Quote:
Originally Posted by Sly
A couple hundred a month is plenty of money to "invest." Investing isn't just stocks and bonds, and many financial advisors even say that people should not consider messing with stocks and bonds until they have other vehicles completely maxed out... such as 401(k) and IRA. Both 401(k) and IRA offer really great tax benefits (which of course could be pulled sometime down the line.) Although in this situation, I think the thread starter is self-employed so he may not have access to the same exact vehicles as a company employee, but I do know that there are IRA like vehicles for the self-employed.
If you break down the math... sticking that $100 a month into a IRA should earn you more money than paying down your low interest loan. On top of that, the fund will continue growing exponentially over time... you aren't going to see that by paying off your house. And then the tax benefits as well...
With this argument you're going to have one group of people that cheer for paying off the house and another group of people that cheer for investing the excess money. Every math breakdown I have seen and done pushes towards investing, but it really depends on what level of risk the person is willing to take and what their long-term goals are.
Investments stomp houses long term.
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You are talking about two different types of investing. he can't invest the money he thinks he is going to need in 7 years into a long term retirement plan. When you do that you going to pay penalties if you take it out before you are 59 1/2. It's not liquid.
A couple hundred a month invested towards your retirement is a great thing to do in general... in most cases, but not what we talking about here, different circumstances.
He is clearly risk adverse and not looking for something that will tie up his money long term. Actually he isn't even looking for something to invest into, he simply asked if he should pay more on the mortgage or not vs on the tax deduction. My comments in this thread have been directed to him as different methods work for different people in different circumstances.