Allocating Our Windfalls // It’s Bonus Time!

2016 has been a tough year. I know we’re not the only ones who’ve been feeling that. (Evidence: this NSFW video from John Oliver.) There’s all the ickiness in the world, the worst election cycle any of us can ever remember, the uncertainty now of what a new administration will mean for retirees, the loss of Prince and Bowie and Sharon Jones, plus we’ve just had an especially demanding and draining work year.

But 2016 has also been a pretty spectacular year for us financially, which we’re still having a hard time reconciling. So just picture us over here confusedly saying, “2016, you’re dead to us,” but also, “Oh, and thanks, 2016.” Strange days, you guys.

You're the worst, 2016. But also the best.

But despite the weirdness of this year, we’ve finally reached the end of it, and what is often our favorite part: when we find out what our year-end bonuses are. (And a semantic reminder: they’re really deferred compensation, not true bonuses, but “bonus” is shorter and makes more sense to people. We broke it all down last year in this post, if you’re curious.)

And this year in particular, the bonus amounts mean more than they ever have, because they will tell us if we can shave any time off of our retirement calendar. We’ll break this all down later in the month after we’ve gotten the word on our bonuses (we find out this week and next, so we’ll share info on the 19th), but I probably don’t need to tell you that we’re crossing every finger and toe, hoping for enough that we can retire mid-year 2017 instead of waiting until year end. Stay tuned…

In past years, we’ve had a pretty straightforward action to take at year end: allocate part of the bonus to hit our mortgage paydown target, and then put the rest in our investment accounts (primarily Vanguard index funds), all according to our projections for the year. Most years we’ve come in right on target or maybe just slightly over.

OurNextLife.com // Our 2016 Q3 Financial Update, on track to retire early in 2017!
Where we were at the end of 2016 Q3, with past years coming in right on target and 2015 coming in a little over our projection.

But this year we got way ahead of schedule, and we’re already past our taxable savings projections even before the bonuses come in. We’re still a way from our mortgage paydown target, because we didn’t allocate much extra to the mortgage this year beyond our regular payments. So our first action will be to pay down the mortgage as much as we had always planned to. But then we need to decide what to do with the extra, which could potentially be a significant sum.

So today: our debate on how to allocate this year’s additional funds: between our mortgage, our investment accounts and even our cash cushion. Let’s discuss!

OurNextLife.com // Allocating Our Windfalls to save for retirement // Do we put more into our mortgage, our investments or our cash cushion?

Our Best Advice: Bank Your Windfalls

We don’t give a lot of directives around here, because we believe that personal finance is truly personal, and that what works for us may not work for everyone. (Besides, we’re really all just guessing about what’s “best” based on whatever information we happen to have. There is no single set of right answers on any of this stuff. Anyone who believes in one right answer has grown blind to their own bias.)

But, despite our aversion to advice-giving, the single best thing we’ve ever done for our finances, beside buying less house than we can afford, is to get in the habit of banking our windfalls. Now every cent that comes in above our regular paychecks — any work bonus, tax refund, bank error in our favor (not really a thing, unless you’re playing Monopoly) — goes straight into one of our savings vehicles. If you can get into this same habit, you’ll never regret it.

The Allocation Debate

There is no debate about spending vs. saving our bonuses. It’s just a question of how we’ll save them. We’ll take some off the top to get our mortgage down to the year-end target we set for it, so that we can have it paid off before we retire next year. But, we could potentially pay it all the way off this year. (So tempting! How awesome would it feel to own our home free and clear, and ahead of schedule?!) Or we could put the extra into our investment accounts and take them way past our projected 2016 target, making the possibility of an early 2017 retirement feel real. (Also tempting!) Or we could put some or all of that extra into our cash cushion that we plan to retire with, so that we’re basically able to retire at any time, without worrying about what the markets are doing at that moment and whether it’s a good time to sell shares.

Pros and Cons of Each Allocation

There’s no right answer here, but there are pros and cons to each potential allocation of our extra funds. Here’s how we see them, but if you have other thoughts, please chime in in the comments!

Invest in the markets

Pros: Research shows that giving yourself as much exposure to the markets wins out over dollar cost averaging over the long run (Vanguard says “Dollar cost averaging just means taking your risk later.“), meaning that we’ll tend to do best when we invest as much money as possible, as soon as possible. If we want our money to grow over time (we do!), we should be investing it in our index funds. Plus, investing more means we can get to our stretch goal by retirement, giving us more wiggle room in phase one of our retirement years.

Cons: The markets feel overvalued right now, and a correction or crash is feeling more and more inevitable with each passing day. As dedicated as we are to not trying to time the markets, it’s hard not to want to time the markets at the moment.

Pay extra against the mortgage

Pros: We have always planned to pay off the mortgage before we retire, so paying extra against the mortgage would only be accelerating our pay-off date by a matter of months. Extra money paid against the mortgage is also a guaranteed return of 3.75% in our case, which is better than any other guaranteed return out there right now, and certainly a better return than we’d get on the same money if we invested it and then a recession hit. Plus, we’d sleep so well at night knowing we no longer owe a penny on the house.

Cons: We’d lose market exposure on that money, meaning it can’t grow for us. We’d lose a small mortgage interest tax deduction (though that’s tiny at this point anyway since we’ve been paying off the mortgage aggressively). I’d be more tempted to quit working every day knowing that the house is paid off and we could keep our expenses very low. (<– This last point is Mr. ONL’s greatest fear about paying off the house ahead of schedule. He doesn’t think he’ll be able to convince me to keep working if we close out the mortgage. And he might not be wrong.)

Build up our cash reserves

Pros: We want to go into retirement with at least two years of cash reserves plus a little extra for emergencies, and we’re currently at a little over a year. Allocating money to cash reserves now would put us in a position to be able to retire at essentially any time, without worrying about what cash we have built up, or worrying whether we’d need to sell shares in bad market conditions or incur capital gains taxes.

Cons: Money allocated to cash wouldn’t be able to grow like our invested assets do, and wouldn’t reduce our debt like mortgage paydown would. Though getting our cash cushion up to two to three years of expenses is a necessary step to take before we can pull the plug, it’s the choice that feels the least gratifying.

Plus: More to Charity

Regardless of what we do with the main allocation areas, we’ve already committed to ourselves that we’re going to give more to charity this year than we ever have before, both in total dollars and in percentage of our income. We’re focused on building up our giving muscles, something not enough high earners do (we were shocked by the data, actually, that the poor give so much more than the rich do on average, and wrote about it here). Charitable causes need our volunteer time, but they mostly need our money, so let’s all give as much this year end as we possibly can.

