That goes likewise for his "pay off your mortgage" advice. If your note is 4.5% and here in the US mortgage interest is tax deductable making your nominal interest rate even lower.
So the calculation becomes... paying off that mortgage is like getting a guaranteed 4% return on your money. But there are many low-risk vehicles that can eclipse that.
It's possible that you'd want to take that guaranteed 4%, but it's not the type of thing that, IMO, is just a given.
I just want to add that in my opinion there is nothing less risky than owning your own home. When I look at what I pay in interest each month for a mortgage and think about how much cash I would need in safe government backed bonds to generate that much income it is a no brainer for me. I know it is unlikely but the government could default, or more likely inflation erodes the real gains over time.
After maxing out a 401K the rest of my money is going towards my mortgage.
same here. the great advice above (or below) re: accounting for the standard deduction when calculating nominal tax savings for mortgage interest and the fact I received the tax form from my mortgage company yesterday showing how much I paid in 2010 (ouch!) I can't imagine any low risk vehicle out there that can compete with quickly paying off your house.
The discount to your mortgage is often quite small since you shouldn't count the entire mortgage interest write-off as a discount, only the amount above the standard deduction. Also, this discount will shrink over time as your interest payments shrink and the standard deduction rises.
You mean only the amount past (standard deduction - state taxes), right?
Even a low 6-figure income for a single person will get you pretty close to the standard deduction in a number of states (California, say) for just the state taxes.
Now if you're married, you have a lot more standard deduction headroom. But you might also have two incomes.
No of course not. But that's not the question. The question is, suppose you've got a lump sum. Would you rather take a risk free 4.x% return by paying off your house, or take on some level of risk -- still far from high risk -- to earn quite a bit more than that.
The OP made the "risk-free 4%" one of his top must-do's. My point is, that's not always the case. Paying off debt is not always the best choice in the current times of very cheap borrowing.
YOU have no appetite for risk (judging only by this comment). That's not true of everybody.
So the calculation becomes... paying off that mortgage is like getting a guaranteed 4% return on your money. But there are many low-risk vehicles that can eclipse that.
It's possible that you'd want to take that guaranteed 4%, but it's not the type of thing that, IMO, is just a given.