Should I pay off our mortgage before retirement, invest that money or go travel now? The Moneyist helps out a couple with a $1.8M nest egg:
My wife and I have done very well working in healthcare the past 25 years. We’ve always taken advantage of 401 and 403 to the max, and have additional savings in an IRA and almost no revolving credit debt. We currently have $1.8 million in these savings accounts.
I understand that we are blessed to have such a nice nest egg, but I worry that stretching that house payment into our first five years of retirement will eat a huge chunk out of the retirement funds that could jeopardize longer-term planning. We also plan on this house being the bulk of the “inheritance” for our two children, so don’t plan on selling and moving once we finally make the retirement plunge.
Depending on the terms of your mortgage, you may be limited on the amount in overpayments you can make , and as galling as it seems, there may be a penalty for overpaying. In your case, that could actually be a good thing. Your tax-advantaged retirement savings at, say, 6% will be doing a lot of the heavy lifting for you, offsetting your 2.5% interest rate, given the size of your 401 — far above the national average — and your salaries.
Even taking an average return of 6% on your 401, plus each of your Social Security payments, and inflation, you would still have enough to live comfortably and pay down your mortgage and/or downsize if you wish.
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