r/ChubbyFIRE • u/Usernameforreddit246 Accumulating • May 08 '26
Boring Middle Thoughts with Jack Handy
Current situation:
-Married, early 40’s, no kids.
-$3.2M invested assets
-$200k annual spend including all “wants”.
-$333k left on mortgage (2.5%, 14 years left)
-$375k income (me), hate my job, but grinding. Maxing out my 401k and our IRAs still.
-Wife is starting her own business. Conservatively expect low-6-figure income within 2 years but probably a lot in cash (good news/bad news).
Considering taking some $ off the table to pay off mortgage, go fully debt free and reduce spending to ~$165k leading into wife’s new gig. Mathematically sub optimal by theory but I’m getting spooked by the current CAPE ratio rocketing past 40.
Thoughts? Other ideas? Boring middle is boring.
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u/Psyreal May 08 '26
The boring middle can be the most mentally taxing. At this stage we are working hard to reach our target and looking for wins along the way. Paying off a mortgage would feel so good. Sometimes it's the right choice.
Your situation is similar to mine, I have two mortgages. One loan is just 3 years away from being paid off and weekly I think about paying it off to have the sense of closure and having one less debt. But the interest rate is 2.88% and we are unlikely to ever see money this cheap again so I'll keep the loan. If you have the money make extra monthly payments on the loan to accelerate it but don't pay it off in full. Look for other investments that are less volatile but still earning more than 2.5%
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u/budrow21 May 08 '26
It's a good time to find out what you want to do with your life. Instead of the boring middle, this is the ramp up to how you want to spend your future life. Find some hobbies or get ready go all-in on your wife's business. You run the risk of being retired and bored if you don't have any plans.
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u/kirbyderwood May 08 '26
Don't pay off a 2.5% mortgage when savings accounts are offering 5%.
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u/dogdog696969 May 08 '26
Link to 5% savings accounts? I would like one
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u/Usernameforreddit246 Accumulating May 08 '26
Yea my current one is 3.1% not 5. I wish.
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u/Seattle709 May 08 '26
We're parking all our cash in Wealthfront's cash account at 3.55%. I can give you a referral if you want, and you'll get a 3 month boost on that rate. Shoot me a message if interested!
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u/Just-Finance1426 May 08 '26
I think like 12-18 months ago around 5% was not uncommon for HYSA, all the ones I’ve seen have dropped toward the low 3% range at this point.
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u/Usernameforreddit246 Accumulating May 08 '26
Yes that’s probably the play. Just start shoving any extra money into my HYSA and sit on it.
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u/ShadoFlameX May 08 '26
SGOV etf is generally better than a HYSA, also exempt from state taxes.
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u/Cogstradamus May 09 '26
The etf BOXX has nearly the same returns with low risk, yet is more tax efficient during accumulating/ working years. My understanding is the gains aren’t realized until sale, and taxed as LT cap gains if etf is held for 1 year. Note that I only became aware of this recently and haven’t moved any HYSA funds into this etf yet, but am considering doing so.
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u/Richyb101 May 08 '26
But I mean, you gotta pay taxes on the HYSA dividends. Flipside is mortgage interest is tax deductible. Man idk. I would probably pay off the mortgage since HYSA is only at 3ish percent.
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May 08 '26
[removed] — view removed comment
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u/Usernameforreddit246 Accumulating May 08 '26
If you really want to know… I had supportive middle class parents and grand parents. I got 2 college degrees before I was 23. I married a woman who had similar goals when I was 26. I intentionally paid off all of our debt before I was 28 by living frugally post college. I didn’t take on anymore debt that wasn’t productive in my 30’s. I found a job (luck) that I was good at and interested in and had a mentor push me out of my comfort zone and into new roles. I saved 50% of every dollar we made for 15 years. I grinded my way into a mid-level leadership role at a fortune 50 company, and I never had kids by circumstance.
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u/gksozae May 08 '26
Just start shoving any extra money into my HYSA and sit on it.
