I used to believe this little "investment in stock market" story but I am a baby-boomer getting ready to retire who has not seen their investment portfolio advance in almost a decade (read my previous post)..
Do I have faith in the next 30 years? Frankly, the way it's going (and gone the last 10 years) I say big fat NO..
Read up on "secular bear markets" (which we are in the midst of right now) and you will find that these can last for years and years, even decades (like the bear market that ran from 1966 to 1982).
Average rate of return during a bear market, 1% per year (if you don't manage to lose your shirt first)...
And like I already noted, this type of market is generally long term. I don't think we'll be seeing a recovery here for many years to come...
More years than I have to wait around for..
So why in the world would you want to pay 6% a year on your mortage when you are only earning 1$ in the stock market? (Or none as in most 401k investors are finding)??
Pay your house off and even if you lose your job (and all your savings), you still have a place to call home..
That's a lot of peace of mind and security as far as I'm concerned..
Nancyof AZ5:41PM February 07, 2009
Everyone keeps talking about retaining the 401k for future security but mine (don't know about yours) hasn't gained any value in the last 8 years, rather it's lost value (lot's of it).. What kind of investment value (or security) is that?
My husband was laid off from his high-paying corporate job in 2001. His 401k was worth $125k at that time. At the supposedly "normal" gains of 10% a year (what a bunch of crock) it should have doubled by now (according to all the financial wizards)...
Soon after 9/11 the $125k dipped to $90k. It took until mid-2008 to build to $125k again, but six (short months) later, it has dipped to $100k and the market is still moving downward. Pretty discouraging (and scary).
So exactly how much "security" and investment it is worth, seems at this point, zippo... The financial investors can run off their mouths all they want about what a bad idea it is to pay off the mortgage early but they're all wet. According to them, the best "plan" is to pay the bank huge amounts of interest (on your mortgage) and invest as much money as you can in your 401K.
Well, you might say, I'm seeing through this little investment banker scheme and have realized the best investment I can make is to pay my mortgage off early...
That way the bankers can go ... themselves (I'm sure you know what I mean) and the stockbrokers can also do the same..
I'm holding on to my own money in the form of hardcore assets (property, etc.). That way no one can rip me off again. Plus, I don't care if the value of the property goes up or down, I'll have a paid-off roof over my head and no one jacking my money around ever again!
Nancyof AZ5:11PM February 07, 2009
Paying off your mortgage is short-sighted. Unless you believe that we are doomed over the next 30-years, it makes a lot more sense to invest in the stock market over that period.
jimmyof LA10:24AM January 14, 2009
This really should be a no-brainer decision but it seems that many people out there absolutely freak over the idea of giving up "the biggest tax deduction I've got." I did the math years ago and figured out quickly that charging interest gets you more money than paying interest. I paid my mortgage off five years ago and have enjoyed an increased cash flow ever since allowing me to stuff my 401(k) and take annual trips to Europe....all because I paid off my mortgage! Anyone who hopes to retire had better take a page out of their grandparent's book and retire their mortgage.
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Nancy of AZ 5:41PM February 07, 2009
Nancy of AZ 5:11PM February 07, 2009
jimmy of LA 10:24AM January 14, 2009
Dave of CA 12:20AM December 24, 2008