Helping spouse understand my brilliance

There is also the cash flow consideration. Right now you are very close to retiring. If you have mortgage paid off, then you need less each month to live on, aka your budget. Not knowing your income situation and tax related issues, combined with the emotional aspects, there is not a straight forward simple answer. Yes the bonds pay more than the interest, but you also have to come up with the principal amount each month once you are no longer working and that has to come from somewhere.

Many with no mortgage and house owned free and clear call it the sleep well at night factor. I get the math, I am an engineer and can see OP's logic. Also agree that 2-5/8% is about as good as it gets for paying off loaned money. However the emotional satisfaction of a paid off house sure feels good. Also with the new tax rules, I was no longer able to deduct the mortgage interest, so paying off the house was my choice. I had a 3% mortgage, so not too far different than OP.
 
When I went through the same thing with DW we had long conversations about it like many people do. I tried to argue mathematics and she was sticking strongly to a more emotional intangible approach. Our middle ground ended up being an extra mortgage payment to a separate Vanguard fund every month specifically for the mortgage. This way I got the growth and liquidity that I wanted and she got the piece of mind that we were saving and would have the funds there in case we needed or wanted to pay it off. This was probably more of a compromise on her part because of the added risk to those funds but marriage is all about compromise. Due to the low interest rate of the mortgage we also agreed that if it gets to the point where it will cover the remaining balance of the mortgage we will not necessarily pay it off we will revisit the conversation and determine what we think is best at that time.
 
I appreciate the humor that other people have brought to the discussion; I had hoped that the title of the thread might create the space for that.


This is not a huge make or break decision for us. I did annuitize the pension account balance from an employer for whom I worked for about a decade and it pays us about twice what the mortgage payment is. One is directly deposited, the other directly paid so it is pretty painless. So it is not like we have to scrounge or burn bandwidth to figure out how we are going to pay the mortgage month in and month out.



Right now I have a substantial balance in a Vanguard MM paying 1.7%, and that is my liquidity source that could cover 3 years of expenses if everything else somehow stopped. Paying the mortgage off would come out of there, and I don't feel like giving up the flexibility of that highly liquid money and convert it into home equity.
 
Compromise- buy a second house and pay off the mortgage of the second house
I am divorced twice, do NOT take marriage advice from me
 
38Chevy454 said:
There is also the cash flow consideration. Right now you are very close to retiring. If you have mortgage paid off, then you need less each month to live on, aka your budget. Not knowing your income situation and tax related issues, combined with the emotional aspects, there is not a straight forward simple answer. Yes the bonds pay more than the interest, but you also have to come up with the principal amount each month once you are no longer working and that has to come from somewhere.
Click to expand...
How does tying up money in the house help with cash flow? Yes, you need less to live on, but you also have less money to help fund it. I draw the opposite conclusion, that to improve cash flow it's keep the mortgage, and have more money in the bank.
 
Would owning bonds OR paying off the mortgage make a difference in how you post in the "Sexual Frequency Poll" thread?! LOL.

All kidding aside, I'd pay off the mortgage. Not mathematically optimal, but there's a lot to be said for the emotional side of it. Whether it was her or you.
 
I too had trouble convincing my wife of my obvious genius.
One of us may have been underestimating or one of us over estimating said genius.

Isn't this risk arbitrage? The bank is probably considering you an AA risk and you're relending it at BBB risks. Also, aren't you really paying the mortgage from that 1.7% MM fund?
Not saying either way is Right or Wrong, but don't discount her feelings for a few bucks.
 
GravitySucks said:
Isn't this risk arbitrage? The bank is probably considering you an AA risk and you're relending it at BBB risks. Also, aren't you really paying the mortgage from that 1.7% MM fund?
Click to expand...


It absolutely is risk arbitrage. I have minimized the risk by having nine different bond holdings, with the largest being Southwest Airlines at $25K and a couple of sketchier ones being only $5k. And given that the bonds all mature at dates certain around the time that the mortgage is paid off, I do not face interest rate risk like I would if I had put the money in a bond fund where the principal value is inversely correlated with rates.