How We’re Leaning

Mr. ONL: If it was only up to Mr. ONL, he’d put all the extra into our investment accounts to give it as much time as possible to grow. He also wants to stick to our work-all-of-2017 timeline, regardless of where we end up with bonuses, and says we have all of 2017 to finish paying off the house, plus next year’s bonuses to build up our cash reserves.

Me: I want to pay off the house, and badly. But I also want us to quit as early as we can next year, so see the mortgage payoff as a more urgent goal. After the mortgage, I’d put the rest into cash so we’re ready ASAP to pull the plug. And then we’ll make up for any shortfall in our investment account with post-retirement fun work. That is, if it was only up to me.

Our task over the next few weeks is to find agreement on what to do with our extra funds for the year, something that will become much easier to discuss once we know how much we’re actually talking about. And then we’ll tackle the bigger discussion of what it all means for our timeline. Lots still to figure out — stay tuned!

What Would You Do?

What would you do if you were in our shoes? How would you allocate our year-end funds across investments, the mortgage, cash reserves and charitable donations? Help us decide!

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118 thoughts on “Allocating Our Windfalls // It’s Bonus Time!

  1. If I were in your shoes, I would pay off my mortgage. I have a 2.75% mortgage with a small interest deduction, so I understand it’s not the financially optimal decision. But for security reasons as well as achieving financial independence, it’s a fixed cost that I want gone as soon as possible. I’ve calculated before what amount I would need to have in investments to cover the mortgage payment, and it’s about twice the mortgage balance (using the 4% rule). I’d rather use that money to pay off the mortgage and then let the other half generate some income for other purposes. But of course, you need to pick what works best for you – the fortunate thing here is there’s not really a “wrong” decision. Best of luck with your decision!

    1. Thanks for weighing in! It’s a great point about the mortgage payoff representing security, and having to save enough to pay the mortgage feels like saving more than you need in that category (why not just save 1x the mortgage but actually pay it off, like you’re doing?). Like you, I’d rather put that money to work for other purposes!

  2. I’m with you. I think I would pay off the mortgage, put the rest in cash, and then allow the cash to build up even more once there is no monthly mortgage payment.

    This close to retirement I think my goal would be to make sure that I don’t have to touch the investments for a while so that they have time to grow regardless of the condition of the market. If the market continues up, then great! I’ll have more money in my investments! If the market tanks, then that’s okay too, because I can spend down my cash reserves without worrying about sequence of return risk.

    Good luck with the bonuses! I’ll cross my fingers for you!

    1. Thanks for joining my corner! ;-) And that’s a great point, that our goal should be not to touch the investments for as long as possible (because you know that will be a whole other struggle, when we actually have to start withdrawing money from them!), and that getting the cash buffer built up sooner would let us focus on dumping as much into our investments as possible while we’re working and then leave them alone for as long as we can. Thanks for your good wishes on the bonuses! Hoping we’ll have a good update in a few weeks. :-)

  3. I don’t know what I’d do in your position, but, based on the arguments and some of our comment exchanges, I’d say mortgage and cash. I can’t believe I’m recommending cash, because ugh… I literally just shuddered thinking of all that money sitting there depreciating but like you said, “it’s all about your sleep at night comfort.” Mine wouldn’t be having that much cash, but for you it’s different since you’re more conservative than I am. So, I’d say pay off the house (timeline gets accelerated), put the rest in cash (sleep well at night), and see what 2017 brings.

    1. I nearly shot coffee out of my nose in response to the idea of being “more conservative” than anyone. (Because we’ve chatted politics offline.) ;-) Hahahaha. But yeah, we’re talking about money, so guilty as charged. :-D And, I KNOW, it hurts to think about that much money in cash, but the alternative is being stuck if the markets drop dramatically, and I don’t like that idea either. I could definitely see us shifting some of our investment allocation from bonds to stocks, though, to make up for the cash cushion, to make sure we’re not missing out on growth. (Saying that to you because I know you’re more in the 100% stocks camp, and we’ve always held onto ~25% bonds.) We’ll let you know what we decide!

      1. Yeah, we do ahve a fair amount in cash currently and have been deciding how best to strategize protecting our investment bundle. Bond laddering was an interesting idea put out there. We haven’t settled on “how” to protect it yet but definitely looking to make it less volatile. Even though it is diversified, it’s still mostly stocks, maybe only 20% in bonds/secruities. Eeep!!! :)

        1. If you figure out bond laddering, let us know. Right now we’re just in bond index funds, which feels more comfortable, but I wonder if we’re being too lazy. :-)

        2. So bond laddering in concept is pretty simple – at least after it was explained to me, lol. Essentially, you buy say, a 5 yr bond, (you could also do 10 yr) and then next year you buy another 5 yr bond, and repeat for a total of 5 years worth of 5 yr bonds or 10 yrs worth of 10 yr bonds. Then in 5 yrs, the first bond matures and you can use it as income, or roll it into another bond if you don’t need the income. And every year after that you will have a bond maturing to provide income. Because you’re letting them mature and not trying to sell them early, then you don’t necessarily care about interest rates rising because you’re holding it until maturity. Allegedly…

          The tricky part is figuring out which bonds to buy and how many to provide $X worth of income. The other bonus is that if you don’t need that income, you just roll it into another 5 yr bond. If the Sh!& hits the fan with stocks, instead of liquidating stocks in a down portfolio, you now have $X worth of bonds maturing each year along with your cash stockpile, so you don’t have to use all of your cash stockpile, and can even supplement it with maturing bonds.
          Does that make sense, and was it clear enough? That’s the general idea as explained to me by a financial advisor, as you can tell, I haven’t looked into much detail since then, but it seems like a pretty decent strategy.

        3. That is super clear — thank you for explaining! Of course as I read this, I thought, “Ugh, I have to keep track of DATES?!” Hahaha. I think this is a sign that I need to quit my job since I normally love planning like that. ;-) But that approach definitely seems worth exploring for us, since we’re into those slow and steady investments. Ha.

  4. You’re right, there is no “right or wrong” answer to this one. Money management is an art as much as it is a science, and much of it just comes down to personal preference. If it were me, I’d focus on debt elimination at the moment, so I’m totally with you about paying down (off) the mortgage entirely, then funding your two year savings. Just get that out of the way and be done with it. This may also give you a little more flexibility next year to quit early if you want because all of your debts, along with your two-year savings pot, will be fully funded already. You won’t be tempted to remain working jobs that you don’t want to be working simply due to the fact that you still have some mortgage to pay or a savings account to fill.