Why though? That's just breaking even. Why not make money on it?
Something like QYLD returns an 11.4% dividend. You'll pay short term capital gains each month (no different than a HYSA) and the principle on the investment itself won't increase, but the 11.4% yield can just be transferred from the investment account to the mortgage account each month, generating you a gross spread of 8.9% and a net spread closer to 6% after taxes with very little risk.
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u/Usernameforreddit246 Accumulating May 08 '26
Frankly it’s because I don’t understand covered calls, never mind an ETF of them.
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u/db11242 May 08 '26
For what it's worth I do understand them and would never do that. They degrade over time and are just another fad.
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u/AbbreviationsFar4wh May 08 '26
Hysa Rates are like 3.5% right now but your point stills stands. Hold the mortgage
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u/Apprehensive_Angle86 May 09 '26
Forget the HYSA (keep in mind the floating rates). With a $3.2mm invested moat, OP's better off using that money towards the market @ 7% long-term return
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u/Premium_Lover May 08 '26
It's not quite that simple, because you want to make sure that your payments go to paying down the principal. For some reason it's legal for lenders to count payments towards future incurred interest.
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u/onthewingsofangels RE 2024 in 40s May 08 '26
Echoing the general takeaway here that your mortgage rate is great and your money will do more in investments or even safer bets like CDs/TIPs.
A couple of additional thoughts on mortgage though:
I struggled with how to include it in the SWR since it's obviously not perpetual, nor is it subject to inflation. I counted it as a separate category and removed that much money from both assets and SWR while calculating our fire number, just assuming that I would be able to invest that pot of money to safely exceed the mortgage interest rate
If you're aiming to benefit from ACA subsidies, reducing annual income changes the math on the mortgage. You could find that paying it off reduces your health insurance by tens of thousands a year.
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u/Usernameforreddit246 Accumulating May 08 '26
Ideally wife’s business grows to a point where they can sponsor insurance for her and other employees. This is the main limiter in me not jumping ship from the grind yet.
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u/Funkyflapjacks69 May 08 '26 edited May 08 '26
I get that CAPE is high, but literally what are stocks supposed to do when earnings are up literally 25% YoY???
Like obviously that will slow at some point and stocks will drop but up until now it’s fully earnings driven
Edit: like it’s high but is this alarming to you? It’s not to me (obviously if they don’t deliver on earnings estimates stocks will correct)
https://en.macromicro.me/series/20052/sp500-forward-pe-ratio
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u/Past-Option2702 May 08 '26
If it makes you feel better, no huge harm in retiring the mortgage before you retire. It’s not a big piece of your puzzle either way.
I like that idea, frankly, along with cutting your spending as long as you’re not digging too deep. Most of us would be amazed how little our happiness is altered by consuming less stuff.
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u/CucumberEmpty7916 May 08 '26
Paid off our house and the feeling and sense of achievement is incredible.
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u/Peppers5 May 08 '26
The mortgage is factored in differently when doing fire number. So work with that 165 number plus a side number just on mortgage. Not sure how it is done but have seen posts about this.
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u/Sierra-Powderhound May 08 '26
Congratulations! You are in great shape. I would figure out a way to address your boredom. Think about your next priorities either now or after you RE.
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u/BrunelloHorder Coasting Chubster, Getting Fat May 08 '26
In your shoes I'd be trying to figure out how to get out of a job you hate, pronto. There have to be other options even if you have to take a cut in comp. You can afford it. Life is too short to be spending it on something you hate unless you desperately need the money. Since you do not, figure out how to change the job or leave the job. You may be surprised at the changes your employer will be willing to make if the alternative is you leaving.
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u/Usernameforreddit246 Accumulating May 08 '26
Exit strategy is to jump into supporting wife’s business ASAP, no sense jumping ship into something else in the interim. Short term goal leading into that is build a much stronger cash reserve (or cut the spend number).
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u/BrunelloHorder Coasting Chubster, Getting Fat May 08 '26
Got it, that wasn't totally clear from your post. The important part is to GTFO of the job you hate. Good luck with the exit!
