Invest or Payoff mortgage after being diagnosed?

[Bootlip]

I'm having a real mental battle with this! My wife and I just completed a 2yr journey paying off all our debt(87,000) outside of our mortgage. Iv had been waiting years for this day for years. The game plan being to dump all our excess money into our retirement accounts. Well as soon as we paid that last debt payment we bumped up our 401K's to 30% of our gross. Intending on bumping it up again to 50% very soon. One week after that first bump,  I'm in the ER where after an MRI they discover I have MS. Our life plans may have just changed...

Now for those who don't know 85% of people with MS have the "mildest" type. As of now I'm pretty sure that's what I have. I should (statistically) live a near normal length life. However after 20yrs of diagnosis 1 in 3 end up with disabilities that may put them in a wheelchair. On occasion some people get real bad real fast with terrible disabilities. There's no real way of knowing.

So now to my question...
I'm 31, my wife is 29. At this point in time my wife and I could pay off our house in about 2.5 yrs if we reallocate our excess income to the house instead of retirement accounts. We owe 116,400 on a 30yr at 3.75 percent. We are only 1 year into our loan. I'm confident investing vs paying it off early will mathematically be the better move. However now I'm wondering if its better to payoff the house to lessen the financial burden if I become unable to work in the future.

I know this is a very personal question, I'm just curious what others would do if faced with this dilemma.
Thank you for any input!

[ysette9]

I am so sorry to hear of your diagnosis. I expect you are going through a grieving process like anyone would when they get bad news that drastically alters their outlook on life. I haven't experience with anything like that, but I have had two second-trimester pregnancy losses that were completely unexpected, devastating, and took quite a period of time to process.

Personally I would advise you to not do anything right now and just focus on your mental and physical health. No on died, but the mental picture you had of yourself and your future died in the sense that it now looks different than you had imagined. In a real death the advice is always to make no big changes or decisions and just let the emotions play out. I think this is appropriate in your case also.

To your question though, it depends on your risk tolerance. You could invest instead of pay down the mortgage but mental earmark that excess as "mortgage payoff fund" if it makes you feel better. Statistically that is the better numbers asnser, but life is more than just numbers.

[TheAnonOne]

This almost highlights the need to invest over the mortgage even stronger. Chances are you will need cash later on for medical expenses...

Sorry to hear you are going through that! As stated above, I might just pile money up and give it a few months..

[Scandium]

...payoff the house to lessen the financial burden if I become unable to work in the future.

Sorry for what you're going through. But how does paying off the house "lessen the financial burden" vs having a pile of money instead? In this situation I think I'd even more so prefer having as much money as possible liquid and instantly accessible rather than tied up in one, single object.

[MrDelane]

In this case I would suggest investing and building up as much liquid reserves as possible.
Your mortgage rate is extremely low.
If you prepay and then find yourself without enough cash reserves to cover potential medical expenses you will need to take out a HELOC or use other forms of credit, likely at a rate higher than 3.75%.

Additionally, if you prepay and find yourself cash-poor in the future the bank isn't going to care that you prepaid a significant amount, they only want their next payment.
And that payment will only become more affordable as years go by thanks to inflation.

Given the unknowns of the future, having a large liquid reserve seems to make more sense as it will give you more freedom.
As things develop you can then decide how/where to reallocate your liquid assets - instead of deciding now before you know what you're dealing with.
If a few years from now you decide that paying off the house makes more sense you will have the funds to do it in one lump payment.
I would say give yourself the freedom to deal with whatever comes your way by keeping your assets liquid, if possible.

As a side note, I have a few good friends with MS, two of which were diagnosed roughly 20 years ago now.
Both of them are thankfully living happy productive lives with minimal issues so far.

I realize that doesn't mean anything specific for you... I guess my point is that you shouldn't forget that you have good odds on your side.
I wish you and your wife nothing but the best in the decades ahead.

In the end, you should talk to your wife (obviously), look at the numbers, and do whatever is going to help both of you sleep better at night.

[Bootlip]

Thanks you all for the responses! I guess my thoughts in paying off were more about eliminating a $843 house payment every month. After paying off our debt we can technically pay our total expenses on my wife's income alone, including the house payment. But that wouldn't leave much money left over.

What I failed to realize is that I could just invest and if the time comes, barring bad timing of health issues and a market corrections, I could liquidate what we've saved in our 401K's/IRA's and use it to payoff the house. That does sound like a better option. Even if I had to take a 10% penalty for early withdraw it would probably be better then "limiting" our excess incomes potential for a problem that may not ever arise.

Thanks again for the responses and by all means feel free to keep sharing your thoughts on these options.

[SwordGuy]

I'm so sorry to hear this.

What you lack at the moment is knowledge - how your disease will progress, where you can get the best treatment, what impact that will have on the livability of your current home (i.e. stairs, width of hallways and doors, etc.), laws about government assistance vs income levels vs asset levels vs type of asset (i.e., homes might not count against getting assistance but cash might), and who else might be able and willing to help your wife take care of you (and the cost for that).

