Is it better to pay off house with funds or invest for retirement?
611452
Excellent Question!  Most people are faced with this.\n\nLet me explain how I think and you should then be able to decide for your self.\n\nWhen you take a mortgage, the interest paid is tax deductible.  Hence even if you have a 6% Mortgage, your effective interest paid is just 3.7%.  Where else will you get money at such ridiculously low rates?\n\nI have been with a financial planner and he is pitching me post tax 9.2% which is pre-tax 14%.\n\nSo if you don't repay your mortgage and invest it, you will stand to gain atleast 5%.  This implies atleast $5000 more each year for every 100K in Mortgage.\n\nI am myself a realtor, so I understand a bit more in real estate.  The way it works in Real estate is very different.  Say you invest in a financial instrument, you get a return of 9.2% after tax on the 100K.  But if you invest the same 100K in Real Estate, you would be buying a property worth atleast 500K, or 1 Million.  If this property appreciates at just 4%, much higher in places like California / Florida etc.  If you consider that you are buying a 500K property with 20% down, the return on your investment will be 4% X 5 (Leveraging) = 20% per year.  You can manage this investment pretty well using 1031 exchange etc. to be able to defer payment of taxes till retirement.\n\nIf you buy a property with a 10% down at 1 Million, your return will be over a 40%.\n\nYou need to seek a right reward to risk ratio.  If you plan your investments well using a Estate Planner, Financial Planner and a Realtor, you will be able to reap good returns and save money from taxes.\n\nDisclosure:  I am a Realtor in San Jose, California working with Century 21.
24208
I agree with Angel. \n\nIt depends if you like living in CA...\n\nBuying is always better if you can afford to. You will build equity in your home and also enjoy nice tax breaks. It's basically "forced" savings :)\nRenting is basically paying someone else's mortgage. \n\nIt's always better to buy the smallest home in the best neighborhood...as opposed to the best house in the worst neighborhood.
186392
Put the money where it can give you the most value at this particular point in your lives.\n\nConsider this order: Emergency fund (3-6 months of living expenses), high interest rate loans, retirement.\n\nMortgage is a long term debt, if it is comfortable for you at this time, leave it. Car? - does it run? Have you had trouble with it? Do you do the regular maintenance on it? If it works, and has no sign of giving up, then continue using the car - should you need to upgrade, consider recently used.\n\nChildren's college fund? Make sure your retirement is good first, then look after the children. It makes no sense to make sure their college education is great, and then have no where to go come retirement.\n\nInvesting in stocks - this is probably where your retirement money will be going. Stock investing is a 10year activity.\n\nWhat would I do with it? I would use it on whatever is the most important thing to me at the time I had the money. Emergency fund, high interest debt, retirement, family, entertainment, work.\n\nGood luck\n\nI am available - you can contact me directly via my website
95887
If you will stay for several years it usually makes sense. \n\nFind the difference in payments with the two rates and then plug into a financial caluculator. What you are looking for is it worth it to invest say $1500 for a point ($150,000 loan) to reduce the payment by say $50 a month.\n\nIf you can then see that the longer you keep it the more $50 bills you get. If you were going to be there 30 years, then is it worth getting $18,000 return for the $1500 investment? YES!\n\nIf you move out in three years is it worth getting $1800 for the $1500 investment? Maybe, but probably not as the rate of return is just a teency bit over 6%. \n\nThis is why there is no set correct answer, as you need to figure out how likely it is you will stay long enough to figure out if the particular interest rate returned is worth it.
268552
Depends a lot on your age.\n\nIf you were 50+, I would consider an inflation indexed annuity, as it would yield more than enough money per month to live off off. No risk, no excitement, but no work either.\n\nIf you were 40-50, I would consider a laddered set of I-Bonds (5 year bonds purchased so that 20% of them mature each year) with about 50% of the money, and the rest invested in dividend-paying solid companies (direct share ownership or low MER mutual fund). The 50-50 split could be played with depending on your feelings. I am more bearish, so I would go more for the I-Bonds, and less for the stocks.\n\nIf you were 20-40, then I would be more speculative. I would put about 25% in the ladered I-Bonds, 25% in high-dividend stocks, 25% gold and silver bullion, and 25% in commodities stocks.\n\nAll of this advice assumes that you have no debt. If you did, pay it off first.
1020732
work, save and invest.  if you want money go to where the money is.
364620
It sounds like you have everything you need for now, so maybe you could look to the future... retirement account perhaps?\n\nSounds boring, but if you start investing now, you will either have a lot of money when you retire, or you can retire early.  If I didn't need anything immediately right now, like a car or a tv or something for my house, knowing I could retire earlier would be nice.
986567
Get a good education so you can get a decent job, then put as much as you can into savings.  Maximize things like 401K, especially if there's a company match.  If you get any extra money, like bonuses, invest that, don't go out and spend it.\n\nIf you have just a little luck with growth of your investments, you could be a millionaire when you retire.
