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Hi @bee A fairly common sense write across a range of money matters. Thank you for posting. This is the type of article I pass along to others to help with thinking and motivation regarding their hard earned money. The various pieces of the article have been discussed here, too; over the years.
This was good. Nononsense, simple, straightforward, without insulting the reader. Even a beginner could grasp it if that beginner is the sort who's not ALLERGIC to things financial. There's a lotta that around. Thanks, @bee. As for me: I can't bear to keep things THAT simple. But I do have some proportions in mind, to aim for. I'm comfortably NEAR those round numbers I've set for myself: 35% global stocks. 65% bonds of different sorts. (Though I don't own any EM bonds anymore. I have found other, less risky bonds that deliver decent yield even better monthly payouts than EM.) Having never built a cash position, I see that my fund managers together have got me into a 9% cash position these days. And my true allocations tonight are 33% stocks and 56% bonds. With 2% "other."
My parents have long term care insurance. I don't think they'll collect a dime from it if it's ever needed, but they want to keep it. They claim that this insurance gives them piece of mind, although I much prefer the options stated in this article.
None of the rules will make you wealthy. The best way for an average person it to start saving earlier and keep saving monthly thru 401K(or similar) for years. The more you save the better you will be. Basically, if you start early to meet your employer matching amount, then increase the amount by half of your raise annually to at least 15% you will be in a great shape.
#1: Put It All In One Fundfor most investors it's a good idea and why most 401K have target funds
#2: Create Your Own Yieldmost average investors can use great Multisector+NonTrad bond funds for higher yield (examples: PIMIX,VCFIX,SEMMX,IOFIX,JMUTX,JMSIX). For advanced investors who don't mind the high volatility PCI,PDI #3: Don’t Buy A LongTerm Care Policycorrect
#4: Cut Your Portfolio Management Costscorrect
#5: Pay Off Your Mortgage Rapidlyabsolutely not. Do the math and decide based on the numbers. In 2012, at the lowest mortgage rates, I took home equity loan for 5 years at 1.99% interest with zero fees. We didn't need it but it was a nobrainer to know that I cam make much more than 2% in the next 5 years.
#6: Moonlightno if you can. Select a profession that pays well
Basically, the article is average at best. It missed the most important rule of saving early and at least 1015% for years. It failed on what bond funds to buy (not all bonds are treasuries) and CD,MM are not a good option. The rest was the easy part.
" to help with thinking and motivation regarding their hard earned money.
The various pieces of the article have been discussed here, too; over the years."
If there are pieces of the article that get some folks off their arses to take some action towards investing, all the better.
No, it is not the perfect write.
Hell, 90% of the folks I've talked investing with for 40 years, never get far off of their arse to take GREAT positive action to their monetary futures.
If some word or words gets someone motivated, to become more curious and study, all the better. Most of us at some time prior to having more time in the investment seat have moved forward from the words or a phrase discovered in a book or publication.
We have not a clue as to what, the majority of the 3,000 or so members here, they have knowledge of, regarding an investing background or desire.
@catch, you think the article is good. I think it's average. I have read so many generic articles with generic ideas. I like to discuss specifics and help people with uniques problems because most have unique situations. I made comments about each rule and what can be improved. As I said before, the most important rule is for someone is to start early and invest 1015% for many years and pay all the bills monthly on time and don't touch the savings. If you like to discuss further on any rule please post about it.
@FD1000 I will agree that there are way too many average and below average investment articles written every day. I wrote "good", you wrote "average", neither of us wrote really great or outstanding. Are these words not close enough for the descriptors each of us used? Hell, I'll edit my "word" if that would be easier on the reader interpretation. I merely expressed that there may certain points that some investors of whatever aptitude may find that help inspire their further commitment to study and learn. I don't care what word or phrase they discover anywhere that may be the trigger. Start early, of course; let compounding be the very big friend til the end. This house, when it was applicable; had a minor Roth IRA in place. I send an email every 6 months to 12 families continuing to encourage the parents and their working children of whatever age to invest whatever their budget will allow into a 401k, 403b or minor Roth IRA. I don't have enough time in my day to care to debate the "goods" or the "bads" of the linked article. We've decided that there is merit to some portions of the write, yes?
