SIGforum.com Main Page The Lounge Continue to invest in 401k vs pausing and paying towards house in current economic climate
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| Member |
OK, here's my thoughts. 1) I'm 67 and have been retired for 12 years. I would not have been able to do that if I still carried a mortgage. 2) I always maxed out my 401K as most advisors tell you to. Thoughts being that that you will be in a different tax bracket later on so its an advantage to reduce taxable income now. You also maintain ability to dollar cost average in changing markets. 3) Now that I'm older and retired although my IRA rollovers from the 401K look great, I still owe tax on all of it so the actual value is much less than the quarterly statements. If I had it to do over, I would sit down with an advisor capable of calculating future value of various strategies, and not one giving the standard answers. However, I would still get out from under the mortgage as soon as possible. I wouldn't care if its at a 1% interest rate. You don't own it until the balance is zero. ____________ Pace | |||
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| Just because you can, doesn't mean you should |
Looking at this strictly as a math problem, keep doing as you were. You're buying the shares in the 401 at a discount in a down market, the inflation rate far exceeds your mortgage rate, and you'll have it paid off soon anyway. I really like my paid off house, but I did it starting early in the mortgage and cut years off during a much higher interest and inflation period. If you have any concerns that your job could be in jeopardy as the economic storm clouds gather, that would be a reason to pay it off a bit early. Especially if the only option was to make early withdrawals from your 401 to make the house payments. That would be done at your maximum tax rate plus the penalty. If you have plenty of savings as a cushion than that's not a worry. Just don't keep so much in cash that inflation eats it up each year. ___________________________ Avoid buying ChiCom/CCP products whenever possible. | |||
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| Member |
Individuals who are age 50 or over at the end of the calendar year can make annual catch-up contributions. Annual catch-up contributions up to $6,500 in 2022 ($6,500 in 2021; $6,500 in 2020; $6,000 in 2015 - 2019) may be permitted by these plans: 401(k) (other than a SIMPLE 401(k)) | |||
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| Green grass and high tides  |
And that is true for Roth IRA's also? If so, I would definitely try to take advantage. "Practice like you want to play in the game" | |||
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| Member |
Traditional and Roth IRAs and 401k(s) offer catch-up contributions for those age 50 and over. | |||
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MAGA |
Stay the course and keep things the way they are. Paying your mortage with earnings that would be taxed later in life vs the interest saved on the last 8 payments vs the likely greater increase in 401K when the markets recover. Without knowing the numbers and doing the math in detail it doesn't look like a very good deal. You've had a long-term plan so far that will have ups and downs. If you trusted your plan in the past, I would stick with it. At least in Indiana if you have a mortage on your home you are allowed a $3000 exception on your assessed value for property tax calculations. Not a huge deal, but something else to take into consideration _____________________ | |||
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| Ammoholic |
I don’t know what your companies’ match is exactly. When I worked for a company that matched dollar for dollar up to 3% of the employees pay I figured one had to be nuts not to contribute at least the 3% to get the match. It is basically an immediate 100% return on the investment. If your company has the same dollar for dollar match, I wouldn’t be in any hurry to cut your contribution below 3%. There is an argument to stay the course, buy low, dollar cost average into the 401k investments. There is also an (maybe emotional) argument for having one’s home paid off and having the smallest possible monthly “nut” (amount you have to pay out every month). For most, rent or their mortgage is the largest single contributor to their monthly nut. Only you can answer which is more important to you. | |||
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| Member |
When the market has been going down, you dollars are buying more shares than when the market was up. More shares mean more dividends, and more of an increase when the market turns around. IMO, keep investing in the 401K. It's exactly what I'm doing, in addition to putting extra money in my brokerage account. You don't mind buying almost anything else when it's on sale, there's benefits to buying mutual funds, ETFs, etc into a diversified portfolio when those are on sale. This advice is not coming from a financial advisor, just a well informed private investor. ------------- $ | |||
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Void Where Prohibited |
If you're over 50 you have a higher maximum allowed yearly 401K contribution amount. You can put in more per year than people under 50. "If Gun Control worked, Chicago would look like Mayberry, not Thunderdome" - Cam Edwards | |||
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| Member |
Either option is ok. Personally I'd just keep rolling along as you are. | |||
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| Member |
Be greedy when others are fearful. Be fearful when others are greedy. | |||
