thank you for any/all responses. :sharebeer
I have to think that you got to 788,000 by getting returns greater than 3.125%
I also will guess that money invested today will not be touched to 20,30 or more years

Put the money in the market

esteen
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by esteen » Wed Jul 17, 2019 5:17 pm

If it were me, option A. You must consider your own personal life circumstances however.

majiaknight
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by majiaknight » Wed Jul 17, 2019 5:41 pm

My answer is A.
I hit the milestone of $1 million in investable assets ignoring home equity early this year but a large portion of them are in tax sheltered accounts. A paid off mortgage (or debt free) by 40 is a very attractive milestone I'd like to target though I only have <4 years left w/ ~$560K balance.

mags
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by mags » Wed Jul 17, 2019 10:02 pm

I prefer liquidity. Also, we have a 4% mortgage rate. We also live near Seattle in HCOL area and earthquake zone. We dont have earthquake insurance as it has a very high deductible and cost prohibitive. I am in no hurry to pay off mortgage for these reasons. As I gain more equity, I may have to revisit earthquake insurance.

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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by willthrill81 » Wed Jul 17, 2019 10:11 pm

whodidntante wrote:
Tue Jul 16, 2019 4:01 pm
Some people think having a paid off mortgage provides financial security. I think having a valuable pile of securities provides financial security.
Both do.

I think the correct answer for the OP is whichever is more motivating to you is better for you.

We opted a few years back to aggressively pay down our mortgage. I was a bit on the fence about it, but my wife was all for it, so off we went. She has been far more willing to make sacrifices to pay it off than had we just been sticking the money in retirement accounts that we wouldn't access at all for 20 years. And once it's gone in about a year, we'll take what we have been paying on it and be able to completely max out all of our retirement accounts. So for us, that was certainly ideal.
“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: 1 million in liquid assets or paid off mortgage by 40?

Post by rascott » Wed Jul 17, 2019 10:14 pm

I'd take a larger mortgage and put it to work. Assuming your work/income is stable. You are 39 years old. Answer would be much different if you were 59.

Not only would I do that, I actually do it. I keep my homes mortgaged at 65-75% LTV. Doing re-fis when rates dip to pull cash (just about to start another one soon). Buying either more rental real estate or push to the max my investment rate higher. Not crazy on leverage, but certainly use it whenever it's a long-term very high likelihood of success.

My home mortgage is the same as yours. I'd borrow $10m tomorrow at 3.125% over 30 years if I could get it.

My plan is to start to cool my leverage jets when I'm running out of human capital runway (likely in my late 40s / early 50s),

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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by AerialWombat » Wed Jul 17, 2019 10:36 pm

With a million in liquid assets, I’d be set for life, so that’s a no brainer for me personally. I could put it all into an ultra-conservative portfolio, mostly TIPS, Treasuries, CD’s, short-term bonds, something of that nature, and live off it forever.
“Life doesn’t come with a warranty.” -Michael LeBoeuf

staustin
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by staustin » Wed Jul 17, 2019 11:16 pm

Option B

Debt is a form of slavery.

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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by bmelikia » Wed Jul 17, 2019 11:53 pm

whodidntante wrote:
Tue Jul 16, 2019 4:01 pm
Some people think having a paid off mortgage provides financial security. I think having a valuable pile of securities provides financial security. You can sell those securities to provide hamburgers. Try converting your fully paid off guest room to hamburgers.
True-but also true, if your mortgage is paid off you can use the money you were directing towards your mortgage towards the purchase of hamburgers
"I would rather die with money, than live without it...." - Bogleheads member Ron | | "The greatest enemy of a good plan, is the dream of a perfect plan." | -Bogle

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AerialWombat
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by AerialWombat » Wed Jul 17, 2019 11:57 pm

bmelikia wrote:
Wed Jul 17, 2019 11:53 pm
whodidntante wrote:
Tue Jul 16, 2019 4:01 pm
Some people think having a paid off mortgage provides financial security. I think having a valuable pile of securities provides financial security. You can sell those securities to provide hamburgers. Try converting your fully paid off guest room to hamburgers.
True-but also true, if your mortgage is paid off you can use the money you were directing towards your mortgage towards the purchase of hamburgers
You can also rent out the guest room to convert it to cash, and convert that cash to hamburgers.
“Life doesn’t come with a warranty.” -Michael LeBoeuf

Ron Ronnerson
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by Ron Ronnerson » Wed Jul 17, 2019 11:58 pm

I consider our mortgage (30-year fixed at 3.25%) to be advantageous. We itemize on state taxes so the effective rate on our mortgage is around 3%. Our savings at a credit union earn 4% (there are some easy hoops to jump through to earn this rate). We’re in the 12% federal tax bracket and don’t pay any California state income tax (thanks in part to the mortgage) so the effective rate on the savings is around 3.5%. Since the effective rate of the savings is greater than the effective rate of the mortgage, we prefer to keep the debt.

If our mortgage were at 3.125%, it would be even more favorable to have debt. I think opportunities exist to take advantage of arbitrage in cases where the debt is at a low enough rate. In those situations, debt can become a source of income.

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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by fanmail » Thu Jul 18, 2019 5:37 am

mags wrote:
Wed Jul 17, 2019 10:02 pm
I prefer liquidity. Also, we have a 4% mortgage rate. We also live near Seattle in HCOL area and earthquake zone. We dont have earthquake insurance as it has a very high deductible and cost prohibitive. I am in no hurry to pay off mortgage for these reasons. As I gain more equity, I may have to revisit earthquake insurance.
Not sure I follow your logic. If an earthquake destroyed your house, you still owe the bank their money back. If that is not what you are referencing, forgive me, but I have seen similar logic in why someone would rather have a mortgage. That is dangerous thinking that you don’t lose the money when your home declines in value if you don’t have the equity.

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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by TallBoy29er » Thu Jul 18, 2019 7:15 am

I had a goal when we bought our house to pay it off before 40. I made it by 8 months.

If I had chosen to keep more liquid assets, I would have felt poorer knowing I had debt. It's just the way I'm wired.

There is no right or wrong choice here.

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JoMoney
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Re: 1 million in liquid assets or paid off mortgage by 40?

Post by JoMoney » Thu Jul 18, 2019 8:24 am

If I had school age children I could imagine a bigger draw to settle in to a house, but personally, I have very little desire to "own" a home.
Not owning a home has made it easier to move and take advantage of different employment (and housing) opportunities. It's also freed me from some of the unexpected liabilities that can come from home ownership.
I've spent a large chunk of my life living in an area of California with tremendous growth in property values, so financially the most lucrative option would likely have been to lever up with a mortgage (not paying it off) on a single-family home in an established "nice" area... but there's no saying the future will continue that way.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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