Thanks @bee. This is what I most enjoy about MFO  the free exchange of ideas. I am not a financial advisor or expert. Just my “gut” reactions (worth maybe a nickel).
#1: Put It All In One Fund  Not me!
#2: Create Your Own Yield  I like the term “stream of return” better. One needs to have a reasonably steady stream of return in retirement as averaged out over the short / intermediate term. This may be accomplished with a broadly diversified portfolio and some prudent hedging and / or cash reserves. Unless it’s a tax consideration, I don’t think it matters whether that SOR comes from “income” or capital gains  particularly in taxdeferred accounts.
#3: Don’t Buy A LongTerm Care Policy  I’m agnostic on this one. Don’t know enough about the subject.
#4: Cut Your Portfolio Management Costs  Yes. Of course. But I won’t be driven into index funds. I still retain confidence that the good actively managed funds will do comparably well over longer time spans, in spite of indexing being all the rave today. Active is what I grew up with. I’ll stick with what I know (but have owned index funds on some rare occasions).
#5: Pay Off Your Mortgage Rapidly  Both sides are right. No correct answer. I’m happy to be carrying a small 3% fixedrate mortgage on main residence. Also own a couple parcels that are paid off. Knock on wood  but I’ve been able to pull much higher than 3% annual on my (tax sheltered) conservative investments over more than 20 years in retirement. There’s an added advantage in having more liquidity at your disposal than if that money were sitting in the home. Like I said ... I can see both sides of this one.
#6: Moonlight  Hell no (not me)!  but others will feel differently. I’ll say here that I perform a lot of home maintenance which others would pay to have done. So, in a sense, I am working. But it’s my schedule  not somebody else’s.
I am trying to decide whether to pay off a fairly new 30year (4% fixed) mortgage or ride it out the term or pay additional principle and reduce the payoff time. I am not using complicated math, just rudimentary figures and math.
I guess conventional wisdom is that if you can make more than the the interest rate investing, then invest. I want to come at this in a slightly different angle.
30year (4% fixed) mortgage $150,000 balance $1,500 (P&I and a little extra for about a 10year payoff)
If I continue on my current path, I will incur $50,000 in additional INTEREST.
If I invest the $150,000, using the rule of 72 and historical 7% return, then at the end of 10 years I would have doubled my investment to $300,000 gross, NET $150,000 profit.
Less the $50,000 of Mortgage INTEREST, I am left with $100,000 net gain after 10 years.
If I pay off my $150,000 mortgage balance, I then free up $1,500/mo and $18,000/yr. Over 10 years, that's $180,000 I can DCA invest (assuming no gains or losses).
Using this "fuzzy" math, ($180,000  $100,000) I would net $80,000 MORE after 10 years, if I payoff the balance of my mortgage today.
FYI: At least ten years away from considering retirement
Any thoughts, suggestions, mild criticisms, etc are very welcome!
@mcmarasco  Excellent summation of tradeoffs. I wrestle a bit with this, though my numbers are substantially smaller than yours (duration, payments, rate, balance). Perhaps lacking in your depiction is the type of vehicle (nonretirement, IRA, Roth, etc.) the assets that would be used are currently invested in, as tax considerations enter the picture.
Putting all that aside (largely irrelevant to me), the one question I’d ask (rhetorically) is: *How much confidence do you have that your investments won’t sustain a substantial loss (greater than 20%) over the next decade?
Locking up your money in that contemplated mortgage payoff strikes me as similar to purchasing an AAA rated bond earning 4% (compounded monthly) over the remaining years on the mortgage. (A partial pay down would reduce the duration by X number of years.) And 4% compounded is a very nice rate on AAA debt by today’s standards. So as a defensive strategy to protect / hedge against a severe portfolio loss it makes sense.
When I look at my own investments, the portfolio has grown so conservative (and diversified) in recent years (age 73) that I can’t conceive of a hit greater than 2025% over the next decade. When I look at the modest 5 year performance of some of my “riskiest” funds like DODBX and RPGAX I’m not seeing “bubble.” So, while I do view many equity markets (NASDAQ, S&P) as in bubble territory, I’m not so worried about my own investments that I’d want to trade a substantial % of them for a fixed rate bond  even though by today’s standards the “yield” would surpass what one can purchase in the fixed income marketplace.