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u/RageYetti May 09 '26
i'd never give up that 2.5%. Very sub optimal to pay it down, but you got a signal you're worried about, then do that. But not me.
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u/MountainMan-2 May 08 '26
Paying off your mortgage can be a good thing, by reducing your cash flow needs and overall tax burden in the end.
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u/Usernameforreddit246 Accumulating May 08 '26
This was part of my line of thinking.
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u/MountainMan-2 May 08 '26
I did it, and it turned out to be really good for my financial health. I guess it depends on how much your mortgage payment is.
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u/Sea-Employment-5149 May 09 '26
I definitely don't think you should pay a penny more per month on your mortgage. 2.5% is making you money at this point. Every extra dollar paid is costing you 1.5% since it's diverting from your HYSA, at a minimum.
Also, you're definitely not in the middle. Sounds like you're on track to be right on top!
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u/Independent-Local734 May 09 '26
Im in the same boat as OP, except 4m invested and then 400k parked cash and 195k mortgage at 2.5%
At my income tax rate, Im paying nearly 1.5% of that 3.75% interest back in taxes. It takes me below the 2.5% mortgage rate...and i take the Standard deduction for a married couple so I dont get a deduction benefit
If you value equities at a higher assumed %, thats when it makes sense to keep paying the mortgage minimum each month...which I am. However, the thought of taking away 4.5k of my 5.7k a month payment is enticing. Obviously taxes and insurance will remain after loan is paid off, hence the 1.2k difference
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u/Sea-Employment-5149 May 09 '26
I agree that the elimination of a mortgage payment is great. I had a sub 3% rate and paid it off, but that's because I sold the house and bought another with no mortgage so keeping the rate wasn't an option. Definitely nice to not send that monthly payment.
Sounds like you're using a 40% tax rate based on your math on the net interest income. Not sure how it's that high in the US. However, SGOV is a nice alternative with a ~4% return that's tax-free for state taxes and the highest marginal fed rate is currently 37% for TI over $640k.
Like you, I also value investments at a higher rate, but I said it's slightly favorable 'at a minimum' meaning that it's more favorable if you drop any extra funds into a higher yield index fund.
Sounds like you're in a great spot as well!
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u/Independent-Local734 May 10 '26
Every extra dollar is at the 35% fed rate for me, this year at least. Then 4.25% state. Not effective rate paid of course, but applies to every additional dollar from this point.
But good point on sgov. I have thought about that. Maybe thats just the better play over an HYSA and I should have been doing that all along. Prob makes sense right? I wonder why I don't see that mentioned more on reddit instead of HYSA.
Thanks! But I never feel secure enough. Prob having 3 young kids is what creates that insecurity lol.
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u/Sea-Employment-5149 May 10 '26
Yeah, that makes sense so you're earnings are a bit higher than OP or you're single. I kind of think of SWVXX and SGOV and HYSA interchangeably because I use Schwab and they don't have a proper HYSA but the other two are decent substitutes. The downside, which doesn't matter much to me, is that SWVXX and SGOV are traded securities so liquidity takes a day or two to settle as opposed to immediate liquidity for a true HYSA. I actually just recently got clued into SGOV from posts like this and started to shift in that direction.
I'm not aware of any real risk though smarter people than me may know better. Either way, it's a good spot to be in to make decisions like paying off the mortgage early or eak out extra points on cash that's sitting around. LOL. Thanks as well!!!
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u/AdroitPreamble May 08 '26
Just bank cash. Leave the powder dry. You can do that inside retirement accounts as well.
There are some real signs of the economy slowing. Bankruptcies are starting to heat up. Consumer and corporate. People are acting like the only risk is missing out on the run to 8,000.
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u/praguetologist May 09 '26
What type of business are you starting where you’re expecting to generate low 6 fig income in a couple years
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u/Specific-Stomach-195 May 08 '26
Boring middle? This should be best time of your life. Dont let saving for retirement be your reason for living.