120424
Try the following: 1)Get the actual amounts you are eligible for at ages 62, 65 and 70 from the SSA.  2) Assume your remaining life span. Since you do not appear to need the money to live, base your decision on the maximum SS $ you will receive based on your assumed age at death.  For example if you are entitled to $1,000/month at age 62, or $1,200 at age 65 or $1,700 at age 70 and you assume you will live until 85 then the math would suggest if you began to draw at 62 and lived until 85 you would draw a total of $276,000; $288,000 if beginning at age 65 and $306,000 if you waited until you were 70. Ofcourse these calculations do not include the added cash you would accrue if part or all of the money were invested as you aged.  Remember the RULE OF 72. What percent do I need to double my money???  Divide 72 by the number of years and the answer is the percent needed.  For example to double your money in 12 years you would need 6% compounded.  (12 times 6 = 72).  It also works in reverse - if I can invest at 9% APR and compound the interest it would take 8 years to double my money. (9 times 8 = 72).  Teach this rule to your children and grandchildren and they will easily see the value in saving....and they have the best advantage of all.....TIME
557331
Get the student loans paid off before you invest.  You'll be losing the difference in the interest between what you PAY (in interest) on the student loans and what you RECEIVE (in interest or gains) on the investment.\n\nIf you're just graduating, you're probably in your early 20's and have plenty of time to worry about saving for retirement and whatnot.  Get out of debt, then your money is your to invest, give away, burn, whatever you want to do with it.
350612
The interest that you pay on your mortgage is tax deductible.  I would pay the mortgage off last.  If you have any credit card debt pay that off first.  Then if you are not maxing out retirement savings, put the $50 a month into a Roth IRA for yourself.  If you still have some extra money than dump it into a 529 ( http://www.529s.com )
44320
Assuming you can pay it off in a lump sum, what would the cost be?  I.E.  Is that money just sitting, or is it invested and what is the return on that investment?\n\nIf you are talking about taking money from a savings account to pay it off, a savings account that is somewhat set asside for retire use, maybe the real question should be, is it time to move?\n\nIf it is, due to retirement, fixing up the house should be top priority, and investigating what you can get to replace it.\n\nIf you do decide to move, the mortgage will be paid off once you sell, and so paying it off is rather irrelevant if you have a quick sale.\n\nIf you are staying forever, really depends on your interest rate, and what you are getting in a return with your invested funds (assuming they are invested).  I know a friend had a rate of 2.75% FEMA loan and he thought he would be more secure paying it off.  He was getting 5.14 on his invested (SECURE) savings account.  Of course HE should not pay it off, because he was making more money by paying on the mortgage.  It all depends on your situation.  Let's assume your investment is a wash with your interest payments.  Having liquid capital is always better than having to go out and get a loan when money is needed.  First, the loan may take a lot of time, 2nd the loan may cost you fees, and 3rd, waiting for the loan could cost you the opportunity that you needed the money for.  The old saying, CASH is KING seems to come to mind here.\n\nOn the other hand, if you are paying 7.14%, while your invested funds are earning you only 2.14--you are losing money without a doubt.  And if you have a 2nd mortgage at even higher rates, need I repeat?\n\nMaybe, you are saying you are going to be able to draw on retirement funds (penalty/tax free) in the very near future.  If this is the case, and again the funds are not outproducing the interest costs, clearly, pay off the mortgage.\n\nHope this helps...
539106
I actually do finance and asset management for families.  If you were to retire TODAY... 1 million dollars at a modest 5% return would pay you $50,000 a year.  MOST could live pretty well off of that.  Depending on your age, you might need to save a little more just to battle inflation.  (essentially   $50,000 a year will not be worth as much each year)  And, if you do not own your home, this has to be taken into consideration as well.  I just read an article that predicts in the next 20-30 years their will be significant advancements in medicine allowing us to live well into our hundreds!  So be sure your prepared to go the distance!
649851
That depends on your life style. Try to put your money into investments, IRA's and stocks and bonds.
502213
If you are getting a higher interest rate from your IRA, then put your $ in to the IRA.  If the interest rate on the home loan is higher than the IRA, then put the $ on the home loan.  Which ever is going to return more $ to you.
95304
As stated, it depends on your age and your tolerance for risk. Savings bonds are guaranteed by the US Government, but only return about 4-6% per year, depending on the bond type. There are very safe mutual funds that allow you to invest over time (like bonds), but that will return a better percentage than savings bonds, which are the most conservative. Even mature people should not be investing "large" amounts of money in savings bonds, because there is a holding period. If you take the money out too soon, you pay a penalty (lose interest). Plus the returns are not that great.\n\nLastly, expecting that savings bonds will create the money you WILL need in retirement is unrealistic. You need to fund a 401(k) where you work, buy some stocks and mutual funds, then you can add some bonds. Diversification is the secret.
206390
Actually it depends on the interest rate and your tax rate.\nNormal 30 years mortgage goes around 6%. If you have money to pay it off, you can allocate it to index funds, which can bring you on average 8-10%. This move certainly not guaranteed and requires investment discipline.\nI would first maximize my 401k and IRA and then make higher payments on the loan. This way I will have tax deffered grows of my investments, minimize my taxes, will have my house paid off and descent chunk of money to retire.