    I understand where your hubby is coming from, though. Ultimately, the longer that your money sits in the market, the better its potential for growth. There’s just no getting around that fact and there’s nothing wrong with his preferred route either. You’re traveling towards the same end goal either way. The only decision to make is the route that you take.

    As you may know about our situation, we have a little over three years of living expenses sitting in an Ally savings account at the moment. This is FAR more money than most people would want out of the market, but we’re okay with it. It gives us a huge buffer for the future and will allow us to ride through market weirdness without as much of a hit to our investments. That’s our preference.

    1. I know where you stand on mortgages, so that advice makes sense! And that’s sort of how I think about it, too — like our market numbers will always be in flux, but we can check the mortgage and cash reserve boxes and then move on to focus on growth. Oh well, either way we’ll do all three of those things, it’s just a question of in which order. :-) And for the record, I think your three year cash buffer is smart. I think we would be aiming for three years if we weren’t planning to work at all in retirement, but as you know, we’re now evolving on that, and so will look to hustle-type fun work to provide the rest of the buffer without us needing to keep quite so much money out of our growth investments.

  5. Wait. I’m confused. Where’s the shopping spree? ;)

    You have to know I’d say mortgage. BUT…that’s probably not great advice even though it feels SO good to see that number drop. But if you want two years of cash, then fill that puppy up, right?!

    1. Momma needs a new pair of shoes! Hahaha. Just kidding. (Well, only sort of. I would definitely not turn down a free new pair of shoes.) ;-) The funny thing is that we’re really just talking about timing differences since we need to pay off the house, hit a savings/cash number and hit an investment number before we quit. So it’s just what order we do it in, and over a fairly compressed time period. So if Mr. ONL gets his way and we invest it all, I won’t be devastated, and I’m guessing he’ll feel the same way if I get my preferred course of paying off the house and then filling up the cash reserves. :-)

  6. I would have a tough time throwing a large chunk of money into the market near all time highs IF I was planning on retiring in 2017. since you are ahead of your savings/investment goals I would hit the mortgage, then shore up the investment/emergency accounts through your last working day in 2017 (whether that is early or not early :) )

    This is a great question, One I can’t get “wrong”

    1. Indeed! No wrong answers! :-) Thanks for weighing in on this — we’ll let you know what we decide. It’s hard not to want to time the markets given the historic highs, but as Mr. PIE reminded us, we’ve been hearing all year that a correction was coming, and yet we’re all sitting on big gains. So it’s anyone’s guess!

  7. Not even a contest, I would pay off the mortgage. There’s no down side to doing so; you were not only going to pay it off anyway, it’s a condition of your retirement plan so it has to get done. It’s the only option that provides a guaranteed return on your investment of a specific amount. The mortgage interest deduction is meaningless since you have to pay interest in the first place in order to write it off, and the other options carry much more risk and offer much less reward, both monetarily and emotionally. Being mortgage free will provide more monthly funds for you to work with anyway, and without a mortgage you can increase the deductible on your homeowners policy substantially (we went with the maximum deductible because we have the funds available, we never file small claims (raises your premiums), and we wanted the lowest annual premium). Not to mention the huge lift owning your home free and clear provides on a daily basis! We still pinch ourselves every now and then about that 😄. It also gives you plenty of time before you head out to see the world to check your title insurance, obtain all your final documents (takes months if you’re in a deed of trust state rather than a mortgage state), correct property tax bills, etc., to reflect ownership free and clear and anything else you may need to update like wills, trusts and the like. You can always take the funds you would have paid in a monthly mortgage payment and allocate then to your favorite charities (and btw, thank you for your recommendation on an earth friendly charity, I took your advice). We’ve made a LOT of financial blunders in our 35 years together, and I’m
    not proud of that, but owning our home free and clear ranks as the absolute best financial decision we’ve ever made, even though I argued for obtaining at least a small mortgage to free up the cash for investing. I’m so very glad we didn’t do that, the markets are so volatile and if we’d lost the opportunity to own outright and had to allocate other assets in order to do so I’d be devastated (and so would the budget). No regrets at all here, I hope to never have a mortgage again, and I don’t miss making that payment at all 🔗!

    1. So glad the charitable recs were helpful! :-)

      Thanks for sharing your perspective on the mortgage. I’m excited to get that “lift” soon one way or another, whether it’s this month or sometime next year. And I didn’t know that we could get a higher homeowners deductible with no mortgage — that’s great info! We never file claims (we know that they can drop you if you file them, even small ones, and we live in a high fire risk area, so can’t risk losing coverage!), so a high deductible for a lower premium would be great.

      So glad it worked out for you guys to be mortgage-free… how wonderful that must feel every day. :-)

  8. I’d sock that lump sum into Vanguard index funds. It’s what I do every January to max out my Roth IRA as quickly as possible. I started doing this right after I read that same Vanguard study. In 2017, I’ll also be maxing out my HSA as early as possible, too. I know paying off the home is tempting, but you’ll be there soon!

    1. It’s awesome you do that, Kate! It’s what we’ve always done in past years, and this is the first time we’ve been so ahead of our targets where we could contemplate a broader range of options. :-)

  9. I am not a fan of paying off mortgages in general–we intend to keep our payment even after retirement. We’ll just keep the equivalent payoff amount in taxable accounts, and maybe have a slightly higher cash buffer for it.

    However, because your stated goal is to pay off in one year or less, I would hold some of the money in cash, knowing you could use it for your cash buffer or to pay off the mortgage. Maybe put the mortgage payoff amount in your cash buffer, and the rest in taxable investments. It is very hard to overcome the desire to “time the market” but I try to just ignore the movement of the indexes.

    1. I think if you plan to be above the ACA subsidy limits in retirement, then keeping the mortgage makes total sense. We’re focused on paying it off to maximize our subsidies, which are looking like they’ll stick around for three years or so while they figure out whatever “better” system we’ll have instead. So that all skews our math a ton in favor of paying it off… plus we just hate debt, so it aligns to our worldview too. :-) And it’s so smart that you ignore the market movements — it’s hard to do that!

      1. I don’t always succeed! There will be weeks when I check the market every day, and I LOVE listening to Marketplace on NPR. I just know I shouldn’t let that drive my decisions!

  10. What a good quandary to have! I’ve want to pay off the mortgage first. Although the math is usually in favor of investing, you’re talking about a pretty short period of time difference since you’re planning to pay it off early. So that money might get 6-12 months more in the market, which is not hugely significant since time is a such a factor in the
    magic” of compounding interest.

    That’s awesome you’re planning to give extra, too! We have a flat percentage minimum that we give to charity for any windfalls that come in.

