Paying off Home instead of IRA?

[Big Bend]

FWIW, I just came into enough money to pay off my mortgage. I'm 42, my wife just quit her job, and not having a mortgage payment will make things alot easier. Are there better investments/tax savings for doing something else with the money? Most certainly. Do I care? Not really... there is huge +EV in mental comfort knowing that no matter what happens with my investments, at least my freekin house that I plan to live in the rest of my life is paid for.

[BloodshotX]

I just went through this same thing. I had a cash reserve though of about 10K.

I purchased a house for around 175K. No matter what you want to max your IRA every year. You are making plenty to do that. Investing early with little m oney is better then investing 7 years down the road with more money. Compound interest.

That being said. I would put 20% down on a house to avoid PMI. Get a lower FIXED 15 year interest rate. Put 4K a year in IRA. Have 3 months living expenses in savings.
Put the rest of your income into mutual funds or another investment.

[ElaineMonster]

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FWIW, I just came into enough money to pay off my mortgage. I'm 42, my wife just quit her job, and not having a mortgage payment will make things alot easier. Are there better investments/tax savings for doing something else with the money? Most certainly. Do I care? Not really... there is huge +EV in mental comfort knowing that no matter what happens with my investments, at least my freekin house that I plan to live in the rest of my life is paid for.

[/ QUOTE ]

I think your situation is very different from the OP's. He's younger and less stable. For various reasons he might want or need to move before the optimal selling date. Essentially, he wants to buy this house as an investment.

You are more stable, have less reason to move, are less likely to wind up upsidedown on your house... blah blah. I think it's smart for you to pay off your house.

But the OP might want to do something different with his money. The question for him is not pay off his home or invest in his IRA, the question is BUY a home or invest. It's VERY different.

[ZServe]

Hi all, thanks for all of the comments. You have basically said what I figured was the case, that it is not optimal to do things this way but it is not a huge mistake either. I just really love the feeling that I have now of owing absolutely nothing to anyone, and I am willing to sacrifice some EV for this peace of mind. I am also a goal oriented person and having the one big monster (the mtg) to try to kill as soon as possible, it will help keep me on the right path I think.

As for meeting Miss Right, this is certainly something to consider as after years of avoiding commitment I am finally starting to consider the idea of finding a nice girl. But no matter what financial plan I have there will be issues of compromise, etc. so I dont think this is a big deal either way.

For the person who talked about inflation lowering the cost of the money I am borrowing, wouldnt that also be the case for any profits on an IRA? Ex. If I made 8% and inflation was 3%, I would actually only make 5%. So wouldnt that make inflation irrelevant? If I am missing something please correct me.

One more thing, if I do start an IRA; I have researched the different types and it seems to me that an SEP IRA is exactly the same as a regular IRA except that your contribution limits are higher on a SEP. If this is the case I would obviously want to do a SEP or a ROTH, and avoid the regular one.

I will also definitely be avoiding the PMI, if I cant afford 20% downpayment then the house is too expensive and I wont buy it. And I agree about the 15 year fixed rate.