{ "media_type": "text", "post_content": "35 yo with 340k in 401k. Same amount between investment and savings. Would it be stupid to lower 401k contribution to pay down mortgage faster? (250k remaining, 2.5%/15 yr).", "post_id": "5fc6e9a12a27f40021ce95f7", "reply_count": 16, "vote_count": 3, "bowl_id": "59064a3cb12379001006592c", "bowl_name": "Personal Investment Chatter" }

35 yo with 340k in 401k. Same amount between investment and savings. Would it be stupid to lower 401k contribution to pay down mortgage faster? (250k remaining, 2.5%/15 yr).

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With that interest rate personally I’d be fine with paying my payments and keep up the 401k. That’s crazy low. Historically you’ll make better returns in the market.

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Financially it doesn’t make sense given the low interest rate but I do understand the peace of mind thing so no you’re not crazy or stupid.

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Setting aside the direct financial outcomes of either option, it’s important to consider that you may be trading peace of mind later for peace of mind now. A larger sum in your 401ks come retirement will give you and your wife peace of mind in its own right. Not to mention your 15-year mortgage will have been paid off by then whichever option you go with.

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Excellent point.

I think a paid off house would give me peace of mind but not sure if it’s worth to go after it so quickly.

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Have the same mortgage stats OP. We aren’t paying it down any faster, my feeling being that a 15yr is already paying it down twice as fast as usual. Might write a big check once we have like 50k left though.

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Rule #1 max out 401k Rule #2 Forget about 401k changes.

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You have another 350k in investment / savings? I say peace of mind is worth it. If $ can make you happy and it's a guaranteed savings of 2.5%, that's better than possible market returns.

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2.5% is better than many years of market returns, that's the risk.

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I'm in a similar situation and I'm paying the minimum on my mortgage. I'm 34. Have $250k in retirement funds. And have $140k on my mortgage at 2.75% for 30 yr. With the mortgage interest rate so low, there really is no reason to rush to pay it off. My mortgage payment is only $1k/mo so I don't need a particularly high paying job to be able to afford it. It's less than rent in most cases. And even if I paid off my mortgage, I'd still own property tax and utilities anyway. I can get much better returns over the next 28 years on that money in the stock market. And even better yet, what will actually give me piece of mind is financial freedom. So I'm taking my money and investing it in real estate. If you're living below your means or have a partner and you could pay the mortgage on the lower of your 2 salaries, and/or if you have a solid emergency fund, then don't worry about the mortgage. If you feel a bit stretched where a layoff would cause concern about payments, then maybe consider putting enough towards the mortgage to significantly lower the payments if you were to recast. I think it would only cost $500 for my old loan. Just ask your bank about that option first. If you pay extra down (I think it had to be$10- or $15k in a few months), then the bank will recalculate your new payment based off the principal. It's a simple process and not a refinance.

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Perhaps see if there’s another area you can cut back on and put that extra money towards the mortgage? You may not notice the 401k returns now, but the 60 year old you might...

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If you are turning away free money, definitely don’t do this. Make sure you get a match on your 401k. If there’s no match to worry about, probably still don’t do this - 2.5% is super low. If you could borrow at 2.5% to invest in the market over 15 years, that would be a good decision. If there’s an early repayment penalty, either explicit or implicit (paying down future interest first) don’t pay down your mortgage. If you’re really worried about the piece of mind part, maybe make a different investment account and think of it as for your mortgage, set a target of 15 years out, slowly move to less risky investments over the final 6 years and use that as a lump sum payment. This is all about investment in general vs paying down your mortgage. For 401k contributions, if you don’t have matching, it’s a good question of when it makes sense to stop contributing. If you believe the tax system will largely be the same today and when you retire, you should keep contributing pre-tax maxing out; if you think they’ll be some large change, you should probably still max it out in a Roth 401k. If you get up to 2M, might be time to stop though, then I’d be worried about required minimum distributions - but far off from that issue currently, imo.

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Honestly either way you’re going to be ok. You’re not talking about reducing contributions in order to increase spending or anything. I get the psychological benefit, But I’d say stay the course a handful more years. The rate is low and the $19.5k puts a dent in it, but isn’t knocking it out overnight. Like others said too, you are already accelerating your payoff by having a 15 yr note as well. In a few years when that $250k is reduced maybe you can knock it out in short order

You should ideally look at your home as an investment (if you’re fortunate enough to be in a growing housing market), so I would say no. From this perspective, you’d essentially be consolidating your investments across multiple sources into one, which tends to not be the generally recommended personal finance strategy. Diversification sounds boring to some people but it’s still generally the best bet for most in the long run.

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