    1. The best quandary ever. :-) Of course I love your reasoning on mortgage paydown since that’s where my head is too. ;-) And yeah, we’re trying to push ourselves to give more so we don’t fall into a bad habit in retirement of not giving. We have been given so much, we have a responsibility to give back!

  11. I’d pay off the mortgage first. I agree that the stock market will likely come down next year, so it seems like a better bet to get the mortgage out of the way, and then put more money into the stock market during 2017 with those excess funds now freed up. Besides, you’re really only looking at a few months of potentially lost capital gains, and that’s only if you believe the market will continue to rise in 2017, not decline at all from Dec 2016. But given the cyclical nature of the stock market, that would be hard to believe.

    All in all, lots of great options so it’s hard to go wrong with any of them. I’m looking forward to hearing what you decide to do and why. :)

    1. Great minds think alike. :-) You’re right that it’s only a few months’ difference. We have NO WILD IDEA what the markets will do, and neither does anyone else, so we don’t want to try to guess about that. This year we were all told to expect a recession at any moment, and here we are sitting on nice gains. So, yeah… impossible to know! But still, I definitely love the idea of the guaranteed gains of mortgage payoff, and just being able to look around and say, “We own this.” :-) We’ll let you know what we decide! Thanks for weighing in. :-)

      1. I paid off my mortgage exactly 2 years ago and haven’t regretted it once. Could I have made money off that lump sum, had it been in the stock market? Sure, but nothing beats owning your house free and clear. It’s an amazing feeling :)

  12. Mortgage all the way, baby!
    I hear your arguments, but it’s so peaceful not having that huge bill every month. Plus, once it’s gone, you’ll have that much more money every month to put toward cash savings, other investments, and you’ll enjoy those decisions too.
    A mortgage is debt, even though it’s not frivolous spending on credit cards. I like knowing that we don’t owe anything to anyone, and it’s nice not to have to deal with the bill every month (and deal with any errors).

    1. Yeah, that’s completely what *I* am imagining, though I don’t know if that argument is quite as persuasive to Mr. ONL. ;-) We won’t be 100% debt free once the mortgage is gone (still have a mortgage on our rental with ~12 years to go), but it will still be an amazing feeling to know that we own our home outright… so now it’s just a question of whether we get that feeling this month or sometime next year. ;-)

  13. Personally, I would hold onto your bonuses for a couple months…

    There’s a reason why the stock market tends to head upward in December…aka the Santa Claus rally. I believe it happens because everyone is so flush with cash from bonuses at year end.

    Some of that money is inevitably invested, causing prices to rise in the month of December.

    Why not wait it out until February? — I suppose it could be considered market timing, but the rally this year just seems…well…overdone.

    Stock prices seem really high.

    1. We definitely noticed that in 2015/2016 — big rally in December, and decent-sized correction in January. Though it all evened out within a few months, which I think is the point most advocates of not timing the markets would highlight. We’ll let you know what we decide to do!

  14. Here are my thoughts while I’m reading the article…

    I feel the same way about 2016. In fact, I feel that way about the new administration. It might be very good for our family financially, but money isn’t everything, right?

    If I was halfway through the 2017, I may be very tempted to stick through the year for the bonus. That is if it is as significant as it seems.

    I usually believe there’s an underpriced market somewhere. Maybe it’s oil, the EU, emerging markets, or a sector index like solar (TAN). Maybe investing in a dividend index fund for additional cashflow is an idea.

    I’m usually not a fan of paying off such a reasonably-priced mortgage (it’s HARD to borrow money at 3.75%), but as you say, it’s personal… and sleeping well is important.

    Whoa, sounds like I’m thinking exactly like Mr. ONL. Maybe it’s a guy thing?

    1. Yeah, screw you, 2016! (But also, for real, thank you.) ;-) The mortgage rationale has a lot to do with Obamacare, which it looks like might stick around for three more years or so, and therefore is still worth planning around. (We explain that reasoning here: https://ournextlife.com/2016/10/31/low-income/.) And for what it’s worth, I am noticing a bit of a gender breakdown on the votes today. It’s not absolute by any means, but more women are recommending mortgage paydown, and guys are more in favor of investing. :-)

  15. You have a nice “problem” to tackle, especially since all options are progress toward your goal.

    My initial thought is to pay off the mortgage. My reason for doing this is give you a sense of what your expenses will be like in retirement. You know your monthly expenses will be lower with the mortgage paid off, but you have not experienced it. Living on smaller month expenses may give you more confidence to pull the cord.

    Another option I thought of is to split it evenly into each bucket. While there is probably no mathematically justification of this approach, it may be a workable compromise.

    Glad to hear you are sharing your wealth with worthy causes, and increasing it this year. I need to figure out how much money I want to donate this month.

    1. Pretty much the best “problem” ever. ;-) That’s a great point, and one we hadn’t thought about, in terms of getting closer to our “real” retirement budget in our final year of work. Thanks for raising that! The even split is another good option — we’ll let you know what we end up doing! And good luck deciding on your charitable contributions! We’re focused on giving to groups tackling issues that we know will be under attack in the next administration, in addition to giving to the national and local orgs we always support. :-)

  16. A most excellent problem to have.

    My gut is with Mr. ONL on this one – his plan is what I would do.

    However, if your plan calls for having your mortgage paid off, and it would just make you happy to have that one done, then maybe pay that off and put any extra into the market. Given all the negativity of 2016, if you can buy your happiness, go for it. I’d leave stuffing your cash reserves full as the final item to complete before you retire – that money is losing value, so fill that bucket up last.

    1. Indeed! We are lucky ducks. :-) Thanks for the vote on Mr. ONL’s plan… I’m sure he’s giving you a virtual high five right now. Though I love your point about buying happiness, and I do think there’s a big desire for that in my preferred approach!

  17. In my opinion (and yours in your post about not always being able to choose when you retire), I would be making sure that you’re ready to retire and building up those three blocks one by one. I would pay off the mortgage with this entire windfall OR keep the funds in cash so that you can pay off the mortgage if you get need to leave your job early for whatever reason. I would make sure you have a year’s cash savings and then split the remainder (and over the next 12 months) between the additional year of cash savings and your taxable investment account.

    Mr. ONL has a point about worrying you might not want to work once the mortgage is paid off. BUT if you really think you would do that, isn’t that a sign? It is to me.

    1. One additional suggestion – it’s probably too late for this now since it’s December, but if you really might not work next year AND will continue donating to charity, I would consider opening up a Donor Advised Fund to take advantage of the larger tax break that you would get this year versus next year being in a higher tax bracket.

