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A place for Get Rich Slowly readers to ask questions
and exchange ideas
It is currently Mon Sep 01, 2014 11:41 am

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 Post subject: What to do, what to do...
PostPosted: Sat Oct 04, 2008 5:18 pm 

Joined: Tue Jul 01, 2008 10:58 am
Posts: 8
My only debt is my mortgage, which costs me $701 per month. ***Big pat on the back for paying off $18k in debt and saving the emergency fund in 18 months!***
I have $7500 in emergency savings ($5k in a 6-mo CD paying 3.75%; $2,500 in a liquid savings paying 3.25%)
I have a $35k home equity line of credit, balance: $0
I fully fund my 401k
I have a ROTH IRA but am not currently adding to it.
I have an investment portfolio worth $150k
I own a vacation home/property free and clear
I have over 200 hours of comp time accrued that I can cash out in an emergency. Its value grows at 4% per year when I get my annual merit raise.

Alrightynow. I'm 54, gainfully employed and LOVE my job. I am paid pretty well for what I do. I only support myself, although I have a daughter, son-in-law, and two grandsons. They are financially very well-off.

Should I aggressively pay down my 5.25% mortage?
Should I be buying stocks in my investment portfolio since there are so many bargain basement prices?
Should I fund my ROTH?
Should I add to my 3.25% liquid savings?
Should I stuff money under my mattress? :wink:

Okay...take your best shot.

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PostPosted: Sat Oct 04, 2008 6:26 pm 
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Joined: Sun Aug 10, 2008 2:50 pm
Posts: 154
Location: South Florida
I would generally not recommend paying off your mortgage as you already have a fantastic interest rate on a tax-deductible instrument; however, you are somewhat near retirement so it may be a personal decision as to whether you want to have this home owned free and clear just like your vacation property. It is unclear how much your mortgage balance is, however, and how much time is remaining if you do not make any extra payments.

Beefing up the emergency fund might be a good idea in your case. It is unclear whether the $701/mo includes the full PITI but it sounds like it could be just the mortgage portion (P&I) and, even when you add monthly living expenses on top of that, I'm not sure how long the $7500 would actually last you in the event of a job loss or some emergency that could take a toll on your finances.

I would definitely recommend contributing the maximum to your Roth IRA every year. Once this is accomplished, THEN feel free to plunge any extra money into your taxable portfolio. It is in your best interest to take full advantage of the tax-free earning power offered by the Roth IRA.

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PostPosted: Tue Oct 07, 2008 2:40 pm 
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Joined: Thu Apr 05, 2007 5:20 am
Posts: 515
Location: Birmingham, AL
Wow congrats on the success thus far!

I would beef up my emergency fund ... unless you are comfortable with the amount you have now. One thing I would consider is as you get older, if you get downsized or let go, it is harder and harder to find a job for the last 5 or so years until retirement.

The markets are shaky, but I would still contribute to my Roth IRA if I were you. But I wouldn't do it in a 100% equity portfolio -- I'd add bonds to it.

Paying off the mortgage doesn't sound like a bad idea either, and heck, you can always do a little bit of everything right? Add to the IRA, add to the emergency fund, and pay extra on the mortgage.

Congrats thus far!

No Debt Plan

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 Post subject: Re: Success Stories
PostPosted: Thu Oct 09, 2008 9:01 pm 

Joined: Sun Sep 07, 2008 3:27 am
Posts: 1
Mortgage Loans are not so easy one, get it. We need to have property on it.Then only we can get it.

Jack Steven

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 Post subject:
PostPosted: Tue Oct 21, 2008 9:06 pm 

Joined: Mon Oct 20, 2008 9:05 pm
Posts: 14
Location: Wisconsin
Congrats on your success! I would definetly fill up the Roth IRA because of the huge tax advantage, you have till April to contribute for the 2008. If you pay off your mortgage, you will not have any tax deductions when you retire, which makes the Roth IRA ideal due to tax-free distributions.

I would not recommend paying off your mortgage since you can use that as a tax deduction since you will be utilizing taxable income from your investments when you retire. With a 5.25% mortgage loan, depending on your tax bracket you are only paying about 3% intrest if you consider the money you save by deducting the interest from your taxable income. You can easily make over 3% interst by contributing to CD or a Bond. Instead of locking that money in your house, I would invest in safe investment vehicles such as bonds, stocks may be too risky since you are close to retirement and with the market being shaky.


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PostPosted: Sat Nov 08, 2008 8:45 am 

Joined: Sun Apr 15, 2007 7:58 pm
Posts: 7
Max out your Roth and do your catch up contributions ($6k for this year and next).

Pay off your mortgage. If you believe that getting a tax break on your interest paid is such a good deal, I have a better one for you. If you send me $10k, I will immediately send you back $5k. That is a 50% tax break I will be giving you instead of the maybe 30% you will get back from the government.

And any one else out there I offer the same deal. If you think paying $1 to get back $0.30 is better than NOT paying the $1 in the first place, let me know!

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 Post subject:
PostPosted: Tue Nov 11, 2008 8:08 pm 

Joined: Mon Oct 20, 2008 9:05 pm
Posts: 14
Location: Wisconsin
And any one else out there I offer the same deal. If you think paying $1 to get back $0.30 is better than NOT paying the $1 in the first place, let me know!

I don't think you understand the strategy here. If your mortgage is 5.25%, then after the tax deduction you only paying about 3% in intrest after the money you make back with tax deductions. So for example if you are going to make a $10,000 payment towards your mortgage, take that $10,000 and invest it in a safe investment vehicle which will most likely make you over 3% in income. So in conclusion, you pay 3% in interest on that $10,000, but have potential of making more than that by investing that sum of money. The key here is to invest that money and not spent it on something else. Also, if you take that money to invest for retirement, for example in a Roth IRA (you get tax-free gains) or Traditional IRA (tax deductions for contributions).


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