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Posted by Ram Samudrala on May 13, 2007, 6:31 am
Let's say one has a lot of disposable income per month and the age is
35. The options are given below and the goal is to maximise lifestyle
(i.e., spend money on things we don't need) with some respect for age
(i.e., lead a good life now).
1. Paying down a 30 year fixed mortgage (at a rate of 6%, say). This
would be good but since it won't get to zero right away and the
payments will be the same, this is essentially a deferral of the
disposable income.
2. Investing that extra cash in a retirement plan. This is another
defferal since it will lead to excessive funds during retirement
(which I never plan to).
3. Investing that extra cash in a normal plan (where the principal can
raise to adjust for inflation, but excess cash can be used to lead
a better lifestyle).
I know it is very situation dependent. In writing this e-mail
down, I figured out an option that is actually what I'll do: all three
of them.
--Ram
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