To answer your first question Hank, the money to pay off the mortgage would come from a taxable account. Yes, I would incur some cap gains, but not too much that would put me into another tax bracket. I have a fair share already in cash doing 2% or so.
I'm probably a little more aggressive than you with my investments, so a 20%25% decline is not desirable. With "cash" paying about have of my mortgage rate, i am losing money on that end.
Anyway Hank, thank you for your observation and insight!
@mcmarasco  acknowledging that the financial (cash flow?) situation will be different for everyone I chose to pay additional principal when I could to cut down the term. Why? You could call my chosen profession (carpenter) seasonal at best with a ride of great years and the not so great resembling a roller coaster. A steady savings account was not possible because of those down years using up the overflow from the good years. Over the 30yr, $140K, initial 8.25% mortgage I was able to buy two better (read: reliable) vehicles while each time refinancing my original mortgage to include funds to pay off the vehicles which were at much higher loan rates. By year 10 I was looking at two newer vehicles and a now 15yr, $115K mortgage at 4.35% which I disposed of in 10 years.
I hate owing anybody anything so the whole point of my exercise was to be fully aware of my fluctuating income while not falling behind on my debts. By including my trucks into my mortgage payment I saved on the interest for those loans while also taking the worry of 2 monthly payments off my mind. When there was excess cash it went toward the principal. If your income is more reliable and consistent I guess you have more leeway to play. I absolutely wanted no mortgage debt in retirement.
The 30,000 foot view: What your are considering (investing the $150K) is a form of leveraged investment. It's as if you started with nothing in your pocket and your home paid off, and then you borrowed at 4% (the mortgage) to invest the borrowed $150K at 7%.
That's a net gain of 3% (less after taxes), but as with most leveraging, increased risk. (This also addresses @davidrmoran's question: what happens if you reduce the assumed rate of return.)
A little more detail: You want to compare two outcomes. The inputs are the same either way are: $150K cash and a 10 year cash flow of $1500/mo. Either way, at the end of 10 years, you'll have your home free and clear. So the only difference between the two paths you suggested is the value of your investment at the end of 10 years.
Path 1: Invest the $150K @7% rate of return. As you noted, you'll have $300K at the end. (You'll also have paid $180K over the ten years to reduce your mortgage debt by $150K, so you'll have paid in $30K in interest.)
Path 2: Invest $1500/mo @7% rate of return. At the end of 10 years, with incremental investments, you'll have about $258K. A lesser result.
Taxes are where one gets into the weeds:
Path 1: The net income of $150K will presumably be taxed at cap gains rate. But you'll also be able to deduct the $30K in interest against ordinary income. We'll assume a 22% rate here.
Your net taxes will be around 15% x $150K  22% x $30K = $22.5K  $6.6K, or about $16K.
Your total after tax value will be around $300K  $16K = $284K.
Path 2: Your net income is $258K  $180K (the cash flow it cost you) = $78K. Again assuming this is all cap gains, the tax is 15% x $78K or about $12K.
Your total after tax value will be around $258K  $12K = $246k.
[The $258K result came from using a calculator and investing $1500/mo at 7% annual compounding for ten years.]
I just wanted to add two other considerations, inflation and the change in interest rates over time (the time frame of your loan more specifically), to this conversation regarding paying off a mortgage with savings.
Both real estate and the stock market are impacted by these two factors over time. With a home mortgage you are locking in an interest rate that will not fluctuate over the next 1030 years (your term). That seems like a good thing. Over that time frame the markets and interest rates will certainly fluctuate.
Inflation will typically rise over that time frame, but your housing costs remain fixed. If inflation rises substantially, your fixed cost mortgage payment is actually lower on an inflation adjusted basis. Your $150K exposure to the markets over those 1030 years should be a good inflation hedge as well...historically speaking.
At some point interest rates should also rise. Rising interest rates often put downward pressure on real assets (both your home and your investments) in the short term, but less so in the long term.
The two paths laid out by @msf seem significant enough to consider path 1 over path 2.
@mcmarasco said: “ ... whether to pay off a fairly new 30year (4% fixed) mortgage ...”
@msf said: “Either way, At the end of 10 years you'll have your home free and clear”
What am I missing here?