      1. I think you’re right that we missed the boat for this year, but a DAF is definitely something we’re looking at for next year! Even if we only work part of the year, we’ll still almost certainly be able to itemize for 2017, so a DAF will make sense!

        1. No boat has been missed if you want to contribute cash rather than appreciated securities OR if you have appreciated securities at Fido.

          Fidelity Charitable year-end deadlines:

          For Wire transfer, initiate on or before 12/27 (Any wires received before midnight on December 31 will be granted a received date of 2016.)

          For assets held at Fidelity, initiate on or before 12/31
          Physical stock certificates or checks must be postmarked on or before 12/31
          For ACH transfers, initiate on or before 12/31

        2. Thank you for this info! We will definitely keep this in mind! Though I do think, given this weird time in history, we’re probably leaning more at this point toward immediate cash gifts to important causes. If we do end up working all of next year, though, we’ll certainly have way more than we need, and I could see us socking a big chunk into a DAF or other long-term charitable vehicle. TBD!

        3. You might not have missed it if you wanted to do a Vanguard one from Vanguard taxable but I wouldn’t rush a decision like that either!

        4. Yeah, definitely don’t want to rush that! I could see us doing a big move to a DAF if we work the full year next year and therefore have more than we need. Stay tuned!

        5. Here’s the dates for Vanguard Charitable: https://www.vanguardcharitable.org/individuals/make_a_contribution/how_to_contribute_assets_to_a_philanthropic_account It looks like you still have time. I wouldn’t recommend rushing this though as it’s a pretty big decision! We made it back in September when we got married and then funded it in late November after my husband got his last bonus for the year and we had an accurate picture of our income for the year.

    2. Oh it’s definitely a sign that I really want to quit my job, but I’m trying to take the long-term view and recognize that I can push through the stress a little longer in the interest of our long-term financial health. ;-) You make great points, and I could definitely see us contributing a bit to each goal this year-end. And then it’s a different set of planning we need to do to figure out how exactly to structure our savings in 2017 to get to the finish line. ;-)

  18. I’m going to think outside the box here and go with heresy. I’m going to suggest that you and Mr. ONL should leave the huge decision of allocating your year-end excess funds entirely to a single roll of the dice. I mean, if you leave it to random chance than Mr. ONL can’t really resent you for not wanting to work if the dice suggests that the mortgage happens to get paid off.

    1.) Pay off mortgage
    2.) Invest in Stock Index Funds
    3.) Put in Cash
    4.) Donate To Charity
    5.) Invest in Tax Exempt Bonds (They probably yield more than your mortgage rate!)
    6.) Buy Extra Nice Christmas Gifts for all of your relatives and friends.

    Happy to help! Let me know what the dice roll suggests even if you choose not to allocate your funds based on random fate.

    1. Hahaha. Love this, TJ. :-) Though can I veto #6, because holy moly, those would be some niiiiiiiice presents, and nobody needs that. Maybe we’ll change #6 to a combo of 1, 2 and 3. ;-)

      1. I couldn’t think of a reasonable Sixth one! But I just thought of one . Change it to “Buy another rental property somewhere dirt cheap”

  19. First world problem for sure! :>)

    Many folks have been saying the market is due for a correction since Q1 this year….and you know how well we have all done being invested during the full year 2016. The usual stuff that really means NOBODY has a friggin’ clue what the market is going to do. I disagree with the “excess cash on the sidelines” crew. It is nothing more than market timing and investing history teaches us that strategy is an unmitigated disaster.

    Although there are some excellent articles (FinanciaLibre, Early Retirement Now) out there on why paying off a mortgage is a really bad idea, the reference to such is quite rich coming from me who has a mortgage paid off on the home we intend to retire to. Human behavior and sleeping well usually trumps (ouch, sorry) sound economic theory. I am with you on that one.

    My vote would be to place half into Vanguard, the rest into mortgage down-payment. 2017 (either partial or full year), can provide for the cash bucket filling and mortgage balance down-payment strategies.

    Good luck with the ongoing debate with your other half!!

    1. Oh yes, we’re all first world problems over here. ;-) You’re so right… investing this year despite warnings of a looming recession have paid off for us. And indeed no one has a clue about any of it… just look at what market futures were doing on election night vs. what the markets have done since then. Makes no sense. And in the also making no sense category, we fully recognize that paying off our mortgage is not many people’s cup of tea, but it’s looking like we’ll still have ACA subsidies for a few years, and that means that our post-retirement income and cashflow matter, and we’d be losing a HUGE Obamacare subsidy if we had to have enough income and cashflow in retirement to cover our mortgage payment. The math simply doesn’t work out in favor of keeping the mortgage in place, regardless of what those very smart people have written in the past. Plus, sleeping better at night counts for a lot — you can’t put a price tag on that! :-)

  20. I suppose there isn’t just one right answer, so don’t worry about it too much.

    If it were me, I would probably want to keep my head down and keep working like Mr. ONL. Why? The 2016 bonus isn’t enough to completely cover the 2017 income goals. In a job with bonuses, it makes sense to work the whole year, otherwise you are working for a 25% (insert right number) discount for part of the year.

    Adding the 2016 bonus to your investment account will probably make the plan to keep working easiest.

    1. You’re definitely right that the 2016 bonus won’t cover everything we need in 2017. But we also don’t need all of what we’ll earn in 2017, which is what our disagreement stems from. I say once we have our numbers, we should quit. He says we should finish out the year and go into retirement with a bigger cushion. We each see the other’s side, but we’re no closer to resolving the question. ;-)

  21. You have a pretty solid consensus here……..pay off the mortgage. I’m in a similar situation being mostly invested but with 2 years living expenses in cash to mitigate “sequence of returns” risk once I retire. But I paid off my mortgage several years ago and never regretted it even when the markets did well. I view this as an inflation protected cash account and own very little bonds. Surveys show people rarely regret paying off their house …although they do retire at an earlier date so that concern is real :)

    Ask yourself a few questions: Do you lose sleep over lost market returns because you had it tied up in equity in your home? Would you take out the equity you have right now and invest it in the market by taking out a second mortgage?

    Do you have any bond investments? If you do have bond investments, then carrying a mortgage makes little sense since the guaranteed return on paying down the mortgage needs to be compared to “safe” investments like US treasuries that yield much less than 3.75% (and are taxed!), not a risky but potentially higher stock market return.

    These questions may help get at both a numbers argument but even more importantly, a psychological argument in favor of paying down the mortgage, especially since you’ve made good investment returns and valuations are high. Think of it as rebalancing.

