<prompt> Human: 36 years old, recently married with no kids nor plans to have. Combined income is about 180k gross. Post-tax total in 401kIRA, assuming 25 tax bracket in retirement, is about 188k. Along with the marriage I moved into my wifes house which she owns and put my old house on the market. Our goal is to retire ASAP, but realistically it will probably be another 20 years before were ready to tap into retirement savings. Hopefully sooner than that, after we have enough saved for retirement, we can resign from our current careers and work part-time until the time comes to dip into retirement savings.2.5 years ago I refinanced from a 30 year to 10 year mortgage, the same year I maxed out my 401k and IRA for the first time. I considered a taxable brokerage in lieu of the additional mortgage repayment, chose the shorter-term mortgage due to its very low risk. Following the same logic behind keeping some bonds in your portfolio to help mitigate risk, I figured equity in real estate was the best place to satisfy that desire for a safe investment. Now Im faced with the same question as we decide how to manage proceeds from the sale of my house as well as the additional income that we can expect once it is sold - refinance to a shorter-term loan on my wifes house now our house, or invest the money for retirement. If we choose the market investment option, some portion will probably be subject to capital gains tax, after maxing out my wifes 401k, IRA, and HSA. My former housing expense was about 1200month 14,400year which is now new income to invest. On top of that there is money that I will get after closing on the sale which, after paying fees and a few other outstanding debts, will be about 50k. I know that investing in the market will be the better option because the rate of return is higher than the mortgage rate: Im assuming an 8 annual return on the market investments, and the mortgage would be at most her current rate of 4.175 less if we refinance to a lower rate. The current principal balance on her mortgage is 195,180. Im trying to get a sense of how much better that option is, both in terms of dollars and of retirement budget. Invest option: Future value of the 50k sale proceeds invested as a lump sum at 8 for 20 years is 233,048Future value of a 20 year, 14,400 annuity at 8 is 658,972. The total capital gains tax on those investments will be somewhere between 0 and 15 of the gains - a portion can go in her 401kIRAHSA, but we may also be able to avoid capital gains tax on some of what goes into the taxable account by withdrawing and depositing the funds into an IRA later in life after we have enough saved for retirement and no longer need to max out the IRAs with income from that year while we are only working part-time. Total gain is 554,020, so the capital gains tax paid would be somewhere between 0 and 83,103..Over 20 more years more years of making the calculated payment only on her current 30-year mortgage, the principal balance will decrease from 195,180 down to 90,239 and well have a tax deduction for the mortgage interest, which decreases over time from 8,142 in 2017 down to 3,753 in 2037, so the associated tax reduction assuming that we stay in the 25 bracket decreases from 2,035 down to 938. If that tax savings is invested in the same accounts which grow at 8, the future value would be about 68,025 I estimated this by taking the future value of an annuity equal to the mean of the maximum 2017 and minimum 2037 tax savings - I know thats not entirely accurate, but would have a much smaller impact than whatever assumption I make about capital gains tax, so I think its within the margin of error. So, with the investing option I would have a future value somewhere between 876,942 and 960,045 in the investment account, and a remaining debt of 90,239 on the house for a net of somewhere between 786,703 and 869,806Refinance option: Ill take the more conservative approach of assuming that the rate stays the same at 4.175, and just treat it as a lump sum additional payment of 50k, followed by a monthly additional payment of 1200month. Doing so would have the house paid off in 6.25 years, over which time our mortgage interest deduction decreases from 5,167 in 2018 down to 0 in 2024. Using the same method as before to estimate the future value of invested tax savings, after 7 years, that comes to 23,052. Since there is no additional tax savings to invest for the next 13 years, the value after 20 years is found by taking the lump sum growth of 23,052 for 13 years, which is 62,693.After 6.25 years of paying down the mortgage until it is gone, we could start investing the 14,400 annual income. The future value of this annuity over 13.75 years is 338,620. The gain is 140,620 so the capital gains tax is somewhere between 0 and 21,093.Adding the 31,486 from above we have a net of between 349,013 and 370,106.The first take-away is that the future value with the refinance option is much, much lower than the investment option. Investing yields more than twice as much! But what does that mean in dollars? Using the midpoint of calculated future value ranges for each option, the future value with the investment option is 468,650 more. Assuming 2 inflation for 20 years this is 315,389 in todays dollars. Assuming a 4 safe withdraw rate, choosing this option will yield an additional 12,616year, which is about 20 of the income that I estimate well need in retirement.This analysis makes it look like the choice of investing in the market rather than paying down the mortgage will have a huge impact on what we have in retirement and consequently, how soon we can retire. I guess my main question is - does this result seem reasonable, and if not, does anyone see a flaw in the math or underlying logic above?Assistant: There are a couple of issues with this analysis - which really reads as if youve read the broader points of rpersonalfinance and rfinancialindependence and took some of the big takeaways Great! but it looks like some of the important details may have gotten lost along the way.First things first: your assumptions.You assume a great many things, such as the fact that tax rates will not change smaller deal, that interest rates on mortgages will not change bigger deal your assumed 4 rate big deal and the fact that youre looking at the stock market to return 8 biggest deal. So lets take a look at each of these:Now, hear me out: yes, on the long term the stock market does return 7-8 adjusted for inflation. However, in any couple