My wife and I have done very well in the health field over the past 25 years. We’ve always leveraged 401 (k) and 403 (b) to the max, and have extra savings in an IRA and almost no revolving credit debt. We currently have $ 1.8 million in these savings accounts.
However, at age 52, we decided to move to Florida – now that our kids are grown up and alone – rather than wait for retirement. We both still work and together earn over $ 400,000 a year. We plan to work until a minimum of 65 and have never had any serious health problems.
At issue: We bought a home at the top of our desired range and have a 20-year mortgage (2.5% interest) with a monthly payment of over $ 4,100. We’ve always paid extra on our mortgages, and my goal was to do the same with this house so that by the time we reach retirement at 65, it would be paid off.
However, my wife says that we will have plenty of money once we reach retirement age to maintain the house payment for the first five to six years of retirement, and that we shouldn’t “pinch” Now that we have time to travel, even before we fully retire.
I understand that we are fortunate enough to have such a good nest egg, but I’m concerned that extending this house payment over our first five years of retirement will eat away at a huge chunk of retirement funds, which could jeopardize the pension fund. long-term planning. We also anticipate this house to be the bulk of the ‘heirloom’ for our two children, so don’t plan on selling and moving out once we finally make the retirement plunge.
Thoughts on how to approach this mortgage conundrum?
Two pharmacists in Florida
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Dear pharmacists,
It’s a win-win. You are charmed if you do, and you are charmed if you don’t.
This column often leaves readers dumbfounded. “I can’t believe this crazy situation! Readers say, trying to deal with the mischief or family shenanigans of some letter writers. “Who would do something like that?” It is a pleasure to read a letter where people have done so much good. You are in a financially secure position, and in the worst case scenario, you could still downsize your current home.
The answer to your dilemma is extremely subjective. There’s an argument to be made that we don’t know if either of us will be here by the time our mortgages are paid off, so why not fulfill our obligations and enjoy all that life has to offer.
Given the interest you will no doubt save by prepaying your mortgage, even at 2.5% interest, I agree with you. Overpay if you can, especially early in the loan term when interest rate payments are higher.
Depending on the terms of your mortgage, you may be limited on the amount of overpayments you can make (10% in some cases), and as frustrating and infuriating as it sounds, there can also be a payment penalty. too much.
For you and your wife, however, it could create a happy medium.
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