Whether or not that's the right decision depends entirely on factors you haven't discussed yet, namely how you currently have your assets allocated, and what your pre and post retirement tax rates are. And how important it is to you to hit a very specific retirement date vs. getting to that point as quickly as possible *in expectation*. (But with the possibility that market fluctuations might set you back a year or two, though probably not likely.)
We currently have about $1,400,000 in a combination of: 1) Equities 75%; 2) Low-risk investments -- bonds, annuities, etc. 20%; and 3) cash (checking & savings account) 5%. We also have about $140,000 in equity in our house. (We also have some life insurance policies, but I don't think they add that much to the whole picture). Last I checked, we supposedly stand to receive SS checks of $5,000-$6,000 month (although I will only fully believe this when I actually see the checks -- SS under political pressure; husband's SS # has been stolen and we've already been through 2 rounds of tax-related ID fraud with the IRS -- who knows if whoever has his number will try to steal our SS income too, not just our tax refunds?)
Our current tax rate is 28%. I don't know how our retirement tax rate would be calculated. Excuse me, if I sound naive here (because I am), but is it still just based on income? Or is the tax rate different if you are living off your investments?
For whatever reason, my husband really wants to retire the year he turns 65, not before or after. (He has a tendency to fetishize certain dates. The upside? He never forgets our anniversary or my birthday!) However, he is a reasonable person and, like I said up-thread, he has a job from which he cannot be fired. If the year he does turns 65, the market goes into a tail-spin, I think he might be persuaded to hang in there a little longer. (Or if we wind up doing really well, I think he could be persuaded to retire a year or two early. It's just that either case will require a little persuasion.)
Whether or not *that* matters also depends on your current asset allocation -- in particular, how much you have available already that's withdrawable (i.e., roth contributions, taxable accounts) and how much that's a pain in the ass to get to pre-retirement (pre-tax-funded 401k/403b, roth gains, etc).
Well, we currently have $83,000 in cash (in checking and savings). We've never in our entire lives had an "emergency" that cost over $20,000. So, the extra cash is in fact one of our current "problems," if you can call it that. As I mentioned in another thread, I'm having a bit of an issue with my husband putting it into his retirement account, since he has already maxed out the matching fund and opened an additional retirement account in addition to his Roth IRA. The house and the cash however are jointly held assets.
I would have no problem with him channeling even more of our money (much of which is currently accumulating in our accounts because of what I have done w/ refinancing our mortgage, getting cheaper insurance, being frugal, etc. even if I am no longer officially working) into his retirement account, if I knew I could have access to those accounts if something should happen to him. He travels a lot for work often to third-world countries and each time he goes I worry about him meeting his end in a car accident, or something. But I just don't know how that works and have held off from researching it partly for psychological reasons (I mean who really wants to think about their spouse dieing!?) I know I am supposed to inherit these investments. But every once in a while, I wonder: "But let's say he's in a plane crash, his body is never found and I can't get a death certificate? What then?" Or "What happens if he is killed in a car crash in India? Will I be able to pay whatever is needed to repatriate his body if I don't have access to accounts in his name?" Yes, I do have a conservative nature & a tendency to think about worst case scenarios.
So, anyway, I want to pay down the mortgage because it will keep some of our investments actual joint investments on paper (instead of just in our brains). And he wants to pay down the mortgage because it gives him a sense of security.
From one tenured professor family to another, if it were me, I'd keep the mortgage as big as possible and then pay the darn thing off a month before you retire. :) My money's where my mouth is on that one -- I have a 3.75% mortgage that's ~25 years out, and every time I look at it on Mint makes me want to pay it off, and it takes enormous willpower to not do so.
OK. This makes sense as a possibility. However, I just thought of another option. We could put the extra cash into the mortgage, continue aggressively paying off the principle each month, then treat that as a very secure investment for which we will compensate by investing our yearly Roth IRAs in more high-risk/high-reward funds.This way we could keep the low-high risk ratio the same over all and still have the psychological boost of paying off the mortgage early. How about that?