    1. I love your point about regret, and I think you’re right that *I* would never regret putting our mortgage to bed once and for all. Don’t know for Mr. ONL, though… he’s occasionally lamented that we didn’t invest more during hot market periods, and I think he might regret it if we didn’t sink that money into the markets and then there happened to be a sustained rally. But then we’d feel pretty smart if we didn’t and then things tanked, so it’s impossible to know.

  22. Sure, thé longer the money is in the market, the better. That is a general rule for long term investing.

    When I would be in your situation, I would attack the mortgage and put the rest in cash for my 2017 expenses,assuming you stop working by mid 2017.

    There is one thing: your husband fears you would stop earlier than him. Maybe that is the real question to answer: when to stop.

    1. Of course you hit on the real question. :-) And since we aren’t currently in agreement about that, we also aren’t in agreement about what to do with the money… probably shouldn’t be a surprise!

      1. No surprise at all… I am curious to see how this one goes. It could be a nice case study for the one-more-year.
        Does it have to be the both of you that quit at he same time?
        I hope you find an agreement.

        1. It is the one more year trap that I’m afraid of and definitely don’t want to fall into! Though someone else’s comment just made me realize that we could potentially donate a lot to charity if we finish out 2017, so that might be the motivation to do that… Either way, we’ll report back on what we decide with this year’s bonuses!

        2. Hmmm, agree that it is the one more year rule case study, but with an interesting twist: “one less year”

          I think here may be running into sequence of returns risk, but it doesnt look like it because you haven’t retired yet.

          As an example, this occurs often in public sector pensions. The politicians bake some interesting assumptions into the returns: 8% YoY real growth. If you ignore the fact that this is very high and optimistic, they hit a challenge if they get exceptionally high returns early on.

          For instance, maybe in the first two years they get 10% returns. They then look at current pension plan value and decide that they can reduce contributions since the value is ahead of scheduled projections. Then when the market takes a downturn they find they are significantly underfunded.

          In this case, they didn’t have enough real assets in the plan, and you might worry about the same happening to you.

          If you take a step back and think about what an equity index fund is, you have essentially a certain (very small) percentage of various means of production. If you hypothetically think of one share as being one breadmaking machine, then maybe you were previously thinking about how many loaves you need to produce for you to live off of. When the price of equity increases (P/E or EV/EBITDA) it is similar to the price of a breadmaking machine increasing. Question: Does the price of a machine impact how many loaves it will produce for you?

          The worry is that by quitting one year sooner due to strong market appreciation (price rises), you will have fewer real assets to support you.

          I think it is important to note that working in 2017 is different from the “one more year” concept, because you two determined how much you would need several years ago. If you were debating working in 2018, that would be a true “one more year” dilemma.

          I know the analogy is not perfect, but I think it ultimately goes back to sticking to a plan you made a while ago. If you agreed to retire whether prices went down or not, would you make the same decision whether they go up or not?

          Sorry, long post. But I found it helpful to myself to put my thoughts on “paper” :)

        3. Sequence risk is something we think a LOT about (https://ournextlife.com/2016/07/18/rethinking-work/), and it’s why we don’t plan to quit working entirely anymore, even though we once did. Our hope is to work enough in ER that we can avoid touching our investments for at least two to three years, which should give us sufficient buffer again SOR. We have other contingencies, too, of course, and having a paid off house will let us live more cheaply than our budget suggests, if we need to. The public sector pension analogy is helpful to think about, though I think we’ve done enough projections at this point, all assuming much lower rates of return than historical averages, to feel good about our particular plan. :-)

  23. I would pay off the mortgage, keep the rest (if any) in cash, and (assuming I’m Mrs ONL in this scenario!) retire as soon as I can. I think Mr ONL should keep working if he really wants to – there’s nothing that says you NEED to retire both at the same time, especially if you’re not in the same place mentally. Mrs ONL could always do some side-hustling or do more around the house to compensate for the unevenness quitting before Mr ONL would bring.

    I had a big windfall this year (about one year salary, as an inheritance) and it was truly a lot of fun to think about what I’d do with it. We decided to full our tax-advantaged accounts, then pay off our (small, with small interest rates) student loans, to get that worry off our backs, then invested the rest. If it had been enough to pay off the mortgage, I would probably have done that instead! The cash not going to the mortgage every paycheck would feel more satisfying to me then just investing the entire amount in one go.

    1. Great minds think alike. :-) I’m writing a post for Wednesday about how our thinking has evolved (and reversed roles!) in terms of retirement timing, which is relevant to your point about Mr. ONL working longer. Let’s just say that’s a non-starter. ;-) How cool that you got to invest a windfall plus pay off your loans! High five for all of that.

  24. Wow, that’s a tough call, but a really good situation to be in. A lot of families won’t ever have this problem. :)
    I would keep it in cash for a bit. That’s the most flexible way to go. You can invest some a bit later. I wouldn’t pay off the mortgage, but that’s just me. The rate is so low.

  25. To me, the answer for what to do lies in what your plans and basis are for quitting work. If you are waiting until you have cash built up and mortgage paid off to quit, then get it done and get out of that stressful situation. If you’re leaning more to staying to year end regardless, then I would go with math and invest ASAP (though that is certainly not a guarantee with current conditions) with leftovers going to cash/mortgage to get you where you need to be by retirement.

    Are you/have you shared what your criteria are for actually making the when to quit decision? I know you reference it being dependent on the size of bonuses, but will an extra $5K, $10K or even $50k make that much difference over the course of a long retirement, versus what it would take to make that up little by little with more sustainable, less stressful work over many years?

    1. That’s totally sound advice… though I think first we have to agree on what our priorities are in terms of quitting. ;-) The funny thing is I used to be the one who wanted to work longer and have a bigger cushion, and now I’m the one who keeps whining “Are we there yet???” Hahaha.

      Good Q on criteria for deciding when to quit — I’m writing a post about this for Wednesday! :-)

      1. Are you married to the idea of both quitting at the same time? If on different pages, why not quit first and take on more of the household chores to free him up since you’ll have much more free time, travel with him sometimes since you have so many travel miles/perks, take charge of figuring out trips and adventures, etc. His income could smooth the transition by padding investments and provide another year of med insurance to bridge the gap until things there are more clear.

        I really think that a set up like that, a plan to work part time, or any other creative options are better than killing yourself for another year OR leaving before you’re both ready and starting off under stress. What if markets tank at his time next year? Would you hang on another year, or two?

        1. That is a totally fair question with a completely non-rational answer. We both decided a while ago that we’d each be resentful if the other got to quit sooner, so we’ve had a longstanding deal that we’d quit at the same time. Everything you’re saying is completely valid, and if it wasn’t a super emotional topic for us, I think we’d probably be inclined to think those options through more. Because you’re right that we’ve backed ourselves into a situation where we’re more stressed than we could be one way or the other — either working longer than it feels like we need to, or starting off with money tighter than it could be.