Admittedly, I struggled to get a C in high school Algebra half century ago (my last math class).
I can see how paying off a longer duration mortgage (let’s assume with 25years remaining) in only 10 years might work if one invested that loan (ie the leveraged sum) in a strong equity market and than rolled all that plus market gains into paying off the mortgage with 15 years remaining after just 10 years.
Might make a good plot for a new Disney production.
$150,000 balance [remaining on the 30 year mortgage] $1,500 (P&I and a little extra for about a 10year payoff)
(I also cheated and checked with an amortization calculator to see that a $150K balance at @4% can be paid off in ten years with a little more than $1500/mo.)
@msf  I was way off in my last post. I failed to take into account that mcmarcasco would still have 100% of his loan (the leveraged amount) left after 10 years. So by applying all of that toward the balance, his gains over the 10 years it was invested would need to be only enough to cover the accrued interest  which shouldn’t be hard in a strong equity market. All boils down to what the markets do.
I'm not clear how you're reading this. On the other hand, I took the fact that this was a 30 year loan as irrelevant, while you're trying to figure out what it means.
All that matters for a loan that you amortize (pay down by paying interest plus some principal) are the balance remaining, the interest rate, and the monthly payments. How the borrower got to today doesn't matter  whether the borrower is in the 5th year of a 30 year loan, or the 2nd year of a 12 year loan, or ....
@mcmarcasco wrote of paying off the loan (principal and interest, P&I) in a decade. If he were to make exactly 4% on his $150,000, then each month he could take $1500 (the earned interest and some principal) and use it to make the monthly payment on the mortgage. At the end of ten years, the $150K would be exhausted, and the mortgage would be paid off.
This is just saying differently what you initially wrote:
Locking up your money in that contemplated mortgage payoff strikes me as similar to purchasing an AAA rated bond earning 4% (compounded monthly) over the remaining years on the mortgage. (A partial pay down would reduce the duration by X number of years.) And 4% compounded is a very nice rate on AAA debt by today’s standards. So as a defensive strategy to protect / hedge against a severe portfolio loss it makes sense.
This highlights again the point that one is comparing a potentially higher returning investment against the certainty of a 4% rate of return. Each has its merits.
Yeah  I don’t think I was reading it very clearly. Apologies @mcmarcasco. But I’ve taken the liberty of restating the question in a way that’s easier for me to comprehend. Hopefully, it hasn’t substantively altered the essence of the original question. 
Question: I am trying to decide how best to repay a fairly new 30year (4% fixed) mortgage. If I continue on my current path, I will incur $50,000 in additional INTEREST.
Here are the three options I’m considering :
(1) Pay off the mortgage now ... If I pay off my $150,000 mortgage balance, I then free up $1,500/mo and $18,000/yr. Over 10 years, that's $180,000 I can DCA invest (assuming no gains or losses).
(2) Ride it out the term, investing the $150,000. Using the rule of 72 and historical 7% return, then at the end of 10 years I would have doubled my investment to $300,000 gross, NET $150,000 profit. ... Less the $50,000 of Mortgage INTEREST, I am left with $100,000 net gain after 10 years.
(3) Pay additional principle and reduce the payoff time ($150,000 balance / $1,500 P&I / plus a little extra for about a 10year payoff. 
That’s how the question appears to me. (Hopefully close to the original intent.) I’ll leave the math here up to @msf or others with stronger math skills. Restating my original reaction: Paying off a 4% mortgage early strikes me from an investment standpoint as quite similar to purchasing a very high quality bond having a 4% compounded yield. You’ve effectively sacrificed the liquidity the loan provided in return for that guaranteed 4% compounded interest you would have paid the lender. For defensive positioning in a down market, a fixed rate long duration bond is beneficial. But in a “heady” equity market environment or a period of rapidly rising interest rates, a 4% bond would look lousy.
right: paying off a loan guarantees a fixed return,
and no one knows the market future, but smartest indications seem to be to expect lower returns than in the past, which is why I suggested looking at <<7%
Even at a 4% mortgage rate, it is higher than most bond yield except to the more risky and long duration bonds EM local currency... Think of it as a loan guarantees as @davidrmoran stated.
Sorry for the delayed response; I have been offline for a few days!
Thank you ALL for your sage input and analysis!!!