I would recommend going into emergency mode and cutting expenses dramatically.  Up your savings.  Don't pay off the mortgage until you know more.   

And while you are doing that, find some savings you can divert into special time with your wife, to (inexpensively) do things you might not be able to do later. 

[Mezzie]

I'd look into the disability laws in your state, particularly long-term care related laws. Having a house paid off may or may not affect how much you have to spend before you get certain benefits.

As an aside, I started saving more aggressively because of my (potentially degenerative) disability. Feel free to swing by my journal or PM me and rant if you need a friendly ear. This is not an easy transition.

[bigchrisb]

Ms can be an unpredictable disease, with plenty of uncertainty. It's different for everyone diagnosed, but it's likely it will take a while to know the extent and likely progression of yours.  Not sure if yours started with optic neuritis, but there is a good study showing likely outcomes over time.  Hope your current symptoms settle down quickly.

In the meantime, I'd investigate:
Are you covered by any trauma / critical illness insurance?
Do you currently have, or are able to get without additional testing any tpd insurance?
What is long term healthcare like in your area? What are subsidies on drugs like?
For financial planning, liquidity is now more important to you. It's likely that you will manage your symptoms and be able to keep working, but this is different for different diagnoses. Fatigue can be one of the biggest issues with ms and work.

Lastly, be careful about disclosure. Once you tell people about it, you can't un-tell them. Not everyone is either noble or sympathetic.

It's a bitch of a disease, and comes with a bucket of uncertainty. But once you get it figured out, get on with living your life. If you spend the rest of your life living in its shadow, it's won.

[bigchrisb]

Two other thoughts:
- pull together your and your partners bucket lists, and think about what you can only do while able and get them done.
- don't underestimate the impact on your spouse, and that she probably needs some support now too. Think about doing something together you have always been meaning to do.

[Morning Glory]

I am with the "invest" camp here.  One more thought to add: Will you be able to stay in the same house should you end up with disabilities in the future?

What climate do you live in? Is your house expensive to air-condition? People with MS often experience more symptoms in hot weather.

How much maintenance does the house need? Will your wife be able to do it all herself if you are unable to help?

Do you have stairs? Are the doorways large enough to accommodate a wheelchair should that be needed? What about the bathrooms? I would suggest having a friend or relative who is in a wheelchair come over and scope out the place. The more disabled-friendly your house is, the longer you will be able to stay out of LTC.


Another suggestion: increase your physical fitness and address any weight issues now. This will help with fatigue, prolong your independence, and make you easier to care for at home once you do need help.

And this is a scary one: MS can lead to short term memory loss and personality changes (not in all cases). This would be a good time to go over the finances with your wife if you are the one who manages everything. Make sure she knows the passwords to all the accounts, and any other odds and ends that she needs to know if she would have to take over. Also consider an advance directive and power of attorney for healthcare. Make sure other relatives know your wishes as well, and spell everything out in writing if you think things could get contentious.

I don't mean to be all doom and gloom, but having your affairs in order will give you peace of mind.

[PaulMaxime]

I know this is a very personal question, I'm just curious what others would do if faced with this dilemma.
Thank you for any input!

I was diagnosed with MS in 2007. Thankfully I've been very lucky not to have any increased disability. Hope you are similarly lucky. It's possible to not have much in the way of long term impact if you are lucky.

I personally focused on getting myself financially independent as quickly as possible, but also taking advantage of my lack of disability to travel and engage in athletic pursuits that I might not be able to do in the future.

One thing that really messes things up is that life insurance and health insurance become problems for you now. The prescription you will have to take costs around $6,000 per month if you don't have insurance. So I guess I'm now an advocate for universal health insurance.

[dess1313]

before you pay off your house consider a few things

how accessible is it if you were limited to a walker, cane, or a wheelchair in the future?  could you reach the bedrooms or use the bathrooms?  this could determine if this is your forever home or not.  if its not, you may want to consider moving, which negates paying it down. you can spend your time looking for the right house and not feel rushed.  houses that are actually accessable can be hard to find.  lots have upstairs bedrooms, split levels, etc etc.  you don't realize how much of an issue it is, till you work in healthcare like i do, or end up on crutches for a few weeks.

also look into any tax credits, local programs, support groups and other benefits you may now be qualified for.

depending on where you live, medical expenses could be a big factor.  hopefully you have a mild form and with minor modifications can continue life as is.  I would start setting aside some emergency money in case you have any further attacks, medical bills, or have to spend time off work.  it will remove a lot of stress during those times. 

I would wait 3 months or 6 months till you have a better idea of the whole diagnosis, and see if any life style changes need to be made.  Also start putting together some bucket lists and travel plans and go have some fun while its easier for you to.

Good luck

[Grogounet]

Ho shit.... Please please tell me you have income protection insurance??

If not, another though (thinking outside the box) is to find a country and/or state where you can get help the cheapest possible way?

[Fire1018]

If you get officially diagnosed as disabled, you can access your retirement accounts without the 10% early penalty before age 59 1/2.  I would recommend that after you get the maximum match for both you and your wife's 401(k)'s, focus on maxing out the accounts in your name for easier access down the road.