  26. I have some questions and process “advice.” Do you have vacation time coming up? If so, I’d “sleep on it” and make a decision after you’ve had time to rest and perhaps gain perspective.

    How long do you think you need in order to say goodbye to your current employer, customers, co-workers, etc? If you know you need time to slowly extract yourself from work, then you know you’ll be working longer and can make your decision based off of that.

    What would it look like to chop up the sum and put a bit in each pot? Is this typically seen as a bad idea?

    1. I’ll answer your questions in reverse order. ;-) 1. We absolutely could contribute a bit to each goal, and it’s possible we’ll do that! 2. The “how long we need” Q is much more complicated for us as consultants than it might be for folks in a less client-facing job. We’ll get marginalized FAST at work as soon as we give notice, and there’s a good chance that even if we offer several months, we’ll be out in just a few weeks. So it’s a weirder calculus for us, and as a result, we’re dead set on not giving notice until we’re sure we’re at all of our target numbers already, and then from there we can try to angle for a prorated bonus, layoff, etc., though we wouldn’t be banking on any of those things. Does that answer your Qs? ;-)

  27. First, on the topic of Bowie’s death, my favorite recent tweet was from Ken Jennings who said: “At least this Christmas, Bowie and Bing Crosby can sing their duet together in person again.” Loved it.

    Second, is there a way split the difference? Put your bonus toward mortgage and Mr. ONLs all in investments and then you quit in the summer and he works a few more months if he feels uncomfortable quitting that early? I realize it’s lame for him to work longer, but it’s also a level of tolerance thing. Mr. T clearly hasn’t quit his job yet (despite me begging him too… though I have no tangible money plan for if he does!). But maybe it’s possible for you each to do different things to compromise. Or you both quit in September and celebrate by coming to FinCon at the end of October! :)

    1. Aw, Bowie and Bing back together. :’-) As for splitting the bonuses, mine is WAY smaller than his, so it would be a very skewed split if we did them that way. BUT, it’s a good idea to attack more than one goal with them. And there’s definitely no way we can quit at different times (more on this to come Wednesday!). I LOVE the idea of quitting before FinCon, though! Then we can take our good sweet time getting to Texas and not be checking email through the whole thing like I was this year!

  28. I’m with Mr ONL on this one. If you pay off the mortgage, its going to make next year that much harder. I also think if these “bonuses” are truly deferred compensation, it would be hard for me to quit mid year next year without receiving my full compensation for the year.

    You’ve expressed several times how you don’t want to have to rely on your creative outlets for pay. You’ve softened that stance lately, but I presume your wage at your full time job is much higher than what you expect to make in retirement. Why not get the most out of your current pay rate and get through the year?

    Perhaps I’m thinking too much with logic and not enough with emotions. I’d put the money in the least satisfying place. Get through next year and let your last bonus pay the mortgage. That will be the sweetest treat to start retirement.

    1. Oh, you have that right — our current hourly wage is way in excess of what we’d expect to earn in retirement! Like not even close, unless I have totally unrealistic expectations about retirement and in reality people are going to throw money at us. But I doubt that’s true. ;-) We do think it’s possible that we’ll get prorated bonuses mid-year, which is why *having* to work the full year became semi-negotiable this past summer, but it would be a gamble. Still, there’s always *some* money on the horizon that could keep us working forever, if we don’t just decide to pull the plug at some point. There’s always a looming 401k match or retention bonus or year-end bonus or something else trying to entice us to stay… that’s all by design, and we have to just make the call to ignore that siren song at a certain point. Plus, once we have enough, isn’t any more just greed? (I think everything you argued for is totally sound — just playing devil’s advocate.) ;-)

  29. I would pay off the mortgage. Not because it is financially more prudent (nobody knows if it’ll beat or lose to the stock market at current valuations), but because it will free up a lot of brainspace currently dedicated to worrying about your mortgage.

  30. I’d pay off the mortgage for sure! There is just so much uncertainty with this new, um, person who will be taking over presidential duties, and I think with everything going on with the economy and the like, a place that is paid-for sounds good to me! :)

  31. It feels a bit redundant adding in my 2 cents here when it agrees with a lot of the comments already here… but if it were me, and the bonus was enough to pay off the remaining mortgage, then I would definitely put it there. Peace of mind is a big thing.

    I discussed something like this in a recent post, but it involved magically getting a million dollars… But my situation is a bit different than yours and my mortgage is still quite high, and at a very good rate, so if I were to get something less than a million dollars, I would probably put it all in my retirement accounts. I still have a long way to go before I get to the early retirement stage.

    1. Not redundant at all! Thanks for chiming in, Jena. :-) It is a funny thing, as you said, how the amount makes the difference. Like if it’s enough after taxes to pay everything off, then it will feel different than if it’s not quite enough, and then we’ll probably just invest it. Like your situation but on a smaller scale. :-) And take a look at the projection chart in this post… proof that you can hit some of these goals way faster than you’d imagine. I bet early retirement is not nearly as far off in the future as it feels like it is right now. :-)

  32. Since you want to pay off the mortgage, I’d do that and then plump up the cash reserves. That close to retiring I wouldn’t want to play with the market!

    1. Thanks for weighing in, Gwen! The truth is that the vast majority of our invested assets will be things we don’t touch for years, and it’s only a tiny slice we need for the first few years of retirement. But I still have that same feeling that you do that we shouldn’t be dumping more into the market when 1.) we might need it right away, and 2.) the markets seem all bajiggity. :-/

  33. We are in mortgage pay down mode right now too (on our rental properties) because our goal is increased cash flow. I love looking at the big 0’s across the “mortgage row” for our own house when I look at our online accounts. We paid off one rental this year too. I can see why Mr. ONL wants to keep investing though too. It sounds like work has stressed you out a great deal this year, so I hope this isn’t causing too much stress at home ;)

    1. Thanks for your concern, Vicki — I’m so touched that that. :-) It HAS been a fairly terrible year in terms of stress and such and it has definitely taken a toll on us. The money victories keep us excited, though, so that has helped a ton. And geez, how lucky are we to have this “problem” in the first place?! I can’t wait to see zeroes on our spreadsheet like you have — we’ll still have our rental to go after the house is paid off, but I don’t care as much about that right now. Though, like you, I also absolutely see Mr. ONL’s argument. We’ll have to figure it out one way or another very soon. ;-)

  34. Pretty sure that I’ve confessed to being super conservative financially, so that’s going to bias my tendency to want to say: mortgage first, then split between cash and investing. The market is oddly high right now but I also really love the idea of wiping the mortgage off the balance sheet as you head into a period of non-work income. At the same time, I can really make the argument for investing all of that money now to give it time to grow and use the proceeds of that investment to pay down the mortgage. I am no help at all :)

    1. The idea of zeroing out that mortgage line item just makes me so happy, so yeah, that’s my totally “rational” argument. ;-) Honestly no idea what we’ll decide to do, but at least we’ll know the answer soon. Hahaha.

