Reader Case Study - Pay off Mortgage or Invest? WWMD?

[WWMD]

Hi guys,

Fairly new lurker here in the forums. I would love to ask what the great minds of the Mustachian community would do with the below numbers, and why.

Quick Overview  (Cashflow Spreadsheet attached)

Age: 35
Savings: $110,000
401k: $40,000
Home value: $275,000
Mortgage: $189,000 13.5 years left on 15 year loan, 3.25% APR
Income: $100k/year
Current net savings/year: $25,000

Plan
My plan up to this point has been to duke it out for another 1-2 years in the corporate hamster wheel, pay off the mortgage, then take a lower paying (happier) job for another 5-10 and invest smartly in the meantime to help me chip away at cell B141. If I go the mortgage route, my income can fluctuate safely in those last 5-10 without the haunt of the monthly mortgage payment, and Time to FIRE is less urgent.

Question
My biggest question: mortgage, savings, or investments? Is it more savvy to invest that 100k than to pull my debt down to zero? Just how much can I expect in terms of dividends on 100k and does that outweigh the $$ I pay in mortgage interest? Which is the safer bet?  Which is more Mustachian? Should I go halfsies between the two? And invest in what? (VTSMX, VGTSX, and what for bonds? I am the Jon Snow of bonds.)

Bestow your great wisdom oh wise ones! I thank you all in advance.

[MDM]

Bestow your great wisdom oh wise ones! I thank you all in advance.

WWMD, welcome to the forums.

“To know thyself is the beginning of wisdom.” ― Socrates

In other words, knowing more details about your situation would help us - and, more importantly, you - determine a likely good path.

Based on your OP, and taking some guesses:
  - It appears your annual expenses are ~$45K. 
  - If you can make $20K/yr freelancing, you need another $25K/yr. 
  - At 4% SWR, you need $625K in savings.
  - You don't have that, and won't get there in 1-2 years. 

If a template for analyzing your cash flow would help, you can use the one in the How to Write A Case Study thread.

[WWMD]

Thank you so much for your reply! I've filled out the Cash Flow spreadsheet and it is incredibly helpful. I have also modified my initial post to hopefully bring more clarity.

[Cheddar Stacker]

There are a lot of great threads discussing this question in general terms, not your specific situation. Here's a good one:

http://forum.mrmoneymustache.com/investor-alley/paying-off-mortgage-early-how-bad-is-it-for-your-fi-date/

I like debt, so I'd keep the mortgage and invest.

If you invest heavily in dividend stocks you could expect annual dividends in the 2-3% range, which would mostly cover your mortgage interest if you had investments equal to the mortgage payoff amount. Plus those stocks would theoretically increase in value over time as well and you would likely come out ahead.

You are very close to having your savings and 401k value surpass your outstanding mortgage principal. Once you reach that stage, re-evaluate your stance because things will seem a lot safer then.

[WWMD]

Thank you for the response! I agree, I think I'm interested in the day I'll be able to pay it off more than I am actually dead set on doing it. But I am a very nervous investor in general so I feel waffly about the options. I've been dipping a toe into stock allocations, but I'm pretty gun-shy. I guess my next step is to dig further into the forums and read, read, read.

[Cheddar Stacker]

You should read the jlcollins stock series. It will help put your mind at ease. Just don't hold a bunch of cash, that is less effective than paying off the mortgage.

[WWMD]

Thank you! It is on my reading list as of right now. Yeah I'm not a fan of having my cash just sit there not working for me, but until I know exactly what I'm doing with it and why, I feel frozen in place.

[WWMD]

So from everything I'm reading, VTSAX looks like a good way to go. Would anyone consider it *on sale* right now since we experienced a bit of a stock dip? 

Trying to decide what to do with the monies now that I'm less inclined to throw it directly at the mortgage.  Thinking:

VTSAX - $50,000
Cash - $25,000  (emergency fund)
VBTLX - $30,000
JILBX - $40,000 (my 401k is through John Hancock, and this was the advisement they gave me)

Should I bother with putting any in an REIT fund?

Mostly wondering if I should be throwing money at VTSAX today while we're still in the dip?