of years that can vary WILDLY. Were currently sitting on one of the biggest bull run-ups in market history, and there certainly are no guarantees - especially when your time horizon is 20 years or less. You can do a number of things to help mitigate this potential issue: prepare yourself mentally to work a few extra years, in case the economy is in the dumps when you plan on retiring, or building up some extra income generating hobbies.The 4 Rate: The trinity study definitely does show that given historic returns, we can expect to withdraw 4 of our funds from a 100 stock portfolio and be probably be successful over 30 years iirc the original was 85 chance of success, and the new study shows like an 87 chance of success, where success is defined as having a portfolio value 0. Now, your retirement timeframe is longer than 30 years hopefully, and the success rate is only 87 - which is something thats a little too risky for me. The last thing youll want to see is your portfolio runs out when youre 70, making it difficult to go back to work no one will hire a 70 year old who hasnt worked in 20 years and generate income. Id personally and again, this is only personal preference go with a 3 withdrawal rate - for a stronger chance of success if you lower the withdrawal rate, the time frame that you run out of money effectively becomes never, again, assuming historical returns.Your interest rate on your mortgage: Assuming that this would stay the same is a big assumption, given the way the Fed is currently planning on adjusting interest rates. Now, this wouldnt be a big deal on the current mortgage you have unless it isnt fixed - but if youre looking to purchase a new house, or sell your current house to roll the equity into a new one, it definitely could have an impact down the line. Its not as big a deal as the first two items, but its just something to consider.The tax rates staying the same: this is something that you just have to think about on your own - I also personally feel the taxes will go up in order to account for certain government shortfalls that weve been having, and the prolonged kicking of the can down the road for years - so Im expecting taxes to go up. How much? No idea; I dont think well ever be at a point in America where the 0-50,000 bracket is 35, so Im not super concerned about this one, but its just something to consider.Also, one thing to note: you cant touch your 401k savings until 59.5, unless youre willing to take a 10 penalty, so make sure that you have enough in your taxable accounts to be able to cover that gap of 3-4 years if necessary. And youre also discounting some of the peace of mind that would come with having a house free and clear, with no additional debts hanging out over your head. Would you consider taking out a loan at 4 to invest it all in the stock market? By not paying off your mortgage, thats effectively what youre doing. Now, Im not saying you should devote every single penny to your mortgage if you have no funds to fall back on in case of an emergency, you could be in dire straits, but I would probably split the extra income the income you used to spend on your old housing between the mortgage investing if you havent, I would also start by building up an emergency fund, some place like Ally, to help in case of a completely unexpected expense. The split that Id use would probably be how I personally felt. Sounds like you would go more for the investments market, whereas I might go a little more towards the mortgage - since it is almost a 200k balance.In summation: The lessons are strong, the under current for a strong retirement is here, but there are a lot of assumptions that youre making which very well may turn out to be correct, and if they do, you could expedite your timeline quite a bit, but if you arent, things could go extremely poorly. I tend to view retirement with a conservative mindset, might as well over-prepare, worst case scenario, Ill leave my children a nice inheritance. Human: Yes, there are assumptions, there is no other way to attempt to predict the future. Onto the specifics of your reply:The time-frame is still greater than 20 years, since I am 36 years old. As you get older and the time-frame gets shorter what is normally recommended is to gradually introduce safer investments. The point of this analysis is to understand how much safe investment I would be introducing to my overall long-term financial plan if I were to refinance. The 4 safe withdraw rate only affects the last piece of the analysis where I compare the benefit with taking the investment option to my overall retirement income. Making this more conservative by using a lower withdraw rate would not really affect the decision-making for this particular issue.Assuming that the interest rate on the mortgage will stay the same is very reasonable - its a fixed rate mortgage. No plans to move in the next 10 years, at which point we should be working part-time and well be paying off the mortgage either way as a lump sum payment from the investments if we keep the 30-year mortgage. Tax rates going up would have only a small impact, but it would be in favor the investments option because it would increase the tax savings from deducting mortgage interest. Beyond that its only a consideration in determining how much to plan on saving for retirement, and whether or not to defer taxes on contributions. Neither of those are directly relevant to the decision at hand.I know you cant touch your 401k before 59.5, but this is irrelevant because the analysis assumes that at least some portion goes into a taxable account, and I calculated the future value if 100 was outside of a 401kIRA with each option.Thanks for taking the time to reply, but I dont think any of the issues you raised are really applicable to what Im trying to figure out.  <response>: I think it does. Your main question was basically this: I want to retire early. Should I invest in the market? Or pay down my mortgage?Then you said a bunch of reasons you felt like you should invest in the market and went looking for validation. I tried to present a case as to why not paying off your mortgage at all is not what I would do, to present a counter point. It basically comes down to risk aversion: do you value a theoretical return? Or a guaranteed 4?I think you already know the answer, and just wanted everyone to pat you on the back and say nice job saving, I hope you retire soonAnd if thats the case: nice job saving, I hope youll be able to retire soon 