Why the Dave Ramsey 'Pay Off the Mortgage' Rule Is Costing High-Income Households $400,000 Over a 25-Year Retirement

"With Path B, pay the mortgage on schedule and invest: Forty thousand dollars a year for 25 years at 7% compounds to roughly $2.53 million in the brokerage. The mortgage interest, partially deductible if itemizing, gets paid from normal income. The pre-tax gap is roughly $930,000 in favor of investing. After long-term capital gains tax and the lost mortgage interest deduction, the realistic edge lands near $400,000."

Debt is framed as a wealth-destroying force, with a rule to apply spare money to mortgage principal before optional investing. A scenario is used for a 55-year-old couple with $400,000 income, $1.8 million in retirement accounts, $400,000 in a brokerage, and a $480,000 mortgage at 5.25% on a $900,000 home. Under the mortgage-first approach, the mortgage is paid off in about nine years, then investing continues, producing about $1.6 million in total wealth including home equity. Under the invest-first approach, investing for 25 years at 7% yields about $2.53 million in the brokerage, with mortgage interest paid from income. The investing path shows a large pre-tax advantage that narrows after taxes and lost deductions, leaving roughly a $400,000 edge, or about $16,000 per year of spending power.

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