Couple of comments and thoughts ...
Or in other words, you are paying an after-tax rate of 2.625% on your mortgage. At your marginal tax rates of 24% Fed and 4.4% state, any paydown of the mortgage is equivalent to investing in a CD that yields 2.625% / (1 - 24% - 4.4%) = 3.67%
Now this is so much worse than the 5% yields you can get from T-bills and HYSA accounts, so paying down the mortgage does not make any financial sense. But I want you to be just aware that 2.625% is not what it seems, it is 3.67% in disguise. Whenever you make future decisions on whether to invest in VMFXX or some such cash instruments, you need to watch out for the yield to be at least 3.67% otherwise you may be losing money.
Therefore, if you are thinking about 75% equities + 25% bonds, consider going 85% equities + 15% CASH. See the link below for backtest against the two portfolios ..
https://testfol.io/?d=eJy1kEFPwzAMhf%2B ... %2FgBaC52L
To answer the potential question of why consider this alternative? Because of 2022 -- you will be immune from the risk that both stocks and bonds decline in the same year.
With 2.625% mortgage rate and $345k balance, your mortgage interest is just barely $9k. Therefore SALT + mortgage interest is only $19k, much less than $29k standard deduction.Debt: House (345k principal remaining, 2.625%), Car ~8k / 0%. No other debt.
Or in other words, you are paying an after-tax rate of 2.625% on your mortgage. At your marginal tax rates of 24% Fed and 4.4% state, any paydown of the mortgage is equivalent to investing in a CD that yields 2.625% / (1 - 24% - 4.4%) = 3.67%
Now this is so much worse than the 5% yields you can get from T-bills and HYSA accounts, so paying down the mortgage does not make any financial sense. But I want you to be just aware that 2.625% is not what it seems, it is 3.67% in disguise. Whenever you make future decisions on whether to invest in VMFXX or some such cash instruments, you need to watch out for the yield to be at least 3.67% otherwise you may be losing money.
While experimenting with the Portfolio Visualizer, I found that instead of investing in bond funds, if you invest 10% more in stock funds but leave the remainder in cash, you get almost identical returns. That is, a 60% stocks + 40% bond funds investment allocation has pretty much the same returns as 70% stocks + 30% cash. This breaks down a bit below 50% stocks threshold, but seems to work for any allocation above that.Desired Asset Allocation: 75 equity / 25 bond (we think - see context section)
Therefore, if you are thinking about 75% equities + 25% bonds, consider going 85% equities + 15% CASH. See the link below for backtest against the two portfolios ..
https://testfol.io/?d=eJy1kEFPwzAMhf%2B ... %2FgBaC52L
To answer the potential question of why consider this alternative? Because of 2022 -- you will be immune from the risk that both stocks and bonds decline in the same year.
$1700 to equities, $300 to T-bills. See the argument for this above ...4. Recommendations on how the 2k/month available cash be directed?
Statistics: Posted by lakpr — Mon Jul 01, 2024 11:42 am
