Currently, stock investments in a 401(k) plan will financially outperform paying off one’s mortgage by 70%+ over five years.
Reasons:
*Mortgage interest is tax deductible.
*Mortgages currently available below 4% interest.
*Stock market historically returns 7%.
*Tax-deferred 401(k) retirement savings don’t allow for paying off one’s residence.
This promotes greater debt and larger mortgages.
Result: more risk and more vulnerability to 2008-type systemic shocks.
Proposed:
*A $5000 annual tax credit for “paid-off primary residence” – for anyone who owns their home without a mortgage. This credit would function progressively, encourage borrowing less, and encourage paying one’s mortgage off.
*Allow repaying the principle on one’s mortgage to be a tax-deferred 401k retirement contribution.