Good caveat. Assuming you have maxed all your tax sheltered investment opportunities I should have said.
I’d rather have a paid off house than a mortgage and an investment that often will be bigger than the mortgage. The incremental dollars aren’t worth as much to me.
2 points for your recent posts
- Vanguard target date funds are performing pretty similarly to VTI, VOO, etc over the last few years fwiw. So it’s not much a diversified investment now, but in 10 years you might see some divergence as it reallocates.
- Is your game a business? You can pump $10k in for an entity as well Buy I Bonds for Your Business: Sole Proprietorship, LLC, S-Corp
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Nothing wrong with that. For many people, it’s a net cash flow analysis, i.e. they know their mortgage interest rate is say 3% and they “know” they can get 5% on average if they invest, so they invest and hope their investment gains outpace their mortgage interest rate. That’s a perfectly logical way to look at it but people do sometimes make mistakes like comparing the guaranteed locked in mortgage interest rate to a risky investment return that will be taxed as well.
Don’t you agree that’s psychological not financial?
No. With a paid off house I don’t have to work. With an 800k mortgage and 1m in investments I have to work and variance can crush me.
Regardless of anything else I can still live in the house if it is paid for.
The stakes are too big for me to gamble for small edges.
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I was upset when I locked in my mortgage for my new house at 4.5% in March. Boy was I wrong.
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Interesting thanks. Game has no revenue and expenses are ~$600/year but will look into it more.
Yeah, owning your home with no liens is a huge piece of financial security that outweighs a couple percent you might pick up elsewhere.
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Even if it is, psychological benefits can have tremendous value, if not easily quantified.
agree. Especially if someone is the type to panic buy or sell the market.
What are your goals?
The first thing you should do is celebrate. Congratulations! for real this isn’t even a “celebrate the small wins” kind of thing, this is fucking huge.
Now what to do with the extra money, my general approach would probably be to throw that cash-flow into a couple buckets. First bucket would be additional money into the market to accelerate and grow the retirement fund. Max 401k → Max Roth IRA (backdoor for you), and anything extra into a standard brokerage invested in the usual suspects. Second bucket for me would be to increase the money I spend on things that I love. Say for example you love to taking vacations to beaches when it is raining. Dial that knob up and take more trips to more exotic locations. The other thing I’d say about this bucket is that it’s OK to have more than one thing in this bucket, so don’t limit the things you love. Third, I would look into giving some of the money away to a good cause, i.e. an animal shelter, web hosting costs for an online forum of sick and weird dudes, a political cause, etc.
The percentage that you choose to allocate to each of these buckets is a personal decision and really depends on your goals. I put additional retirement funds first because I got a late start in that area and I don’t want to work all the way to 65, but perhaps you’re way ahead. Then maybe you only put 10% of this extra money to retirement, then you have 90% to allocate to the shit you truly enjoy and giving to good causes. These proportions are also apt to change depending on the season in your life.
After the buckets, I’d evaluate your employment situation and decide if you’re doing what is best for you because, all of a sudden, it isn’t a huge risk to downshift a little bit on the employment front. Like sure, you’re doing OK but is there maybe a specific line of work that is really interesting for you? Explore some companies or projects that fit your needs/interests/goals better.
I don’t hate talking to a fiduciary financial planner either. I think there should probably be some pre-work done on your side to define your goals a little more concretely that way they can provide more specific advice. I assume most of them have some sort of prescreening questions anyways, but I’ve never done it and mostly have little respect for people in some of these professional positions, LOL LAW for example.
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Cursory googling suggests “it’s complicated”. Seems many states have a real estate equity limit that’s protected, and in many of them it is quite low. Employer 401k’s seem safe, other stuff doesn’t. Most bankruptcies seem to have similar protections, and limits.
But my argument for paying off the house is protecting it from foreclosure if you lose income later. If you stop paying your mortgage you can lose your house in a matter of months, and if you try to cover it with retirement funds you’re usually going to pay a penalty.
Anything else you should be able to stretch out a lot longer. You can not pay property taxes for years without losing the house.
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Some good stuff here thanks for the detailed post, I’m on vacation but will bookmark and reread in a week.
We max 401k, trad ira, i-bonds starting this year, only obvious thing we don’t do is mega backdoor roth which doesn’t seem great. We aren’t frugal by any means but don’t spend as much as we want so to speak. The friends we went to the french laundry with earlier this year are pre-FIRE types and they seem miserable really. Fuck that.
Goals? I really don’t know. With me at 46 and wife 41 it seems a bit premature to start thinking about lifestyle changes . Right now I just want my cats =/
If you can eat the tax hit then not doing a mega backdoor seems foolish. Taxes have to go up at some point. I’d rather eat it now than roll the dice and hope I’m in a lower bracket later. I converted the last of my traditional IRAs this year - and then immediately lost 20%.
how the fuck is bitcoin still at 19500 lol
I’ve heard that there is no second best.
Wow TIL mortgage rates suck in Australia. I’m at 3.94% variable now (30 years) which is by far the lowest I can find. It’s not even with a bank but an investment firm so very GFC vibes. Fixed rates seem terrible and the best length I can to lock in is 3 years and then variable after.
All the fraud and hacked accounts has taken a lot of bitcoin out of circulation and reduced the float?
It’s still really good for buying drugs, humans and sex?