Here's my first OP.
Let me tell you what I'm planning to do and let you agree or shoot it full of holes.
I am married, 54, and working as a Unix Customer Engineer assigned to one customer who pays for me, but who told me they plan to leave in 2 years and do their own tech work.
Note that I am a few months from the Age 55 Rule where, if needed, I can take money from my 401K w/o penalty (just taxes and losing future returns.) The Mrs, age 48, and I have about $800K in our 401K's and no debt besides the house. At the end of this year, we'll owe $133K on the house.
We are currently making our $2K mortgage payment plus sending an extra $1,325/mo to reduce principal. At this rate, it would take us to the end of 2018 to pay off the house balance, $133K (4 years of payments of about $35K/yr.) However, this extends 2 years past my possible unemployment.
I was trying to figure out if I should keep my 40K in savings, and add to it over the next two years, keeping current payments, or if I should work to pay off the house during the two years, so that if I'm unemployed, our monthly expenses go way down.
Paying off the house in 2 years would be done by putting my $40K savings against the principal in the year I turn 55, 2015, leaving a $93K house balance, continuing the currently planned 2 years of $35K/yr payments, plus using OT and unspent income (about $30K/yr) during those 2 years to pay the balance. The advantage to this plan was that it would reduce our monthly expenses $2-3K, so that if I lost my job, we could live on my wife's income or I'd could take out minimal from my 401K until I'm 62 and can get Soc Sec + 3 years Child Benefits. I'd save some thousand in interest too. The Mrs has about 20K in savings.
If I didn't try to pay the house early, I could add to the $40K savings account and continue the two years of $35K/year payments, but, after losing my job, switch back to the standard $2K mortage payment which would take 4 more years after the first two. Basically, each year of accelerated payments $2K + $1325/mo extra knocks a year extra off the loan. This option would mean possibly taking more out of my 401K since I'm paying more in interest.
So, should I plan on paying off the house in two years, or sandbag money and pay it off in 6 years, keeping more in savings for the unknown? I did a year by year comparison and it seems I'd be better off paying off the house, but I might be missing something.
I do want the house paid off by the time I'm 62 anyway.
I'm not factoring in finding a new job at this time, or possibly being reassigned to another customer who might want to pay for a FT Unix resource since I'm doing worst case scenario. We have done 4 years of prepaid MD 529 for the kid.
Thanks for your input