What Is the Best Route to Take If I Want to Retire in 10 Years? (Invest or Pay Off the House?)

my wife and I own single home family rentals. we have $200,000 left on mortgages. We are now the possibility of maintaining $70,000 annual income by selling and investing in stocks and bonds. How does this work out?

My mortgage is 3.3% with a balance of 169k remaining on a home valued at 400k. While I do invest $3,500 monthly currently I plan to pay it off in 5-6 years in full. I remember my father paying off our home in 11 years and for the rest of his life the peace and mind of having a paid off home was so worth it.

I agree with Bo on paying off low interest loans when your investments are earning far more.

Retired at 45, been retired for just over 3 years now. Mortgage will be paid off in 24 years (2.625% rate). No stress for me at all.

We do not have a mortgage, and my husband has retired and wants to travel. We don't indulge. Inflation has hit severely, and we wish to relocate while increasing his 401k, which is currently minus $2 million. I'm more cautious than ever when costs rise. What is your opinion? I would be happy to talk about it.

Brian with the measured rounded advice that’s tempered by the extra years living in this crazy world. The math might seem totally obvious but when there’s a 2008 crash your investments nuke 50% and you get laid off suddenly can you stick to the plan. Gotta keep that possible situation in mind and think can you stick to the plan when everything is on fire for a few years.

I had $50k left on a $100k mortgage at 5.25%. I had paid a little extra each month for the life of the loan to pay it off about 7 years early. 17 years in I received an inheritance that would cover it plus a little extra. I got the mortgage paid off in only 17 years at 48 years old. Since paying off the mortgage I have been able to focus pretty much solely on accumulation for retirement because I'm 100% debt free. I wasn't ignoring retirement before, now it's just supercharged. I think it was the right decision for me.

I didn't buy a home until 44 yrs old. I saved up during that time for 68% down payment and paid it off in 3 years. I calculated the amount of mortgage interest I paid in that 3 years, and it was $2,100. A mortgage interest rate of 3% or now 7% doesn't mean you're just paying 7% a year. Every conventional mortgage loan has you pay the bulk of the interest at the 1st half of the loan. And most people who only pay the monthly amount for 30 years end up paying twice or more in interest payments, as what they took out on the mortgage. Would I have had much more money in my 401K now had I used all that money for the house from 20 yrs ago - 13 years ago? Probably. But you gotta subtract all that money I saved in interest mortgage interest, which to me, makes a better case psychologically, to put massive amounts of money towards down payment and principle payments to pay it off much earlier.

My 15-year mortgage rate is at 2.125%, after doing 2 refinancing during COVID in a span of about 12 months and costed me about $4000 in closing costs total. The 15-year mortgage will end in my late 60’s, long after my planned retirement age of 59. However, I have zero intention of paying it off sooner than needed, with my cash sitting in a Money Market fund yielding 5%.

Sitting on a 2.5% mortgage with a very manageable monthly payment. I considered paying off early and even started making additional payments for a couple years but then realized it's probably a mistake, so instead I'm throwing that same extra cash into my 457b account. Thanks for the content!

It’s not explicitly mentioned in the video - even if your free cash investment earns not much more than your mortgage rate (say, 5% vs 4%), it’s still advantageous, in terms of providing good cash flow, to hold that extra cash and not piling that into your mortgage balance. Imagine if you need $15,000 to replace your roof, or your 20-year old furnace, it’s great to be able to come up with that cash without trying to get a 2nd mortgage at 7% (or worse, credit card debt).

Ugh, ten years until retirement and I feel so behind! I want to be comfortable, travel, but I'm worried about this inflation and recession stuff.

I compare the after tax return on things like T-bills, HYSAs, and CDs. If the returns are higher than your mortgage rate, build up savings. Then if yields drop, use the extra savings to pay off the mortgage. Comparing stock market returns to mortgage rates isn’t the best comparison because the stock market is volatile and therefore it increases risk compared to paying down a mortgage.

I'm paying off my 3 percent mortgage. I hate the payment. I'm investing 20 percent into retirement.

Pay off the mortgage but keep working. Once the kids are grown, saving is so much easier. I saved 92% of my bring home pay this week. I had over $200 in bonus rewards on a card. I bought small gifts for the kids and my guy, plus put gas in my car, etc. Bills this week $32.51. Next week won't be as cheap but should be under $100.

This was a good take. When you are younger it feels like you should maximize everything and make as much money as you can. This likely stems from the idea that if you fall you just get back up and life goes on. When you are older the same risks seem more... risky. You want to reduce some of that risk and preserve what you have. This likely stems from the idea that if you fall you could be seriously injured and getting back up might not be as easy. Even with several sources of income, it will feel more painful to fall financially when you are older. By the time an older person isn't worried about expenses their investments are likely growing faster than they can spend it.😊

Investing the difference only works if you have the discipline to actually do so. Most people I know who parrot this advice just use it as an excuse to burn another $800 a month on the hedonic treadmill.

I think it's different on the commercial side. We have one commercial property that housed our business that we paid off about a decade ago. Now that we've sold the business but kept the building we're collecting rent on that property. The company that bought us signed a long lease but they eventually want to buy the building outright. Now that I'm retired cash flow trumps a lot of arb opportunities just simply for the peace of mind. I think from Bo's point being the younger of the two it does make sense to keep the low rate and let the money work elsewhere. For Brian though being around my age it's hard to look past that peace of mind. But they're literally the Money Guy Show and not going to go into it blindfolded.

6 years into our only debt, the mortgage of 2.75% for $375k, we got about $150k left. We’d like to retire in 5-8 years, so we’re throwing everything into our investments and making regular mortgage payments. We’ll lump sum the rest to pay our mortgage off right before we retire, for now, we just need our investments to grow.

I ran into a similar issue with paying off a low interest mortgage. The last few years I had enough money to easily eliminate it through extra payments or even one large payment and was tempted to so I would be completely debt free but I held off so I could put money in a bucket that would earn more interest. I am glad I took that route. It's paid off now and I'm better off financially because of it. I did not have retirement weighing on my near future at the time though.