I follow most of what is expressed/stated and if I interpret it as intended, it appears to me that: 1) paying off the mortgage immediately is not desirable 2) paying additional principle to reduce the loan duration is acceptable
Is that accurate?
To restate: the 1,500/mo P&I does include additional principle in order to reduce the loan duration to almost ten years.
As some have mentioned, what if future stock market & bond market returns are not what they have been over the last "several" years (I presume, that's likely). We've had one heck of a ride the last decade or so!
Would it not make an expedited paydown of the loan more advantageous? 4% mortgage; 3.5% portfolio return over the next decade (for example).
If I am still missing the point, please help me understand.
In terms of pure returns, I think you've got it right. Hank analogized paying off the mortgage with buying a AAA rated 4% bond, and that's a good way to think of it.
However, there are also risk factors that go beyond guessing which investment will have the greater cumulative return at the end of ten years.
Suppose you invest the $150k in equity funds, figuring that over 10 years you'll do better or at least as well as a 4% guaranteed return. Consider the risk of an economic downturn. You could lose your job and the ability to generate the $1500/mo cash flow. At the same time your equity investment could be taking a nosedive, hurting your ability to make the monthly payments out of reserves.
On the other hand, suppose you paid off the mortgage, and then rates dropped a percent. You couldn't take advantage of this and "releverage" you home. If you took out a new, lower rate mortgage to invest the money, I don't believe the new mortgage would be deductible (you wouldn't be using it to buy or improve your home). If instead you kept your mortgage, then if rates dropped you could refinance and benefit from a lower (and deductible) monthly payment.
More generally, because mortgages come with put options (you can prepay at any time), mortgages are different from vanilla AAA rated bonds.
IMHO there's more to consider than just which option may get you the better return over the next ten years. FWIW, I've had to make this decision a few times. Sometimes I went one way, sometimes the other.
Comments
A fairly common sense write across a range of money matters. Thank you for posting.
This is the type of article I pass along to others to help with thinking and motivation regarding their hard earned money.
The various pieces of the article have been discussed here, too; over the years.
#1: Put It All In One Fundfor most investors it's a good idea and why most 401K have target funds
#2: Create Your Own Yieldmost average investors can use great Multisector+NonTrad bond funds for higher yield (examples: PIMIX,VCFIX,SEMMX,IOFIX,JMUTX,JMSIX). For advanced investors who don't mind the high volatility PCI,PDI
#3: Don’t Buy A LongTerm Care Policycorrect
#4: Cut Your Portfolio Management Costscorrect
#5: Pay Off Your Mortgage Rapidlyabsolutely not. Do the math and decide based on the numbers. In 2012, at the lowest mortgage rates, I took home equity loan for 5 years at 1.99% interest with zero fees. We didn't need it but it was a nobrainer to know that I cam make much more than 2% in the next 5 years.
#6: Moonlightno if you can. Select a profession that pays well
Basically, the article is average at best. It missed the most important rule of saving early and at least 1015% for years. It failed on what bond funds to buy (not all bonds are treasuries) and CD,MM are not a good option. The rest was the easy part.
As noted earlier:
" to help with thinking and motivation regarding their hard earned money.
The various pieces of the article have been discussed here, too; over the years."
If there are pieces of the article that get some folks off their arses to take some action towards investing, all the better.
No, it is not the perfect write.
Hell, 90% of the folks I've talked investing with for 40 years, never get far off of their arse to take GREAT positive action to their monetary futures.
If some word or words gets someone motivated, to become more curious and study, all the better. Most of us at some time prior to having more time in the investment seat have moved forward from the words or a phrase discovered in a book or publication.
We have not a clue as to what, the majority of the 3,000 or so members here, they have knowledge of, regarding an investing background or desire.
As I said before, the most important rule is for someone is to start early and invest 1015% for many years and pay all the bills monthly on time and don't touch the savings.
If you like to discuss further on any rule please post about it.
I will agree that there are way too many average and below average investment articles written every day. I wrote "good", you wrote "average", neither of us wrote really great or outstanding. Are these words not close enough for the descriptors each of us used? Hell, I'll edit my "word" if that would be easier on the reader interpretation. I merely expressed that there may certain points that some investors of whatever aptitude may find that help inspire their further commitment to study and learn. I don't care what word or phrase they discover anywhere that may be the trigger.
