My wife and I have $1.8M saved and earn $400K. I want to pay off our 20-year mortgage before we retire. She says no

Pricey Quentin,

My spouse and I’ve executed very effectively working in healthcare the previous 25 years. We’ve all the time taken benefit of 401(ok) and 403(b) to the max, and have further financial savings in an IRA and nearly no revolving credit score debt. We at present have $1.8 million in these financial savings accounts.

Nevertheless, at 52, we determined to maneuver to Florida — now that our children are each grown and on their very own — fairly than wait till retirement. We each nonetheless work and collectively make over $400,000 a yr. We plan to work till 65 at minimal and have by no means had critical well being issues.

At challenge: We purchased a home on the very high of our desired vary and have a 20-year mortgage (2.5% curiosity) with a month-to-month fee of over $4,100. We’ve all the time paid further on our mortgages, and my purpose was to do the identical with this home in order that by the point we hit retirement at 65, it’s paid off.

Nevertheless, my spouse says we can have loads of cash as soon as we hit retirement age to take care of the home fee for the primary 5 to 6 years of retirement, and that we shouldn’t “penny pinch” now that we now have time to journey, even earlier than we totally retire.

I perceive that we’re blessed to have such a pleasant nest egg, however I fear that stretching that home fee into our first 5 years of retirement will eat an enormous chunk out of the retirement funds that would jeopardize longer-term planning. We additionally plan on this home being the majority of the “inheritance” for our two youngsters, so don’t plan on promoting and transferring as soon as we lastly make the retirement plunge.

Ideas on learn how to method this mortgage conundrum?

Two Pharmacists in Florida

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Pricey Pharmacists,

This can be a win-win. You’re charmed when you do, and also you’re charmed when you don’t.

This column typically leaves readers flabbergasted. “I can’t imagine this loopy scenario!” readers say as they attempt to course of some letter writers’ misdeeds or familial shenanigans. “Who would do one thing like that?” It’s a pleasure to learn a letter the place folks have really executed a lot proper. You’re in a financially safe place and, in a worst-case state of affairs, you can all the time downsize out of your present dwelling.

The reply to your dilemma is an especially subjective one. There may be an argument to be made that we don’t know whether or not any of us will probably be right here by the point our mortgages are paid off, so why not fulfill our obligations and luxuriate in all that life has to supply.

Given the curiosity you’ll undoubtedly save by paying off your mortgage early, even at 2.5% curiosity, I agree with you. Overpay when you can, particularly early on within the lifetime of the mortgage when the interest-rate funds are greater.

Relying on the phrases of your mortgage, it’s possible you’ll be restricted on the quantity in overpayments you may make (10% in some circumstances), and as irritating and galling because it appears, there might also be a penalty for overpaying. 

For you and your spouse, nevertheless, that would create a contented center floor.

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