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Coin Sniper |
I just had this discussion with my financial advisor. I'm still at least 15 years from retirement. He advised me that when the market is low like it is now and you're a long term investor, buy. Ignore the fluctuations. He also showed ma graph that detailed that trends over time during non-election, and election years. The market always struggles a bit leading up to the election. Once the decision is made, the market rebounds. It doesn't seem to matter who, just that the uncertainty is removed. Pronoun: His Royal Highness and benevolent Majesty of all he surveys 343 - Never Forget Its better to be Pavlov's dog than Schrodinger's cat There are three types of mistakes; Those you learn from, those you suffer from, and those you don't survive. | |||
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| If you see me running try to keep up  |
Unless your employer offers a great 401k with lots of investment options, stop putting in that and open a Vanguard or Interactive Brokers IRA. It will give you a lot more investment options than most company plans with more flexibility. Oh,don't pay off the house yet. | |||
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Alienator |
You should keep that 15% going in, you are buying at a discount currently. I would stay the current course. I'm in the same boat. SIG556 Classic P220 Carry SAS Gen 2 SAO SP2022 9mm German Triple Serial P938 SAS P365 FDE P322 FDE Psalm 118:24 "This is the day which the Lord hath made; we will rejoice and be glad in it" | |||
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| Thank you Very little  |
https://www.irs.gov/retirement...tch-up-contributions https://smartasset.com/retirem...tch-up-contributions | |||
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| Staring back from the abyss  |
In my opinion, being debt free is a far better safety net than having some money in a 401k. ________________________________________________________ "Great danger lies in the notion that we can reason with evil." Doug Patton. | |||
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| No, not like Bill Clinton  |
Does this include money I put in Roth IRA? Is there a single place I can look at max 401K, Roth and catchup contributions? I believe that link said about 20k for 401's???? Never mind, very clear info in that second link. Thanks HRK Catch-Up Contribution Amounts and Limits The IRS sets catch-up contributions for eligible retirement plans each year. Of course, you must first reach your plan’s contribution limit before you can make catch-up contributions. Below, we break down the 2021 and 2022 individual contribution limits and catch-up contribution amounts for different plans. IRAs: The 2020 contribution limit for IRAs and Roth IRAs is $6,000 in 2021 and 2022. The catch-up contribution is $1,000. So in total, you can make a contribution of $7,000 this year if you are 50 or older. 401(k) and Other Workplace Retirement Plans: The annual contribution limit for workplace retirement plans like 401(k)s, 403(b)s, most 457s and the government’s Thrift Savings Plan (TSP) stands at $19,500 in 2021 and $20,500 in 2022. The catch-up contribution amount for these plans is currently $6,500. So you can essentially contribute up to $26,000 in 2021 and $27,000 in 2022 if you are 50 or older. SIMPLE 401(k): The contribution limit for SIMPLE retirement plan accounts is $13,500 in 2021 and $14,000 in 2022. The catch-up contribution amount is $3,000. So the total you can contribute is $16,500 in 2021 and $17,000 in 2022 if you are older 50. | |||
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Step by step walk the thousand mile road |
And my contrarian position. First, I generally agree with the commentors who looked at this from an investing standpoint. That said here is how I disagree: Those that think you will do better investing the cash rather than give up a 3% mortgage, fail to recognize that the marginal money you make investing rather than paying off your mortgage WILL NOT PROVIDE HOUSING to you and your family. If you own the place outright, no one can take it from you so long as the utilities and taxes are paid. In contrast, if you still have a mortgage when ('when' not 'if') the economy dumps us in the shit again and you end up unemployed for an extended period, you may lose the place to your mortgage holder via foreclosure. This is why I decided to balance the 401k contribution against the mortgage. I continue to pay an extra payment every two months. I am now in the toe of the curve where more goes to principal than interest, so the balance continues falling at a good rate (but never fast enough for me). In the end, the marginal sum I might have made investing is offset by the knowledge that I will never end up homeless (absent serious mental incapacity). Nice is overrated "It's every freedom-loving individual's duty to lie to the government." Airsoftguy, June 29, 2018 | |||
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I Deal In Lead |
It is but the best way to be is the best of both worlds, being debt free and having a bunch of money in a 401K. | |||
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| I Deal In Lead |
But what's substantially better is a self employed 401K plan if you can start your own business. You can put away twice as much, up to $67,500 for 2022. https://www.nerdwallet.com/art...se%2050%20or%20older. Solo 401(k) contribution limits The total solo 401(k) contribution limit is up to $58,000 in 2021 and $61,000 in 2022. There is a catch-up contribution of an extra $6,500 for those 50 or older. | |||
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