The University of Texas at Austin
  • Professor researches the benefits of a 401(k) plan

    By Robin Gerrow
    Published: Jan. 27, 2009

    Don’t even consider prepaying your mortgage if you haven’t put aside an emergency nest egg or owe credit-card debt. Many advisers recommend saving even more if your job’s at risk and may take time to replace. Clemens Sialm, a finance professor at The University of Texas at Austin, says under certain circumstances, it’s actually better to contribute to your 401(k), especially if your company offers a match. He says one factor to consider is the interest rate, which right now is relatively low. Sialm and his researchers found that many people are so risk-averse that they opt for the lower returns of a prepaid mortgage rather than investing in a 401(k) plan. Those extra earnings could result in additional savings of $1.5 billion a year, or almost $400 per household.

    The Wall Street Journal

    Prepaying Mortgage May Not Trump Investing

    Jan. 9

    • Quote 2
      Brock Predovich said on Feb. 7, 2011 at 11:29 a.m.
      Robin, would be interested to delve into this topic a bit more. So many Americans believe OWNing their home, working hard to pay it off in full. But not leveraging personal investing strategies they end up House Rich and cash poor. This WSJ article is right on target. Although investing in one's home can be a good strategy, it should not be one's only strategy, especially if you do not plan to sell or move in the near future. The correct strategy in my opinion is controlling the cost of one's mortgage and disciplined low risk investing. Many folks incorrectly treat their home as an investment rather than a liability. Would you elaborate on this topic further, other safe investment strategies one can use. what about self employed? What are some vehicles they can use. Please contact me when you update this, would love to feature your work on our website COMortgageResource which focuses on mortgage related information for the Denver, CO real estate market. Consumers need to know some very basic ideas on correct investing when it comes to their homes, so we'd appreciate any work you do on these topics.
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