should we pay off house

Too many variables not mentioned.
My suggestion?
Hire an accredited independent financial planner preferably one who is a CPA specializing in retirement.

tonymull wrote:

bbaker2001 wrote:
unfortunately I don't have enough write-offs to use the interest. yes at this moment it is liquid. looked at long term investments, but Schwab says do not expect over 3-4 % for some time.
our funds have lost 21% since last year. we really do nor want to lose more.

First move your money to Vanguard. Lowest cost you can find. Then park it in a 500 index fund or a total market fund. I think the outlook for the market is considerably more than 3%.

Can't imagine how you managed to lose 21% on investments in the past year. I just made a rough check of ours and we are down 6% since 12/31/14, not counting dividends taken as cash. That said, we are way up from where we started 10 years ago, even after the "Great Recession". I agree with Tony's suggestion to move to Vanguard low cost index funds.

You may find http://jlcollinsnh.com/stock-series/ to be of interest in improving your investment outcome.

To answer your original question, I would pay off the mortgage, especially if your itemized deductions aren't greater than your standard deduction by at least the amount of the mortgage interest. There is an old saying "You can't deduct your way to wealth."

For myself, I decided to pay the house off as early as possible and have had it paid off for awhile now. There are physiological benefits to being debt free, and while I have personally done pretty well with investments over the years, I've always been aware there are indeed risks. It's comfortable to us to know our future housing is covered other than taxes and sustainment sorts of expenses.

Personally, being somewhat conservative I can't imagine retiring while having debt. We debated retiring this year, but have decided to continue working one more year till I turn 58 so that we can build a little more diversity into our assets.

bbaker2001 wrote:
unfortunately I don't have enough write-offs to use the interest. yes at this moment it is liquid. looked at long term investments, but Schwab says do not expect over 3-4 % for some time.
our funds have lost 21% since last year. we really do nor want to lose more.

If Schwab told you that the outlook for their long term funds is less than 3-4% over a long term, I think they explained it wrong. If they told you that next years return was 3-4%, I'd buy that.

Honestly, with your funds down 21%, now is a good time to buy, but it's always referenced by sell date, which should be referenced by when you "need" the money.

You've lost nothing until you sell.

Largely, this is risk versus time frame. Longer the time frame, the lower your risk. I'd try to ignore losses or gains for a single year.

I've got a father-in-law who, like you, is risk adverse. He was quoting things like you were - markets down 15-20% in a year, uncertain economy. He had no need for that investment nest egg for a period of 10-15 years. So, for the last 10 years, he's kept that egg in a CD, I think "earning" about 1.75%. He's happy because the balance hasn't dropped. Had he needed that money in 2-3 years, he made the right choice.

However, he's lost money versus inflation. Had it put that money in a simple index fund at the *worst* time possible 10 years ago, he'd be way ahead. Vanguard index fund

Try to find a period of 10-years where an index fund lost value... It may be possible if you bought at the height of a booming economy and rode it into a recession, but that's not what's going on now. Even you said your funds are down 21%.

I'm not a financial advisor. You can get better advise. However, you need to specify two things:
1) Time frame
2) Risk level

There are funds that are "target" funds (date) that get less risky over time.

3% guaranteed return is good right now. That hedges at about the rate of inflation. Paying off the house would be better, as you're not tax advantaged by the interest. However, if you're going to let that money sit for another decade, I think you'd be better off doing something else. Perhaps substantially better off.

bbaker2001 wrote:
unfortunately I don't have enough write-offs to use the interest. yes at this moment it is liquid. looked at long term investments, but Schwab says do not expect over 3-4 % for some time.
our funds have lost 21% since last year. we really do nor want to lose more.

First move your money to Vanguard. Lowest cost you can find. Then park it in a 500 index fund or a total market fund. I think the outlook for the market is considerably more than 3%.

Yes. Consider that anything you can deduct such as interest gains you about 25% reduction in your payable tax. So if you can deduct a dollar, you pay 25 cents less tax.

Also having no house payment really frees you to do lotsa other things with your moola.

Good for you.

Yes

I've been debt free only once in my life.... that was the day I was born! After that, it all went down hill! What a great feeling that was! (not being born, being debt free!) Actually, I was 100% debt free until I got married at the age of 29, and that included Student Loans and college tuition, I paid myself. Now, I'll be paying for stuff until I'm 129! That's funny how marriage and kids will do that to a guy!

Debt free means FREEDOM! If you can pay it off... do it! Debt is a taskmaster!

should we pay off house

YES!

I would not have even thought about retiring with a mortgage still on my house. Being debt free before retiring was always engrained into me. I am happily retired with no financial burden. :)

Of course times have changed, but my thinking hasn't. To each, their own.

When we could no longer deduct our house payment (too small an amount) we paid off the mortgage.
This allowed us to then funnel those payments into investments.
Having no mortgage and enough money aside allowed us to retire early.

One of my old co-workers did something similar, only when they retired they leased the house out, which allowed them to buy a nicer RV and hit the road.

Years later, when they had seen just about everyplace in North America you can drive to, they terminated the lease, remodeled the house with the funds the renters had paid them and then moved back into their own home. Having owned three RVs their renters helped pay for.