Quote:
Originally Posted by blkgsr
for the topic of pull investments (or invest said money) vs pay down mortgage.
Let's assume we're in the highest tax bracket or close to. Let's assume it's not in a TFSA but a regular taxed account.
If I have $20K to invest and I'm getting 10% return, I'm going to lose %50? of the to the tax man? so let's say it comes to approx 5% gains?
Assume mortgage is in the 4.5% range, it would be slightly less gain putting that money direct on the mortgage?
Please correct my numbers and logic if I'm missing something
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For the simplest math let's just say the marginal tax rate is 50% so if you record a 10% gain in your taxable account (let's say you made $100k) you'll get taxes on half of it at your marginal tax rate so you will end up paying $25k in taxes and have a real gain of 7.5%.
This would mean investing has a highest return than your mortgage of 4.5% (a 3% diff) but you were choosing a riskier investment versus the sure thing of a 4.5% return on your mortgage.
Some more context on my choice to pay down - my portfolio is relatively high risk for someone that's near retirement (I hold around 15% cash/bonds and am heavy in tech) because of how much my stocks have grown (I've held Apple and Amazon for 10+ years) so my pay down of my mortgage is partly driven by this. I'm taking the sure thing of a 5.37% return on a portion of my portfolio in the face of a what I think will be a relatively flat year in the market and what was a huge year for me in 2024. I chose not to pay down much in 2023 or 2024 because I was bullish on the market.