Start early, of course; let compounding be the very big friend til the end.
This house, when it was applicable; had a minor Roth IRA in place. I send an email every 6 months to 12 families continuing to encourage the parents and their working children of whatever age to invest whatever their budget will allow into a 401k, 403b or minor Roth IRA.
I don't have enough time in my day to care to debate the "goods" or the "bads" of the linked article. We've decided that there is merit to some portions of the write, yes?
Good evening.
#1: Put It All In One Fund  Not me!
#2: Create Your Own Yield  I like the term “stream of return” better. One needs to have a reasonably steady stream of return in retirement as averaged out over the short / intermediate term. This may be accomplished with a broadly diversified portfolio and some prudent hedging and / or cash reserves. Unless it’s a tax consideration, I don’t think it matters whether that SOR comes from “income” or capital gains  particularly in taxdeferred accounts.
#3: Don’t Buy A LongTerm Care Policy  I’m agnostic on this one. Don’t know enough about the subject.
#4: Cut Your Portfolio Management Costs  Yes. Of course. But I won’t be driven into index funds. I still retain confidence that the good actively managed funds will do comparably well over longer time spans, in spite of indexing being all the rave today. Active is what I grew up with. I’ll stick with what I know (but have owned index funds on some rare occasions).
#5: Pay Off Your Mortgage Rapidly  Both sides are right. No correct answer. I’m happy to be carrying a small 3% fixedrate mortgage on main residence. Also own a couple parcels that are paid off. Knock on wood  but I’ve been able to pull much higher than 3% annual on my (tax sheltered) conservative investments over more than 20 years in retirement. There’s an added advantage in having more liquidity at your disposal than if that money were sitting in the home. Like I said ... I can see both sides of this one.
#6: Moonlight  Hell no (not me)!  but others will feel differently. I’ll say here that I perform a lot of home maintenance which others would pay to have done. So, in a sense, I am working. But it’s my schedule  not somebody else’s.
I guess conventional wisdom is that if you can make more than the the interest rate investing, then invest. I want to come at this in a slightly different angle.
30year (4% fixed) mortgage
$150,000 balance
$1,500 (P&I and a little extra for about a 10year payoff)
If I continue on my current path, I will incur $50,000 in additional INTEREST.
If I invest the $150,000, using the rule of 72 and historical 7% return, then at the end of 10 years I would have doubled my investment to $300,000 gross, NET $150,000 profit.
Less the $50,000 of Mortgage INTEREST, I am left with $100,000 net gain after 10 years.
If I pay off my $150,000 mortgage balance, I then free up $1,500/mo and $18,000/yr. Over 10 years, that's $180,000 I can DCA invest (assuming no gains or losses).
Using this "fuzzy" math, ($180,000  $100,000) I would net $80,000 MORE after 10 years, if I payoff the balance of my mortgage today.
FYI: At least ten years away from considering retirement
Any thoughts, suggestions, mild criticisms, etc are very welcome!
Thanks, Matt
Putting all that aside (largely irrelevant to me), the one question I’d ask (rhetorically) is: *How much confidence do you have that your investments won’t sustain a substantial loss (greater than 20%) over the next decade?
Locking up your money in that contemplated mortgage payoff strikes me as similar to purchasing an AAA rated bond earning 4% (compounded monthly) over the remaining years on the mortgage. (A partial pay down would reduce the duration by X number of years.) And 4% compounded is a very nice rate on AAA debt by today’s standards. So as a defensive strategy to protect / hedge against a severe portfolio loss it makes sense.
When I look at my own investments, the portfolio has grown so conservative (and diversified) in recent years (age 73) that I can’t conceive of a hit greater than 2025% over the next decade. When I look at the modest 5 year performance of some of my “riskiest” funds like DODBX and RPGAX I’m not seeing “bubble.” So, while I do view many equity markets (NASDAQ, S&P) as in bubble territory, I’m not so worried about my own investments that I’d want to trade a substantial % of them for a fixed rate bond  even though by today’s standards the “yield” would surpass what one can purchase in the fixed income marketplace.
