Increases in three funds/etfs which I have wanted to dump are going to pay off my mortgage. Can't think of a better use for it. My roth is the largest portfolio and this way no tax on withdrawal. This will leave me debt free except for monthly bills. Woo hoo. At the same time, leaving ML and transferring balances to Fidelity (where i transferred my traditional ira last year)
Over 20 years, Lord willing, will save me over 5k per year totalling $100k.
I'm selling MMUIX, PKW and XLP (I have another consumer staple etf RHS which has done twice as well ).
Anyone else that has the same type of quandry whether to pay off mortgage should think about it
Comments
From an investment stand point it's not the principal that you should be so happy to pay back, but the 20 years of interest that you are avoiding. In a sense this mortgage principal has now been re-positioned in your portfolio as home ownership and no longer act as a drag due to these interest payments and I believe can be thought of as a net positive for your net worth.
Your home will still hopefully retain its principal value and over 20 years and at the very least appreciate with inflation.
My question to you is this: Do you have any other resources other than your Roth to use towards your mortgage pay off?
Have you sold your kid's baseball card collection, your wife's fur that she hardly wears anymore, your seldom driven convertible? Your Roth account was created as an after tax investment that in a perfect world would be the very last account you should pull from. It grows tax free and when look at through the lens of a long term investment in your portfolio, it would hold your most aggressive investments.
I applaud your desire to be mortgage free, but where does this leave you? If your budget will now net the savings of this mortgage payment where will that savings go? Into a taxable account? Into the formation a new Roth account?
What you are doing is a bit of a shell game. I believe my ($150K, 2.875%, 15 Year mortgage) that is tax deductible allows my $150K Roth to outperform my mortgage interest (2.875%) over the next 15 years, but that's a risk I am willing to take.
Thanks for your concern, but the balance of $45k @ 4% only had 8 years to go, and I was only getting $2k deduction on the interest each year. I have no children, late husband was very wise and converted substantial amount of IRA to Roth but still have enough to fund the rest of my retirement. (Yes MJG I ran the Monte Carlo numbers) I could cash out munis, but they are getting more than 4% since they were issued in 90s.
All your suggestions are important to run through before doing some thing like this, but I feel confident I will be fine.