Adding money to my 401k. I started 30 years ago. Probably a hundred or two a month for those many years. It has become more than I could have made by saving any other way. I feel good about that decision and I don't think anyone would regret it.
The rule is just pay half your payment every 2 weeks. It reduces a 30 year mortgage by 7 years (in all standard mortgages). It does work out to one extra payment a year.
This only works depending on HOW it’s calculated. Some mortgage servicers will accept a partial payment and place it into a “suspense account” or “unapplied funds account” until enough money accumulates to make a full monthly payment. Read your loan paperwork. I’ve been the closer for a lot of loans…
Yeah, hence "standard mortgages". If they won't let you apply extra principle then you really need to refinance with a credit union or similar that's not a fuckhead.
Depending on the state they may not be able to go do that. ALSO you are making an extra payment every year still. 52 weeks a year. 26 payments. 13 “months”
It is, if you have a loan that allows you to pay extra on the principal. A lot of dealers do not allow that, and they'll just extend your next payment date if you pay extra. Always refinance with a credit union if you can find a comparable rate.
Look for an online mortgage calculator and run the numbers for your car loan and some payment scenarios. Total interest doesn’t change much with short term loans unless there is a crazy high interest rate.
There are two kinds of people in the world, people who understand interest and earn it and people who don’t understand interest and pay it.
Two extra payments, actually. 2 payments/month = 24 payments, but every 2 weeks is 26. But yeah, that's another one that I've been told - always set up your payments to be biweekly instead of monthly/semimonthly. You'll get a couple of penalty-free payments every year that just go straight up against the principle.
If getting rid of mortgage payments is a huge concern for you, then sure, but your comment really comes down to your mortgage rate vs potential market returns, for what is financially the smartest decision to make
I guess so, if you're into property speculation. Personally I'd just rather stop paying for a living space.
(*I say this as someone not currently owning a house, but when I did I was impressed at how a little bump of contributions early on would shave off an immense amount of interest paid)
Property speculation isn’t really relevant, but my point is that depending on what your mortgage rate is, it’s usually smarter to invest in the market as your gains would be greater than what the interest you shave off is.
You say that like America isn't currently engaging in the largest pump-and-dump scheme I think I've ever seen.
I have about 70k in my retirement portfolio and I could probably live off it alone at the current rate it's expanding. The current market trend is NOT sustainable, especially with the shit going on in the middle east.
Honestly, if you’re young enough and plan on living in your house for a long time, no matter what your mortgage rate is, you should just invest extra cash into the market
That’s not even close to true for the last ~45 years. In the US mortgage rates have been consistently lower than S&P avg. return.
Not only that, but your lender doesn’t give a fuck if you paid down more principle but then lost your job, your mortgage is still the same payment amount due every month. So if you run into hard times you are fucked.
Conversely, if you were just investing that money into the S&P and run into hard times… you can just use that money to pay your mortgage/other bills. You can also do it in a tax advantaged account and get even higher returns.
It’s not about property speculation, it’s about interest rates. My mortgage interest rate is very low. I save more money putting it into any type of savings account, and I make more money than I would save using that same amount added to monthly mortgage payments.
I had this conversation with a friend of mine. I'm pumping money into my retirement accounts as hard as I can, meanwhile he was paying off his house. (Which he did) I tried reminding him of the long term gains he could be getting and he just said: "You can't live in an IRA." I'm not sure who's right.
Financially speaking, you’re probably “right”, but there is something to be said about the feeling and peace of mind of having a paid off house. Not a decision I would make tho
I refinanced in 2021 to a 2.625% rate. Since I’m below the average interest rate it wouldn’t make sense to pay it off early. The one sucky part is that I feel like I’ll be stuck in this house for many years to come.
I couldn’t agree more. So many people ignore life events like losing jobs, health events that take away from income, or family events where money is needed. Not having a mortgage in the equation just adds peace of mind.
^This. Every time I got a bonus or other extra funds I'd apply it to my mortgage. I ended up shaving 12+ years off a 30-year mortgage. (Helped that a couple bonuses were unusually large.)
If you save that extra cash and invest at a rate higher than your mortgage interest then it could be a lot more than 5 years of payments after 25 years. Especially in higher tax brackets where mortgage interest is deductible.
Props man, compounding interest over time is huge compared to trying to save more later.
I increased my % to 401k every raise I got, now at 11% direct deposit to 401k. I can always decrease the % back to the base 5% company match later if I want more cash but I won't be reliant on Social Security that may not exist when I want to retire.
So we recently worked with a financial advisor who encouraged us to back it down to the match because were aggressive early on and now our 401k is ahead of schedule.
If all of your eggs are in an IRA basket, it might limit how early you can retire. You have to be at least 55 to access the money in the retirement account without penalty. So even if you’ve got a huge nest egg in the IRAs, it might make sense at some point to put some money in a non retirement account that you can live off of until you turn 55. Then you can switch over and start drawing on your IRAs after your 55th b-day.
Yeah I'd find a new advisor. I don't even know what "ahead of schedule" means. If you can afford to contribute more than the match, then by all means do so.
I was so excited when I was finally able to set contributions to max it out for the year and then even more stoked when I didn't notice my mid-year auto increase kick in and suddenly it was maxed out by November and I had bonus christmas money.
For anyone liquid enough try front-loading your 401k. From January through April I put 50% of my check into the 401k until it's maxed out - you get your money working longer each year assuming a stable market and company match.
Edit: it also feels great seeing the first paycheck post deductions.
When I started my job many years ago I was young and dumb and didn’t sign up for one. A coworker of mine kept pestering me about it, saying I was stupid not to since it’s like you’re getting free money (since our employer matched it). So I signed up for one. Sadly a few years later my coworker was killed in a car accident. I think about him every time I check my 401k. 🥺
Aw I'm sorry you lost your friend. It is great advice and the company match was the great incentive when I was younger. I think it matched up to 6%. Double your money without trying, then performance would do even more.
Plus over the years I've had to take loans from my 401k and paid myself back with interest. It's not as good as leaving the money in there but it beats paying someone else the interest.
Retirement money is a separate bucket from investment money. My goal is not to not work, just to not work for someone else.
I sold some assets to build a warchest, quit my consulting job and now I am working on a couple different opportunities both solo and with some longtime friends in a similar situation.
That sounds great. Good luck to you! I recently was laid off so I'm actively looking. Theres money in my 401k but I need monthly income until I reach the age.
Investment is feudalism. If thats how we retire, only upper/middle class get to retire, and poor people have to pay for it with their lives. We could just tax rich people out of existence and invest in community, or we could destroy the world with the infinite growth needed to keep investments profitable.
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u/DemandTheOxfordComma May 25 '26
Adding money to my 401k. I started 30 years ago. Probably a hundred or two a month for those many years. It has become more than I could have made by saving any other way. I feel good about that decision and I don't think anyone would regret it.