The fungibility of money means that it is a mental artifact to say what money is being used for what purpose. So whether the money is attributed to come from the annuity, or the money market, or the interest from the bond portfolio is a distinction without a difference.
 
If you don’t want that mortgage anymore, can I have it?
 
Under the circumstances, I would pay it off and give DW the peace of mind.
 
pb4uski said:
Do you have other lower yielding investments that could be redeemed to pay off the mortgage? That way you can both win... sell the lower yielding investments and use the proceeds to pay off the mortgage and keep the corporate bond portfolio.
Click to expand...

Castaspey said:
.... Right now I have a substantial balance in a Vanguard MM paying 1.7%, and that is my liquidity source that could cover 3 years of expenses if everything else somehow stopped. Paying the mortgage off would come out of there, and I don't feel like giving up the flexibility of that highly liquid money and convert it into home equity.
Click to expand...

So there is your answer.... pay off the 2.625% mortgage from VMMXX... the wife will be happy and you will be 1.075% ahead of the game... then take an amount equal to your mortgage payment and replenish VMMXX.

Everyone wins!
 
What are those bonds worth if you sell them today? What is the effective "interest rate" on that presumably larger amount? Perhaps your wife just feels that you should take that available profit and secure the house.
 
I don’t agree with the overwhelming pay it off crowd. Going into retirement with a mortgage is perfectly OK if your cash flow can cover it and you have a terrific deal there.
 
Castaspey said:
Right now I have a substantial balance in a Vanguard MM paying 1.7%, and that is my liquidity source that could cover 3 years of expenses if everything else somehow stopped. Paying the mortgage off would come out of there, and I don't feel like giving up the flexibility of that highly liquid money and convert it into home equity.
Click to expand...
This is a key point - flexibility. Once the loan is paid off, the funds are locked in the house and unavailable any longer unless you refinance or sell.
 
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Your argument for keeping the mortgage makes sense only if it's an A or B question. IE, you have to sell the bonds to pay the mortgage. But I'm gonna guess it's not that simple, you have other, maybe lower-earning funds, to add to the mix?

I was also an "emotional" pay it down person IRL. Fortunately DH was on the same page. We just put it behind us and used the increased monthly cash from having no payment to increase other savings.

It felt good. I considered it in that "money buys experiences" category even if it wasn't technically the soundest financial decision. If your wife understands this, and your position, and she isn't a twit but is basically saying "i know... but I'd still feel better if..." then I agree with your wife.

Marital decisions do not do well if one goes "well I asked on the internet and most people agree with me..."
 
If someone says "Happy husband, happy life" then it is inferred that his wife must be under his thumb...but if someone says "Happy wife, happy life" then most people nod in agreement as if that is wise advice. I don't get that double standard.
 
audreyh1 said:
I don’t agree with the overwhelming pay it off crowd. Going into retirement with a mortgage is perfectly OK if your cash flow can cover it and you have a terrific deal there.
Click to expand...

Not really since the OP has said that he has money in a Vanguard MM fund earning 1.7% that would be used to pay off the mortgage. So the more relevant comparison is the 2.625% that he is paying in mortgage interest and the 1.7% he is earning on the Vanguard MM fund. So with a $140k mortgage he would be ahead abotu $1,200+ in the first year... enough for a nice dinner a month with his DW.

The 4.6% bond portfolio return is irrelevant because that would be kept if he keeps the mortgage or pays off the mortgage.

Castaspey said:
I appreciate the humor that other people have brought to the discussion; I had hoped that the title of the thread might create the space for that.

... Right now I have a substantial balance in a Vanguard MM paying 1.7%, and that is my liquidity source that could cover 3 years of expenses if everything else somehow stopped. Paying the mortgage off would come out of there, and I don't feel like giving up the flexibility of that highly liquid money and convert it into home equity.
Click to expand...
 
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