‘My wife and I are both retired’: Should we dip into our $2.3 million investments to pay off our 2.9% $300,000 mortgage?
“Right now, we’re withdrawing about $100,000 a year from our investments.”
The couple in question has a substantial nest egg of $2.3 million and a relatively low-interest mortgage of $300,000 at 2.9%. Their annual withdrawal of $100,000 from investments is likely to continue, supporting their retirement lifestyle. The question is whether it makes sense to use some of those investment funds to pay off the mortgage.
In a low-interest-rate environment, it often makes sense to prioritize investing over debt repayment, especially if the investment returns are likely to exceed the mortgage interest rate. However, this strategy depends on individual circumstances, risk tolerance, and investment goals. For this couple, using $300,000 from their investments to pay off the mortgage would eliminate debt with a low interest rate, freeing up more money for living expenses or other goals.
To watch next: The couple's investment returns and how they compare to their mortgage rate. If their investments are generating returns significantly higher than 2.9%, it might be better to maintain the mortgage and focus on growing their wealth. Conversely, if investment returns are expected to be low or volatile, paying off the mortgage could provide a guaranteed return and reduced financial risk. The couple should also consider factors like tax implications, liquidity needs, and overall financial goals before making a decision.
Originally reported by marketwatch.com. BondNews adds analysis for finance & markets readers.