[USER]

My wife and I are 29 years old, no kids. Our household income is $222k. Our only debt is our house: we owe $185k at 2.25% and it’s worth $320k. Our net worth is $366k including equity , 401k, and stocks. We have paid off all cars and student loans.

We’re unsure what to do next… we don’t want to work until we’re 65 but also don’t want to take on a ton of risk. We will have the $185k to pay off the house within the next 3 years or so…. Yeah yeah we know paying off 2.25% is silly. But my thoughts are we pay it off, then we will have $2k a month passive income after we move.

What would you do?

Thanks!

[Courtney]

Read The Simple Path to Wealth. You are doing great. Also learn about Roth Accounts and Roth conversion ladders. Make a plan for where you want to be in 5-10 years and reverse engineer it.

[Monique]

I would never pay off a home and definitely not one with an interest rate that low. Find another investment vehicle for that money. Stock or real estate or both. Focus on your investing education. That’s most important.

[Ashley]

I wouldn’t ever pay off that house with that rate. I have 3 at 3.5% and less… let the tenants pay it off when you move.

[Kevin]

Not pay off the house and get into indexed funds. By letting that money compound you will know you could pay the house off at anytime. Stocks are pretty liquid a house not so much so. If you got in a bind and one or both of you loss your job you could sell the stock but not so easy if you paid off your house to get that money quickly!

[Jasmine]

We threw everything at the house too. I know some will disagree, and in fact the mathematics may disagree too, but the sense of satisfaction and security from owning a house full and clear of debt is incredible!

[David]

I would start tyring to hit a high savings rate and invest that money based on your goals, time horizan and risk tolerance.

Based on your post you have roughly $135K invested. You have most of your net worth tied into a home. I would start maxing out 401Ks, IRA’s, HSA’s and the rest funnel into taxable accounts.

[张扬]

If you take the long term view, investing in the stock market (using index funds) is not risky. However paying off historically low interest rate debt that’s below the rate of inflation (and CDs!) is, especially when you’re young and your money has the potential to compound for 5 decades or more. I paid off my house at your age and regretted it after looking back decades later and seeing what I missed out on. I wish someone had imparted this insight/advice to me, because my net worth would be another million or more higher today.

[Frank]

Invest your money and avoid sacrificing your long-term future in the interests of feeling good now.

Mostly you need to actually bite the bullet and LEARN about investing instead of avoiding it with platitudes you tell you yourself about not wanting to take any risk, blah, blah, blah, stick fingers in ears and avoid any new knowledge to the contrary.

Life is risky. If you rent your house, your tenant may burn it down. Bad things happen. Most of them are temporary setbacks when they do.

I would ask yourself whether you want to be a wealthy person or not. Wealthy people in the US typically have less than 15% of their wealth tied up in their residence and put the bulk in growing investments or businesses. So an easy way to approach this is put about 4 dollars towards investments for every 1 dollar put into your house.

Or you can keep on keeping on and probably end up with the bulk of your wealth in your house like average Americans who then have trouble retiring because their assets are illiquid.

[Author]

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