Ep. 404: Should We Eliminate Our Mortgage or Keep Saving?

The Pete the Planner® Show

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This week on the Pete the Planner Show, Pete and Damian are digging back into the mailbag to respond to real questions from real listeners. We love talking directly to our tribe!

Remember: In the first six months of 2021, we’re going to make over five families’ financial lives, LIVE on the air! WE’RE GIVING AWAY FIVE FREE HEY MONEY, MEMBERSHIPS to walk with them across six months telling their stories about their struggles in personal finances. Check us out!

No time to listen? BUMMER. Here’s some of what happened and when:

Show Notes:

MAILBAG QUESTION 1: [3:02]

• “You mentioned that the goal of 401(k) contribution should be an excess of 12-14% of your income. What if your annual 401(k) contribution is maxed at $58,000 per year with profit sharing, employer & employee contributions, plus $12k to IRA and spousal IRA, but you’re still reaching only 11-12% of your income? Should we look for other vehicles?”
  
  • Damian: This is a good problem to have. You’re going to have to look for other places to stash cash. High income earners sometimes find they weren’t saving enough over the long term.
  • Pete: Let’s say their current income is only covered here, not their income over the entire career. Let’s say they only got to this point where they’re aggressively saving dollars in recent years, as if playing catch-up.
  • Damian: It’s a large number they’re saving now, but that scenario is very possible depending on how much time is left until retirement.

MAILBAG QUESTION 2: [27:05]

• “My husband and I have no credit card debt. Each of our credit scores are over 800, and own our car. We have over $20,000 in a savings account. My husband, retired, also has $400,000 saved for retirement. His sole income is $1,395 from Social Security. I have a pension plan and a 457 plan with $130,000 in that account. I recently refinanced our mortgage from and we owe $127,000 on our home. We budget our groceries and eat out once per month. Since I will be working for at least another 10 years, should he pull $127,000 our of his retirement and pay off the mortage, while I shift the $1260/month I currently put toward it to an investment? OR should I take the extra $700 I have left after I pay all our bills and put it towards the principle of our mortgage instead of savings?
  • Damian: No. I don’t think you should remove from assets to put toward something can be cash-flowed. I’d be reluctant to take the tax hit.
  • Pete: I get excited about a low interest mortgage. No, don’t take from a higher interest-earning asset to pay off a lower-interest rate.

There’s so much more in the full show! — click PLAY below for the full show.

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