BMW 328 Diesel and Finances

[corvetteguy78]

I get the Investing vs Mortgage Refi argument but that is if everything is peachy with the Market. When my mortgage is paid off at 55 years old, eliminating that $2100/m(took out property taxes ) mortgage payment, i have just given my self $25,200 a year take home pay raise. That's an extra $201,600 i can invest from 55 to retirement at 63.

 

[get_nick]

I get the Investing vs Mortgage Refi argument but that is if everything is peachy with the Market. When my mortgage is paid off at 55 years old, eliminating that $2100/m(took out property taxes ) mortgage payment, i have just given my self $25,200 a year take home pay raise. That's an extra $201,600 i can invest from 55 to retirement at 63.

That's not the right way to think of it, and there are a LOT of reasons why:

1. If you invest wisely, earlier in life, you can retire earlier.
2. You don't get a "pay raise", you recover an expense. your income is still the same. you have to consider taxes in that equation too.
3. That $201k would be better served investing at 5% for 30 years instead of at 5% for 8 years.
4. In theory, your income should go up when you get to 55. Paying off now when you don't have as much discretionary income reduces your liquid assets.
5. The investments from age 55-63 are MUCH more conservative than the portfolio of a 40 year old.

I know it's your money and paying off the mortgage is the easiest way to go. Especially when people fall into the mindset of zero debt or the Dave Ramsey methodology. but the financial models and forecasting are never wrong. With that said, whatever helps people sleep easier at night is what they should do.

I personally believe (and it's my actual plan), that investing that money into a second house and renting it out would be a better investment than paying off the one you have now. You'll have a house that accrues value and you can generate income from it.

 

[Briansol]

yup, i recently did some modelling on my HSA account to solve a similar problem
It has a savings portion at like .05% and has $5.50 a month in service fees until $5000 balance (3.50 for account maintenance, and $2 for brokerage link). An hsa only lets you put in 3400 a year per IRS requirements.

my model was, now that i'm on year 2, i have covered the 5k in the account. Does it make more sense to keep paying the 5.50 fee per month, or put the 5k in the cash portion to stop paying the fees and re-start the investing going forward.

I ran a few models with some spread in between.
all cash to 0 vest
5% cash to 95% vest
all the way down to
0 cash 100% vest, factoring out the fee each time.

Assuming more than a few percent in returns, it makes the most sense to continue paying the fee as I earn an average of $4 in a day and the other 29 days of the month are profit vs if it was in cash. As the balances go up, that day time period turns into hours and then minuets.

The bank makes out - I make out. it sucks that it's the best way and they know it and profit off of it.