Pay down mortgage or save for retirement?

[redfox]

I'm sorry I ever mentioned any of it.

[Gardenarian]

I would pay off the student loan and other high-interest debt first, then pay the mortgage, then save for retirement.

I'm coming from the point of view that my house yields the highest gains of any investment I have. We have paid off our mortgage on a our house that cost around 550,000 and is now worth around 1 million. Same with my cabin - I paid off the ~150,000 (no mortgage) and it now worth over 500,000. So even without a lot of retirement savings, we'd be in excellent shape by selling off any of the real estate.

This obviously depends on where you live and when (and if) you intend to sell.

DH and I plan to downsize within the next 5-7 years, and I don't see real estate in the Bay Area taking a nosedive in that time period.

[fidgiegirl]

Given your age, if it were me, I'd aim for this:

1) Refinance the mortgage if possible. Even though rates are no longer at rock bottom, I would bet you can do better than a 5.xx% rate still. Or, think about moving. Do you plan to stay in your home indefinitely? Could you get anything comfortable in your neighborhood but for less borrowing? If you sold your home, would you expect to get more than what you owe? More rhetorical questions than anything, but feel free to answer them if you want . . .
2) Pay off the cc and car and possibly the medical debt (or maybe just stick to payment plan since it is 0%) and then start rolling those $$ into retirement savings.
3) Keep current on the student loan, but don't go overboard on paying it off. It would be interesting to know the outcome of if you are better off submitting to some garnishment of SS or by keeping with the payment plan. One of the recent Marketplace Money episodes had a good listener question about student loan forgiveness v. income-based repayment. I wish I could remember which week it was. Maybe if you poke around in the podcast archives the descriptions would tell you enough to know which one it was.
4) Put any extra available $$ toward retirement. It's an "put on your own mask before putting on that of others" kind of scenario in my mind. You might be ok with working until 70, but you may not be able to. I think the time to beef that fund up as much as you can is now.

You might also consider cross posting this in the MMM forums. I hate to recommend that but you won't be torn from us if you do it. There are a lot more people over there and many of them are very well versed in investing. You gotta have a tough skin, though. I've never been brave enough, myself.

ETA: Here's that student loan podcast (not the whole thing, you might have to hunt around to where within the hour they talk about it): https://itunes.apple.com/us/podcast/...234231719&mt=2

[razz]

I would put the money in retirement funding after paying off the high interest loans. The mortgage will always be payable or you will sell the house if the funds change.

[Teacher Terry]

I agree with razz. I am usually big on paying off the mortgage but in your case I do not think it makes sense. You may need to sell the house in order to retire and you don't know what the housing market will be like then. Also Fidgiegirl is right that you may not be able to work till 70(either physically or getting laid-off and can't find another job). I would hope for the best & prepare for the worst.

[lhamo]

I pretty much agree with fidgie. I would:

1) If you are sure you want to stay in the house for at least 5 years, try to refinance. You might want to check with BECU about their rates -- I have been a happy BECU customer for nearly 25 years. A mortgage broker might also be able to give you a sense of what you can do.

If you are not underwater, and depending on how housing values are doing in your neighborhood, you might want to consider downsizing now to a condo or townhouse, or maybe even going back to renting an apartment. 2k/month is pretty high, though I realize that includes extra.

2) Pay off the credit card, then the car loan -- both as soon as possible

3) Figure out whether you have the possibility of getting the student loans forgiven. that would be HUGE. didn't the non-profit forgiveness programs start around 2007? If so, then you've been paying several years already while working in the non-profit sector. That should count, no? EVen if you have to pay a bit more now based on your higher income, the prospect of having nearly 100K in loans forgiven is MEGA. Take this more seriously and figure out what you need to do to get in the program. End of lecture

4) After you have done the steps above, throw whatever you can into retirement. Given your ages, you might want to be a bit more conservative in your asset allocation. Or maybe this is the time to throw it all at higher risk/higher return options, if you really are sure you are willing to work another 10-20 years. You could go with more risky for him (since he has a longer work horizon) and more conservative for you. You are going to get better returns in the market over time than you probably will putting the extra on the mortgage. And then if you want to pay off the mortgage with retirement funds when the time comes, you can always do that.

Do also take the time to figure out what your social security income likely to be for you and DH at ages 62 and above. I know you had lots of years of no or irregular income, but there should be SOMETHING there and knowing what you have coming will help you plan better in terms of cash flow.

If you know you want to keep the house for awhile, I would still keep a close eye on the market and think seriously about selling/downsizing at some point. Look into whether you might eventually qualify for Seattle's subsidized housing programs for the elderly at some point -- SHAG is the big group you are probably familiar with, there may be others. If you could wipe out the student loans, get rid of the mortgage and reduce your housing cost, you might be able to retire much sooner than you think.

Good luck figuring out your plan and putting it into motion. You can do this!

[onlinemoniker]

My student loan is on a repayment program where I pay 10 years of payments based on my income and the rest is forgiven because I am a public servant. Thanks George Bush!

I am a public school teacher. I make a sub-standard salary. I will get a pension and Social Security. My retirement program is that I am working hard to pay my mortgage off early. When the mortgage is paid and student loan forgiven, I'm retiring. Hopefully, less than 10 years from now which will still make me 5+ years older than the average retiring teacher.

I have virtually no savings but with the mortgage gone and receiving pension and SS, I will live pretty well.

[redfox]

This is all very helpful, thank you!

- The house: not under water (current Zillow at 290K & local comps strong). We are planning to stay, as we've put a lot of work into it, and really like it here. It is über affordable for Seattle, well insulated, etc. I don't think we'd qualify for a re-fi due to my SL debt. Nor do I think we'd qualify for another mortgage for the same reason. Might I be incorrect, in your estimation? I have investigated senior housing which is affordable, and we'd qualify once I am retired & living on SS, but not with current income.

- The SL: I have not paid on it in some years. The interest rate is 3.2%. I will start paying a graduated payment in the next 60 days, $200-350/Mo for a year while I investigate the non-profit 10year/120 payments pgm. I want to pay on it, but it is frankly my last priority. I'm working on putting a number to what it would mean to lose 15% of my SS each month towards it.

I think it may be time to consult a financial planner. Keep those ideas coming!

[Yarrow]

- The SL: I have not paid on it in some years. The interest rate is 3.2%. I will start paying a graduated payment in the next 60 days, $200-350/Mo for a year while I investigate the non-profit 10year/120 payments pgm. I want to pay on it, but it is frankly my last priority. I'm working on putting a number to what it would mean to lose 15% of my SS each month towards it.

I don't understand the attitude of it being ok not to pay on your SL for years, and no care from you that it might not be paid off in your lifetime????? I paid off my student loans, my kids are working hard to pay their SLs off. What makes it ok for you not to, but have a nice house, etc. I did without a lot to get my SLs paid off before I ever took on a mortgage, etc.

[onlinemoniker]

Yarrow: It sounds like you don't understand the "Student Loan Scam." (Hint: It's not what borrowers perpetrate on the lenders/government when they borrow and fail to pay back according to the original terms.)