Home or Portfolio?

[Edgy MD]

I have a home, about 3/7 paid off. I have a retirement portfolio, currently worth about 42% more than the home's full market value. My wife is beset by anxiety and is strongly considering withdrawing from the retirement account to pay off the home.

We have a great mortgage rate — 3.25% — so the bank would love me to pay it off, as presumably, they can do better with the money than collect 3.25% from me. But from my wife's perspective — and I am not immune to this — the country is on fire, and intentionally so, as the president is an arsonist, and we already saw our investment sink in 2020, and that was when our country was actively trying to fight adversity, rather than deliberately causing it.

Withdrawing the money is almost certainly a terrible idea, as there is a 10% penalty on any money we pull out of the account, plus the tax-man considers it income, so we get hosed at both sides, but ... (/waves hand) this. Also, we are not currently putting money into the account, as we are both self-employed, and just trying to get by on what we take in.

So which of my two assets is a better place to drop my fundz?

Extra points if any of youse is a banker, or possibly a lawyer that just joined a firm specializing in real estate.

[Benjamin Grimm]

I wouldn't do it. If you're antsy (and understandably so) I would move the retirement funds to more conservative investments. I can't see how the withdrawal plan is a good idea. That way, you're guaranteed to take a hit.

[metirish]

I wouldn't do it. If you're antsy (and understandably so) I would move the retirement funds to more conservative investments. I can't see how the withdrawal plan is a good idea. That way, you're guaranteed to take a hit.

Agree , I would certainly talk to a trusted money manager

[Johnny Lunchbucket]

401k managers are always telling you that whatever you have socked away for retirement isn't enough.

That will be very more more true thanks to that fucking idiot.

[Edgy MD]

That last one is true. I like my 401k fund manager, and he's the husband of a friend, but he loses if I take $$ out, so his interests are compromised.

Also, he's a Republican. Though I never found him to be Trumpy — and his wife hates the president — I worry that he has an ideological reflex/need to tell me that the market is the right place for one's money over the long haul.

That is true through most of US history, but this is, like un-history.

[whippoorwill]

Not trying to be nosy, but how many years are left on your mortgage?

[Chad ochoseis]

No! Bad dog! Stay away from that money!

OK. I think I remember you're two years younger than me. I turned 60 a few months back, so that was #58 that I rudely neglected to acknowledge last week.

- You're just a year and a half away from being able to withdraw without penalty.

- If the economy gets blown to hell, everything is going with it, including home values. So you'll take that hit, pay those taxes, and put your money into another lousy and also illiquid investment. If the (economic) worst happened and you lost your job because of the tanking of the economy, then (a) you can probably hold off the wolves at the bank for a year and a half and (b) I believe the rule is that if you leave your job voluntarily or involuntarily at 55 or older, you can then withdraw from the 401(k) without penalty. So the money's there if you need it.

- I agree with Grimm. Move the money to a conservative investment plus perhaps an investment in a European index fund, since they may be better equipped to survive the next four years. No guarantees there, of course, but that's what I did with my own 401(k).

Disclaimer - I'm not a money manager, either.

[Edgy MD]

Good advice, folks. Thanks, all.

Mortgage is about 40% paid off. We don't really look at it as years, because my wife never lets things go full-term. Cars, piano, etc. all get paid off as soon as she can. She is deathly allergic to debt. Me, not so much, but I appreciate her ways. I guess it is about 18 years left on the mortgage.

[Fman99]

I would move the retirement funds to more conservative investments

I believe this is the best answer. More bonds, less stocks, and more stocks/portfolio stuff likely to withstand the ups and downs - allows your retirement funds to continue to grow while the market is in a volatile state. Shift things back towards stocks once the market seems to be trending more positively.

Note: I am not a full time financial planner but I am in my 50's and more attentive to my overall debt and savings as I get closer to my retirement

[TheNextMetsManager]

While obvious the idiots running the country are deeply stupid and bland people, pretty much the only thing they covet is money. (power/money are basically the same thing in America)

After a lifetime of watching these people pretty much always win and get richer, I'm banking on stocks, 401ks and that ilk being pretty viable for a while.

Pretty much the same with the house. The system is pretty set up for houses/land to pretty much always be a growing asset. To the point that even a lot of otherwise liberal people instinctually reject things like multi-use zoning, multi-family houses/street parking, affordable housing complexes..

When I bought my house 10 years ago it seemed insane to think this pretty average, maybe even lower end for the area, house from the 1950s would still be desirable, would appreciate over 30 years. We paid like 400k for it..the way houses are appreciating it seemed insane to think of a nearly 100 year old house selling for something approaching a million dollars when the mortgage was done. Now, just a third of the way there or so, Zestimate is 660k? two houses away they completely tore down and rebuilt (much bigger) and sold for like 900 or something, made like 450k in profit over like 9 months.

[MFS62]

More bonds, less stocks,

But keep in the back of your mind that some municipalities issue bonds in anticipation of income from already awarded federal money.
And that money may not be available under 47.
Do your homework on how those bonds will be funded going forward, not just on their past record.

Later

[Lefty Specialist]

Don't borrow from your 401k unless it's an absolute absolute emergency. Most funds are diversified enough to hopefully withstand even these idiots.

We bought our house in 1992 and refinanced 3 times as rates fell, and paid it off in 2008. We refinanced to a 15-year loan at the end. It was more expensive per month but the amount we saved in aggregate was amazing. It's a nice feeling not to have that payment, and we plowed that money into our 401k's. Don't know if a 15-year would work for you, but if you're worried about paying things off that might be an option. We paid extra money each month that went straight to the principle rather than the interest, so we paid it off early. My wife was obsessed with paying it off as soon as possible. But we never stopped putting money into the 401k's, especially since we had a company match.

[cal sharpie]

We bought an apartment in the early '90's and tripled what we paid for it in 2001. We put that into the house we are in now. Because we had made such a killing on the first one our mortgage was relatively small. We paid that off in, I think, 2016. Not paying monthly dues for the house is quite sweet. That being said, I would not have taken money from my 401(k) for any of this.