JudicialTyranny
DIS Veteran
- Joined
- Mar 31, 2005
We have more in savings than home equity, but it depends on what is considered "savings".
I consider my IRAs and 401K as "savings", as well as mutual funds and stocks I own outside of retirement accounts. But when you read the dire articles about savings rates in the USA, they don't include these things which distort the statistics.
Another reason we have more in savings is that I chose to have a mortgage even though I could pay off the house. It's not a huge mortgage, but I refinanced when interest rates were near the bottom (5% on 30-yr mortgage).
I took the amount I would have used to pay off the house and put it in some fairly safe investments. With a mortgage rate of 5% (effectively lower because of deductibility of mortgage interest), it was not hard to meet or beat that rate. Especially now with money market rates nearing 5%.
So if I should need that money in the future (such as college tuition), I have it effectively at a fixed 5% tax-deductible rate. If I waited until then to refinance or use a HELOC, who knows what interest rate I'd be paying. That's why I was not a big fan of people paying cash for houses or paying off mortgages back in the early 2000's when interest rates were historically low. Money was cheap and wasn't going to stay that way forever, so locking in the cheap rate seemed like a better move.
I consider my IRAs and 401K as "savings", as well as mutual funds and stocks I own outside of retirement accounts. But when you read the dire articles about savings rates in the USA, they don't include these things which distort the statistics.
Another reason we have more in savings is that I chose to have a mortgage even though I could pay off the house. It's not a huge mortgage, but I refinanced when interest rates were near the bottom (5% on 30-yr mortgage).
I took the amount I would have used to pay off the house and put it in some fairly safe investments. With a mortgage rate of 5% (effectively lower because of deductibility of mortgage interest), it was not hard to meet or beat that rate. Especially now with money market rates nearing 5%.
So if I should need that money in the future (such as college tuition), I have it effectively at a fixed 5% tax-deductible rate. If I waited until then to refinance or use a HELOC, who knows what interest rate I'd be paying. That's why I was not a big fan of people paying cash for houses or paying off mortgages back in the early 2000's when interest rates were historically low. Money was cheap and wasn't going to stay that way forever, so locking in the cheap rate seemed like a better move.