{ "media_type": "text", "post_content": "I got a new job making $277K. Treating it as an opportunity vs. buying bigger/expensive stuff. If I stop investing (except up to 401k match) & put the extra $ towards house ($292k left), I could......", "post_id": "5d471765e739e6002a92bd9c", "reply_count": 30, "vote_count": 1, "bowl_id": "59064a3cb12379001006592c", "bowl_name": "Personal Investment Chatter", "feed_type": "bowl" }

I got a new job making $277K. Treating it as an opportunity vs. buying bigger/expensive stuff. If I stop investing (except up to 401k match) & put the extra $ towards house ($292k left), I could......

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A few things the come to mind: I’d boost the emergency fund closer to at least 6mo salary, given your title and currently salary. Also I would max 401k and not just up to match. After that I don’t know if I’d be so aggressive as to pay the house off in <10years but I don’t have a good argument not to as long as your retirement and cash is all sound, which sounds like it is.

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I feel OP & myself are somewhat kindred spirits. So, here’s what I would do:

Pay down the mortgage until principal balance is a low 5-digits (say, $50K). I have a 2.625% mortgage and I still regret not paying it down, regardless of the opportunities in the broader equity market.

In the meantime, contribute the max $19.5K to your 401K. I am lazy so I overcontribute (approx. $25K/yr). I may increase that amount just so I can automate more of my savings. Combined with my firm’s contributions and wealth building accounts, my retirement balance changed by ~$100K over the TTM.

I don’t do backdoor Roths, but maybe you can.

Those are the 3 nuggets I have for you.

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This is the logical response and reaction.

However, the same principle that says you can't time the market, also correlates with your inability to time a downward shifting market. So, you could very easily have missed the market boom as you could have avoided a market debacle. There is no way of knowing.

Have you ever bought stocks in a collapsing market? It's easy to say, and commonsensical, but very difficult to do in real life. No one goes out buying stocks when you're not sure if you will have a job the next day

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Hello, I’m a Prince from Cote d’Ivoire in West Africa, I need help getting out of the country. I’m requesting you send me $10,000 and in return I will repay you double. Pleaze help.

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Parts of your plan are bad. Don't pay extra to mortgage at the expense of not maxing out 401k and HSA. Those retirement accounts and tax deductions are going to be what allows you to retire early, not aggressively paying the house down. Especially if you're going to sell in 8 years anyways.

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Okay humble brag much. What do you want us to say?

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You're correct about professional advice. But I've seen very well thought out posts via these bowls. Wanted to see if someone comes up with something I haven't thought of.

Even being risk averse, I don’t think you should consider paying off the mortgage early.

3% is such a low rate, as others have commented you should be able to clear a return in excess of this easily. Of course, there is a sliding scale of risk that brings on.

Additionally, I’d spend time thinking about how with your new/higher income you can limit your tax exposure. Two easy ones that come to mind for me... 1) mortgage interest deductions - which obviously you eliminate if you pay it off. And 2) 401k contributions, which you not maxing out.

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I would recommend continuing to invest in assets outside of your house. If you’re looking to retire early, at some point you’re probably going to wish you had access to your home equity. Also, I don’t know your tax situation, but your effective rate in that 3% loan after any deductions should be much lower than the return you’ll see off of most long term market returns.

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You’ll still have access via a HELOC and other similar instruments, but ideally you’re not borrowing to fund your retirement.

you're missing out if you don't do backdoor Roth, it's easy to do, and takes your future gains away from the tax man. stop being inefficient with your money

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Cont'd...have it paid off between 2023/2024.

Mortgage was for $324K 3 years ago at 3%. Both kids 529's are fully funded, have $500K in retirement accounts, $25K emergency fund, and no other debt. Plan to sell/move within 8-10 years. I'm 43.

I'm thinking this would allow me to retire sooner, reduce my risk of ever losing my home (property insurance is $3,100 a year...not a typo), and really would have to worry if I lost this job.

Thoughts?

*wouldn't have to worry...

Sounds like a solid plan, but I'd consider increasing your savings. Always thought general rule was 3-12 months worth of salary. Sure up the emergency fund and pay off the house

It's not based off salary. It's based on your expenses. 3 to 12 months of expenses.

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at that rate I would understand more than put towards mortgage.

Agreed. 3% is cheap money. Put it to use elsewhere.

I share the same concern with you re: losing job/having to settle for less money. But I always fall back on 1) live below your means and invest the rest to build a solid net worth and 2) being able to make almost as much somewhere else as being effective hedges against getting canned. You may not make 277k next job, but you won't be making 40k either. You'll likely be at least around 200.

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I would retain the 3% loan and invest in a vehicle which makes 12 percent. Or even better put money in Roth, and let it grow tax free. Sorry I don’t see how this is smart to pay off a 3 percent loan. At the very least do a 15 year loan and buy something on the side

See, this conversation is making me realize something. I'm thinking of this from a risk perspective, and a bit like the lottery. Never in my life did I think I'd make this much $. So I see this as an opportunity. While the loan is only 3%, I could pay it off while things are good, then save like crazy afterwards. Then whenever the next recession hits, if I'm laid off, I could get a much lower paying job and be ok. Not going on vacation, but not losing everything either.

The other side is to keep investing and make more than a 3% return (not hard). But when the next recession hits, all my account balances would go down and I'd still have the house payment.

I'm seeing all this through the lens of things are amazing right now, but I don't know how long it will last. What could I do in a short time that would have the most impact?

This is the first time I've ever made so much money that it disqualifies me from putting money into a Roth without having to do the back door.

Don’t forget to check if you can mega backdoor roth. Also, an extra downside of paying off your home is you lose the leverage that the mortgage gives you. Might not care - but helps you make money if you ever plan to sell (assuming you didn’t buy at the peak)

What leverage are you referring to?

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