Hope others will share their thinking.
for me, retired and a couple months shy of 73, it is all sleepatnight and cashflow, countering those who advocate no mortgage debt in retirement
(ours is not large, however, just under $100k, not like $300k, and yes, at <4% rate)
but if I could refi now for 40y mortgage, I would
ymmv
I'm probably a little more aggressive than you with my investments, so a 20%25% decline is not desirable. With "cash" paying about have of my mortgage rate, i am losing money on that end.
Anyway Hank, thank you for your observation and insight!
I hope others will share their thoughts as well.
Matt
I hate owing anybody anything so the whole point of my exercise was to be fully aware of my fluctuating income while not falling behind on my debts. By including my trucks into my mortgage payment I saved on the interest for those loans while also taking the worry of 2 monthly payments off my mind. When there was excess cash it went toward the principal. If your income is more reliable and consistent I guess you have more leeway to play. I absolutely wanted no mortgage debt in retirement.
The 30,000 foot view: What your are considering (investing the $150K) is a form of leveraged investment. It's as if you started with nothing in your pocket and your home paid off, and then you borrowed at 4% (the mortgage) to invest the borrowed $150K at 7%.
That's a net gain of 3% (less after taxes), but as with most leveraging, increased risk. (This also addresses @davidrmoran's question: what happens if you reduce the assumed rate of return.)
A little more detail: You want to compare two outcomes. The inputs are the same either way are: $150K cash and a 10 year cash flow of $1500/mo. Either way, at the end of 10 years, you'll have your home free and clear. So the only difference between the two paths you suggested is the value of your investment at the end of 10 years.
Path 1: Invest the $150K @7% rate of return. As you noted, you'll have $300K at the end. (You'll also have paid $180K over the ten years to reduce your mortgage debt by $150K, so you'll have paid in $30K in interest.)
Path 2: Invest $1500/mo @7% rate of return. At the end of 10 years, with incremental investments, you'll have about $258K. A lesser result.
Taxes are where one gets into the weeds:
Path 1: The net income of $150K will presumably be taxed at cap gains rate. But you'll also be able to deduct the $30K in interest against ordinary income. We'll assume a 22% rate here.
Your net taxes will be around 15% x $150K  22% x $30K = $22.5K  $6.6K, or about $16K.
Your total after tax value will be around $300K  $16K = $284K.
Path 2: Your net income is $258K  $180K (the cash flow it cost you) = $78K. Again assuming this is all cap gains, the tax is 15% x $78K or about $12K.
Your total after tax value will be around $258K  $12K = $246k.
[The $258K result came from using a calculator and investing $1500/mo at 7% annual compounding for ten years.]
I just wanted to add two other considerations, inflation and the change in interest rates over time (the time frame of your loan more specifically), to this conversation regarding paying off a mortgage with savings.
Both real estate and the stock market are impacted by these two factors over time. With a home mortgage you are locking in an interest rate that will not fluctuate over the next 1030 years (your term). That seems like a good thing. Over that time frame the markets and interest rates will certainly fluctuate.
Inflation will typically rise over that time frame, but your housing costs remain fixed. If inflation rises substantially, your fixed cost mortgage payment is actually lower on an inflation adjusted basis. Your $150K exposure to the markets over those 1030 years should be a good inflation hedge as well...historically speaking.
At some point interest rates should also rise. Rising interest rates often put downward pressure on real assets (both your home and your investments) in the short term, but less so in the long term.
The two paths laid out by @msf seem significant enough to consider path 1 over path 2.
@msf said: “Either way, At the end of 10 years you'll have your home free and clear”
What am I missing here?
Admittedly, I struggled to get a C in high school Algebra half century ago (my last math class).
I can see how paying off a longer duration mortgage (let’s assume with 25years remaining) in only 10 years might work if one invested that loan (ie the leveraged sum) in a strong equity market and than rolled all that plus market gains into paying off the mortgage with 15 years remaining after just 10 years.
Might make a good plot for a new Disney production.
$150,000 balance [remaining on the 30 year mortgage]
$1,500 (P&I and a little extra for about a 10year payoff)
(I also cheated and checked with an amortization calculator to see that a $150K balance at @4% can be paid off in ten years with a little more than $1500/mo.)