  35. I would do all three. 40% each to the choice each of you values most and the remainder to the last choice. Things don’t have to be this or that. Both, er, all three, is often a great option.

  36. I’m with Mr. ONL. Invest it and let it grow. I understand being leery of this as most do feel that the market is overvalued. Timing the market is a fools game, but I understand your timing of retiring soon. Still, people have been saying we’re due for a correction since back in 2012? Even if that correction does finally come in 2017, with your plans to have 2 years of cash savings, you won’t need to access it and you’ll have plenty of time for it to recover.

    1. Yeah, and we just heard that analysts are predicting another surge in the S&P next year. So who knows? My biggest reason to focus on the mortgage has nothing to do with the markets or their valuations, but just with wanting to have the house paid off! :-) But we’ll let you know either way what we decide! Thanks for weighing in. :-)

  37. I’ll go with the rest of the ladies. Pay off the mortgage now, remainder to bulk up the cash, use the extra money that paying off the mortgage frees up to invest in the taxable account next year. That way if the market does fall (and i think it will), you can take advantage. If it doesn’t, I’m not sure you will lose that much returnwise (although yeah, you might lose a bit of motivation to stick with the work timeline.)

  38. Great discussion here. I love your directive about banking windfalls — especially when they’re not truly windfalls. Things like tax refunds and deferred compensation are at least somewhat predictable. Better to not get fooled into treating them like free spending money! I also totally admire your commitment to donate more this year. You’re setting fantastic examples for this privileged community ❤️

    1. Great point, Matt! It’s super easy to think of year-end money or tax refunds as shopping spree funds, not money to save, when they are fairly predictable. And thanks for saying that about our giving. Feels like a time when it’s especially important to do so, so just hoping to inspire a few others to do the same. :-)

  39. We have a similar bonus at the end of each year. It’s a lot of money and every year we go through what we will do with it (besides taxes, that’s usually quite a bit of it since we’re self employed). Typically, we end up doing a bit of everything to make everyone happy. We just have to figure out what amount goes where. I think it’s good for our marriage to do it that way- no one completely gets left out of what they want to do.

    1. That’s a great approach, Sara! We’ve tended to not have much extra to allocate each year beyond the pre-determined goals, so this year is the first time we’ll be looking at a big number to apportion. Should be interesting! :-)

  40. I’d pay off the mortgage. It feels good to be completely debt free. It’s a great insurance policy should something happen. Also it kinda nice walking through life knowing you own your home while most others are enslaved to working to pay the debt. Regarding working I’d commit to the end of the year or alternatively let Mrs. ONL retire earlier than Mr. ONL if that works for the two of you. With the Mortgage paid off I’d arrange the spending to be inline with what you expect post retirement spending to be and use 2017 as a financial dry run. Regarding freed up cash flow I’d direct it at both goals of increasing cash position and investment position. Good luck.

    1. I can’t wait to feel that feeling of knowing we own our home! (Mr. ONL is also excited about it, to be fair… he just doesn’t want to sacrifice our other goals like investment gains to get there just a bit quicker.) ;-) I wrote today about why quitting at different times is not an option, though I think that’s a great suggestion for other couples!

  41. I haven’t read a single comment yet because I wanted to respond to your post without any influence. If I were in your shoes I think I would a) pay off the mortgage and then b) throw the rest in taxable investments. This appeases both you and your spouse to some degree. Then use the payment savings from the house plus excess in 2017 to boost cash (some of which can be deployed to stocks when the market inevitably corrects).

    I think I’d also lean toward his suggestion of working through all/most of 2017 no matter what, just because the more years we go without a major market correction, the more likely one becomes. Statistically, the worst time to have one is 1-3 years into retirement as far as making your money last! The risk there is falling prey to the “OMY” syndrome, or feeling you need to work “one more year” to really make “sure” you’re stable and ready to quit, financially. One more bonus, one more year.

    1. Thanks for chiming in, Elizabeth! If it was only up to me, I think I’d do exactly what you’re suggesting (though I doubt even a big bonus would cover the mortgage AND have money leftover to invest — but we can dream, right?). ;-) And we definitely know all about sequence of returns risk, and plan to do some side hustle type work for the first several years at least to avoid having to draw down our portfolio too quickly!

  42. Our only remaining debt is our mortgage, so we are inclined to aggressively pay down our mortgage when we have ‘extra’ income. I know it doesn’t make the best financial sense given our mortgage rate of 2.75%, but we are focused on freeing ourselves of this last debt. For us, the earlier piece of mind is more important than a few thousand dollars that may be made in the markets.

    Regarding your ‘adios’ date, I’m more aligned with Mr. ONL’s path (maybe it’s a guy thing). Mrs. Need2Save is always pushing for an earlier date :-)

  43. We faced the same question. Ultimately I split the numbers between mortgage and stocks for many of your same arguements. It’s not necessarily an all or nothing situation afterall.

  44. Do you plan on staying in your current home for the foreseeable future long term?
    If it is possible could Mrs ONL quit early in 2017 and really try to monetize your side hustles and the website? It appears Mr ONL is content to work through 2017 so let him. Regardless you guys are doing well and happy for you. Cheers

    1. Whether to stay in the house is a big Q. We’re definitely willing to downsize, but the housing market where we live doesn’t make sense right now, and has super high priced smaller homes, meaning we could take enough money out of our house to make it worth downsizing. Thanks for the well wishes, my friend! :-)

  45. Like you, I am pretty desperate to pay the mortgage off (though we are still four years away). You do make an interesting point though, that you might not be able to resist quitting if the mortgage was paid off. Perhaps you could strike a deal with Mr ONL? Pay the mortgage off with the bonus’ but commit to him that you will work until x date. Maybe not end of 2017, but maybe mid? A compromise of sorts. Looking forward to reading about the decision!

    1. Hooray for early mortgage payoff! I really bet you’ll get there faster than four years, because that’s how these things go. This was supposed to be our ten year plan, after all, and we’re only in year five! ;-) I’m positive that Mr. ONL and I will figure all of this out quickly and get to a place where we’re both happy. :-) We’ll share all the updates soon!

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