I know there have been plenty of discussions on this. But I would like some suggestions on my current situation. I have $150,000 sitting in a money market account earning a whopping .60%. I also have a liquid stock portfolio right now worth about $263,000. I have a pension at work which I max out with a partial company match. I am married with no children and no plans to have any. We have a mortgage for $100,000 @4.375%. No other major bills. Just the normal electric,phone,heat,etc. Problem is my wife is about to lose her job. That is going to trim our monthly income by about $2000. My income wont cover that much of a loss. I was just curious as to what some of you would do. Pay off the mortgage from the money market acct. and be done with it? That would leave $50,000 which would be our only emergency fund(cash). Pay off $50,000 or so on the mortgage, then refi @3.375? That would drop the payment by about 50%. I could manage that. I love the cash we have! But should I really keep that much in a crappy money market? If it matters, my wife and I are in our early 40's. I know from reading other posts that most, if not all of you, are better with $$ than I am. So I would really appreciate any help you could offer. Thanks!!

What industry is your wife in? Is she planning on getting another job? How long do you think that might take?

Generally when a layoff is impending you want to batten down the hatches. That usually means keeping your cash as cash so that you can dole it out slowly for living expenses. Even at 0.6% interest, your $150k could pay that mortgage for a long, long time.

On the other hand, long term the best move is to pay off the mortgage. Every month that you have the money sitting in that money market account, you pay about $360 in interest and earn $50, a loss of $300 every month. If your wife may be unemployed for a long time, or forever (aka retired) then you might as well get it over with. You may not be retiring, individually as a couple, but you do seem to have enough cash and other liquid assets to consider long term moves like that.

It seems to me that you have plenty of liquidity, and it's a no-brainer to pay off the mortgage. The key factor here is will your remaining liquid assets be able to cover living expenses long-term, should your wife remain unemployed (in addition to any other emergency that may arise). The answer seems to be yes to me but we don't know your monthly living expenses to be sure.

I agree with this statement. Seems like the logical choice.

If you're planning to stay in the home for a while I'd pay it off also.

Does your wife have a retirement portfolio, or is that $263k combined?

I'm not big into paying off the mortgage, but if it will make you feel better, do it. I would just worry about putting all your cash into the house, and then not having enough to live off of if your wife does decide to "retire." You can't actually take that retirement money out now without paying taxes, so it's not really all that liquid. I hope the $50k will last you. Not sure of your standard of living, so 50k may last a while, it may not. I just wouldn't put all my cash into a house. Just another opinion from the girl in the peach house.

Thank you very much for the quick responses!! My wife was/is in the Restaurant/Bar Management Bus. She has plans to get another job, but not in that field. Not anywhere even close to what she was making, but there will be some income there. To be safe, I am treating it as though I am bringing in the only income. Our monthly expenses, with no mortgage, I figure to be around $1500 a month. Since upping my retirement deductions from my paycheck, I bring home around $2100-$2200 per month. As of right now, our retirement is going to consist of my Pension(currently estimated at $1800 per month), Stock Dividends (which I currently get a $1500 dividend check per quarter), any cash savings we have, and social security(yeah right). Peachy, The $263,000 is combined. My wife has no retirement portfolio at all (cheapskate restaurant owners)! I met with the investment guy today and I can sell any amount of the shares for cash at anytime. Tax free (inheritance), provided they dont go above a certain amount per share. Not arguing with you, just want to make sure everyone understands. Again, thanks for all your replies and I look forward to hearing more advice from you!

I forgot to mention that I have a trust payment of about $1300.00 quarterly. I dont know if that will make a difference in any of your advice or not. Thanks again!

I think the fundamental consideration is that, when confronted with uncertainty or with a major change, cash is king. I would not do anything to use up cash including paying down the mortgage. Your rate is good but that is not the main consideration. I'd not pay it off right now even if it were 10%. You can use the cash you have to make payments for many years until your finances reach an equilibrium again after your wife gets a new job or whatever. At that point you should reevaluate your options for using cash. Liquidity is very important now.

This might seem a bit arrogant of me, but I think you've still got it pretty good!

I'd do the following:

1) Pay off the mortgage in full.
2) Try out living off of one income.

With just normal bills to pay, I think it's totally possible to do this.

Here's my only caveat: Do you and your wife have adequate health insurance through your employer?

Well it seems we have about a 50-50 split. Either payoff the mortgage in full, or keep the cash and continue mortgage payments. Nobody mentioned they think I should refi. so I am shelving that idea. Probably a good thing with the closing costs I would incur. However, my credit union is offering a no-fee, home equity loan @4.25%. I am considering this. So pay it all off, or HE loan. I have about 1 month to decide. @Flinch thankfully we do have adequate Health Insurance (for now). I work in local government, so I feel comfortable with that. But, as we all know, anything can happen! Again,thanks for all the responses. Keep them coming. Your comments are going to figure in heavily on my decision.

So if I get it right:
Your combined income is about to plummet. The new income will not pay the total costs. Ie. something needs to happen to get back to enough cashflow. Money is not (yet) a problem.

For me the big question is, if you do pay of that mortgage, what will your monthly cashflow be? Say you could (with job & EF) keep living like you do (or maybe cut back slightly) for 10 years. That's a cashflow problem of $410 per month not counting interest. Well, that sounds like a plan. Although you'd much rather not touch the EF, it's there for a reason.

And the chances of things changing in that time are high. Although cost of living will increase, likely your wages will as well. You seem to be confident your wife can get another job, that's likely to happen as well within those 10 years.

I'd advice you to do some maths, especially regarding cashflow. Do include the refinancing option as well. If that 263 is potential spending money as well (ie, not retirement) include that in your calculations as well. I'm leaning towards paying off the mortgage, but it really depends on how the numbers add up.

Thanks for all the suggestions. We decided to go with a Home Equity Loan for $70,000 @ 4.25% and take $30,000 out of savings and payoff the Mortgage Co. This drops the payment to $525.00 per month from $1107.25. I really wanted to pay the whole thing off (I HATE INTEREST!), but I thought we should keep a good bit of cash till we see how things go. Hopefully, the wife will get a job fairly quickly and we can get rid of that payment for good. Feel free to bash me on my decision!