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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Nuns on October 27, 2014, 04:14:15 PM

Title: Mortgage or IRA?
Post by: Nuns on October 27, 2014, 04:14:15 PM
I have $10K sitting in my saving/rainy day account and I feel like I could be using that money more effectively. I am thinking of spending $5K towards either my Mortgage or towards my IRA.

I currently max my 401k contribution but haven't made an IRA contribution this year or last year. (My IRA balance is at about $26K).
I am paying 4.75% (it is considered an investment property) on my mortgage which stands at ~$220K (30 year, $1420 per month). If I paid the principal down by $5K I'd pay it off 18 months early.

Should I put my money in my IRA which I have neglected the past few years or would my money be better spent towards the principal of my mortgage? 

Title: Re: Mortgage or IRA?
Post by: solon on October 27, 2014, 04:20:09 PM
By paying down your mortgage you'd make 4.75%. How much would you make in your IRA?
Title: Re: Mortgage or IRA?
Post by: sol on October 27, 2014, 04:24:59 PM
And would the IRA be a Roth or a deductible IRA?  If you qualify for a deductible IRA and are in any tax bracket above zero, I'd probably take the deduction rather than the 4.75% on your mortgage.