ANSWERS: 9
  • yes' then stay debt free'
  • I would never do that, especially if the 401k money is being matched or partially matched by the employer. The glowing warmth of the phrase "debt free" does not override the rational warmth of "get the biggest bang for your buck", which clearly favors the 401k in the overall long-term cost/benefit analysis. But if that warm glow is your favorite thing, nobody will stop you! :)
  • DEBT FREE IS THE NEW FREEDOM IN THE USA. BELIEVE ME!
  • It depends upon what your mortgage interest rate is and your expected rate of return on your 401k. For example, if your mortgage is at 6% (which is effectively about 4% because of the tax deduction) and you expect your 401k to make 8%, then it makes little sense to stop your 401k contributions. OTOH, if your mortgage is at 10% (about 7% effective rate), and you expect your 401k to make about 5%, then this makes perfect sense. That's the financial analysis. There are also 'peace of mind' considerations. Increasing the equity in your house means your less likely to get 'upside down' in your mortgage if (when?) the housing market declines, and getting to own one's home outright is a worthwhile goal. My personal opinion is that I would put more money in a tangible useful asset (a home) and less in "the market". But that's because I think we're headed for a major financial meltdown. Good luck . . .
  • Sometimes it is very psychologically comforting to have your home or car paid for. Could you not contribute more money to the 401k after your mortgage is paid? (like normal amount, plus what your house payment was?)
  • Let's break each on down. 401K -Expect 8-10% return on your money -Employer's often match a certain percentage of the money -Money is invested tax free, so the money that would have went to taxes is now drawing you interest. -Stocks are currently down, which is the perfect time to invest. Most people do the opposite, but you're supposed to buy low and sell high. Think about the stock market after 911 and how it dropped and then rebounded. If you invested when it dropped, you made a lot of money -Money invested compounds, so the earlier you invest, the better you are in the long run. The interest starts to draw interest, and that interest draws interest. Money drawing 10% interest doubles about ever 7 years. Your mortgage payment will never increase though and there is no compounding of the interest working against you. Pay mortgage -You're only paying about 6% interest -You pay probably at least 25% on the money on federal, state, and other taxes -Although the intention is to use the money for mortgage, now that it is in bank account, that plasma TV starts sounding better and there is a chance the money that would have been invested never makes it to the mortgage. -Once the mortgage is payed off, will you double up on investing? Probably not, and in the end you will find yourself working longer
  • As long as you don't withdraw money from 401k to pay down house thats fine.I see nothing wrong with halting contributions to pay down house.Or you could find ways to not spend during the month and allocate more funds to paying down mortgage. I did what you are thinking about (reducing contributions to pay off house).House is now paid off,no regrets Good luck
  • Depends upon what interest rate your mortgage carries.
  • I am in a similar situation and I will not be contributing to an RSP (like a 401K) this year. Instead I will be putting a chunk of money on my mortgage. When the market looks a little better, I'll consider putting money back to RSP's.

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