I just really need some opinions on this because I just keep going round and round in my head. Here is our situation as a 35 year old married couple:
Assets:
--Approx $1M in a well-diversified 80% stock/20% bond portfolio at Vanguard
--Emergency fund $20,000 in CD ladder
--$95,000 in 529 for our one nearly 4 year old daughter (no plans for more children)
Liabilities:
$295k on a 5.25% 30-year fixed mortgage with 29 years left
Income:
combined salaries: $94,000/yr
annual gift from parents: approx $47,500/yr
Contributions:
--Max out 401(k) - $16,500
--Fully fund Roth IRAs for me and hubby - $10,000
--Hubby has no retirement plan at work, unfortunately
We usually have about $10,000 annually "left-over." So my question is should I pre-pay the mortgage? Here are my thoughts:
Pros:
--If we prepay $10,000/yr, we will have it paid off by the time my daughter enters college, thus allowing us to supplement her tuition, if necessary, with cash flow.
--After daughter finishes college, we can think about retiring early (in our 50s) and with no mortgage payment. I don't like the idea of having to generate an extra $1,700/month in income from our investments until we are 65 and the mortgage is paid off.
Cons:
--We are 35 years old and our savings rate is still really important. That $10,000 will have about 20 years to grow if we invest it yearly in our taxable account.
--The rate on our mortgage is low (5.25%), but our tax bracket is also pretty low (15%) so we don't get too much savings from the deduction. Our itemized deductions are only about $9,000 more than the standard deduction,.
Any thoughts? From people who have been there/done that? Thanks so much for any input. Like I said, I am really stuck on this.
Assets:
--Approx $1M in a well-diversified 80% stock/20% bond portfolio at Vanguard
--Emergency fund $20,000 in CD ladder
--$95,000 in 529 for our one nearly 4 year old daughter (no plans for more children)
Liabilities:
$295k on a 5.25% 30-year fixed mortgage with 29 years left
Income:
combined salaries: $94,000/yr
annual gift from parents: approx $47,500/yr
Contributions:
--Max out 401(k) - $16,500
--Fully fund Roth IRAs for me and hubby - $10,000
--Hubby has no retirement plan at work, unfortunately
We usually have about $10,000 annually "left-over." So my question is should I pre-pay the mortgage? Here are my thoughts:
Pros:
--If we prepay $10,000/yr, we will have it paid off by the time my daughter enters college, thus allowing us to supplement her tuition, if necessary, with cash flow.
--After daughter finishes college, we can think about retiring early (in our 50s) and with no mortgage payment. I don't like the idea of having to generate an extra $1,700/month in income from our investments until we are 65 and the mortgage is paid off.
Cons:
--We are 35 years old and our savings rate is still really important. That $10,000 will have about 20 years to grow if we invest it yearly in our taxable account.
--The rate on our mortgage is low (5.25%), but our tax bracket is also pretty low (15%) so we don't get too much savings from the deduction. Our itemized deductions are only about $9,000 more than the standard deduction,.
Any thoughts? From people who have been there/done that? Thanks so much for any input. Like I said, I am really stuck on this.