AssetBuilder Inc. Registered Investment Advisor - Simple Investing. Smart Future.

Should we pay off our mortgage?  We have cash accounts (savings, cds) of 550,000, another 500,000 in ira/roth/401(k) accounts (mostly in stock funds).  I am 58 still working (95M per year), max out 401(k) each year, draw an Air Force retirement of 65M per year.  I am about to inherit 600,000.  Our mortgage is at 5.74%, balance 184,000, P and I of around 1,250 per month, house value around 250,000.  Originally a 30 year loan, but with twice-monthly payments, it should be paid off in about 18 more years.  No other debts.  Should we pay the mortgage off?  If so, where should we invest the money?  Another option....should we refinance for 15 years and continue the twice-monthly payments?

At 5.74 percent there would be little benefit in refinancing and a lot of hassle. Even if you enjoyed a small reduction in the interest rate you pay, that benefit would be offset by the expense of refinancing.

That said, there is little reason to pay it off. First, you aren't pressed for cash for other expenses because you're making additional principal payments. Second, you are getting some tax benefits from this, particularly if your RE taxes are sizable. Third, you're still earning wages so this isn't a contest between what you pay and what you can earn on the same money. Keeping the mortgage is just a way to benefit from the ongoing depreciation of the dollar--- you'll pay the debt off with dollars that buy a lot less than they currently buy.

So I'd keep the mortgage, continue making the double payments, and know that you may want to rethink this when you actually retire and no longer have wage income to support your mortgage.

Scott