All that matters for a loan that you amortize (pay down by paying interest plus some principal) are the balance remaining, the interest rate, and the monthly payments. How the borrower got to today doesn't matter  whether the borrower is in the 5th year of a 30 year loan, or the 2nd year of a 12 year loan, or ....
@mcmarcasco wrote of paying off the loan (principal and interest, P&I) in a decade.
If he were to make exactly 4% on his $150,000, then each month he could take $1500 (the earned interest and some principal) and use it to make the monthly payment on the mortgage. At the end of ten years, the $150K would be exhausted, and the mortgage would be paid off.
This is just saying differently what you initially wrote: This highlights again the point that one is comparing a potentially higher returning investment against the certainty of a 4% rate of return. Each has its merits.

Question: I am trying to decide how best to repay a fairly new 30year (4% fixed) mortgage. If I continue on my current path, I will incur $50,000 in additional INTEREST.
Here are the three options I’m considering :
(1) Pay off the mortgage now ... If I pay off my $150,000 mortgage balance, I then free up $1,500/mo and $18,000/yr. Over 10 years, that's $180,000 I can DCA invest (assuming no gains or losses).
(2) Ride it out the term, investing the $150,000. Using the rule of 72 and historical 7% return, then at the end of 10 years I would have doubled my investment to $300,000 gross, NET $150,000 profit. ... Less the $50,000 of Mortgage INTEREST, I am left with $100,000 net gain after 10 years.
(3) Pay additional principle and reduce the payoff time ($150,000 balance / $1,500 P&I / plus a little extra for about a 10year payoff.

That’s how the question appears to me. (Hopefully close to the original intent.) I’ll leave the math here up to @msf or others with stronger math skills. Restating my original reaction: Paying off a 4% mortgage early strikes me from an investment standpoint as quite similar to purchasing a very high quality bond having a 4% compounded yield. You’ve effectively sacrificed the liquidity the loan provided in return for that guaranteed 4% compounded interest you would have paid the lender. For defensive positioning in a down market, a fixed rate long duration bond is beneficial. But in a “heady” equity market environment or a period of rapidly rising interest rates, a 4% bond would look lousy.
and no one knows the market future, but smartest indications seem to be to expect lower returns than in the past, which is why I suggested looking at <<7%
Thank you ALL for your sage input and analysis!!!
I follow most of what is expressed/stated and if I interpret it as intended, it appears to me that:
1) paying off the mortgage immediately is not desirable
2) paying additional principle to reduce the loan duration is acceptable
Is that accurate?
To restate: the 1,500/mo P&I does include additional principle in order to reduce the loan duration to almost ten years.
As some have mentioned, what if future stock market & bond market returns are not what they have been over the last "several" years (I presume, that's likely). We've had one heck of a ride the last decade or so!
Would it not make an expedited paydown of the loan more advantageous? 4% mortgage; 3.5% portfolio return over the next decade (for example).
If I am still missing the point, please help me understand.
Thx, Matt
However, there are also risk factors that go beyond guessing which investment will have the greater cumulative return at the end of ten years.
Suppose you invest the $150k in equity funds, figuring that over 10 years you'll do better or at least as well as a 4% guaranteed return. Consider the risk of an economic downturn. You could lose your job and the ability to generate the $1500/mo cash flow. At the same time your equity investment could be taking a nosedive, hurting your ability to make the monthly payments out of reserves.
On the other hand, suppose you paid off the mortgage, and then rates dropped a percent. You couldn't take advantage of this and "releverage" you home. If you took out a new, lower rate mortgage to invest the money, I don't believe the new mortgage would be deductible (you wouldn't be using it to buy or improve your home). If instead you kept your mortgage, then if rates dropped you could refinance and benefit from a lower (and deductible) monthly payment.
More generally, because mortgages come with put options (you can prepay at any time), mortgages are different from vanilla AAA rated bonds.
IMHO there's more to consider than just which option may get you the better return over the next ten years. FWIW, I've had to make this decision a few times. Sometimes I went one way, sometimes the other.
I couldn’t agree more. There’s much more to consider than just investment returns.
Although each approach has its merits I’m beginning to lean towards a pay down over time.
I’m not sure interest rates are going to go much lower, but your point is well made and understood.
I hope the conversation continues! I enjoy and take something from everyone’s viewpoint.
Thx, Matt