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Mortgage or Retirement? Where Should LGI Homes Employees Put Their Money?

Healthcare Provider Update: Healthcare Provider for LGI Homes LGI Homes primarily partners with The Retirement Group, a division of Wealth Enhancement, to facilitate employee benefits and provide assistance related to healthcare coverage. Potential Healthcare Cost Increases in 2026 As LGI Homes prepares for 2026, employees should brace for significant increases in healthcare costs. With reports indicating that ACA marketplace premiums could rise dramatically-some states experiencing hikes over 60%-many employees may face higher out-of-pocket expenses. Additionally, employers, responding to mounting healthcare cost pressures, are likely to shift more expenses onto workers through increased deductibles and coinsurance rates. By familiarizing themselves with changing benefit structures and optimizing their health savings accounts, LGI Homes employees can mitigate the financial impact of these projected cost increases. Click here to learn more

'LGI Homes employees approaching retirement must balance investment opportunities with debt reduction, and as Patrick Ray of The Retirement Group, a division of Wealth Enhancement Group

'LGI Homes employees retiring soon should consider not just the numbers, but also their comfort with debt and financial flexibility—Wesley Boudreaux of The Retirement Group, a division of Wealth Enhancement Group

In this article, we will discuss key factors influencing the decision to allocate extra funds toward investments or mortgage repayment. Specifically, we will explore:

The Financial Trade-Off – Analyzing potential investment returns versus mortgage interest savings.
Risks and Considerations – Understanding market volatility, liquidity, and tax implications.
Personalized Decision-Making – Evaluating individual financial circumstances, debt levels, and retirement goals.

In the world of personal finance, choosing to allocate extra money to investments or debt reduction can be difficult, especially for LGI Homes employees nearing or entering retirement. This choice becomes particularly important in situations where a mortgage is one's primary source of debt. This debate's central argument frequently comes down to weighing the expense of debt versus possible investment rewards.

A financial perspective on investing versus accelerated mortgage repayment

The main justification for favoring investments over accelerated mortgage payback stems from the stock market's past success. In particular, the S&P 500 index had an average yearly return of 9.9% (including dividends) between 1965 and 2022. This implies that one could fairly anticipate long-term returns in the range of 7% to 8% for a well-diversified portfolio that includes both equities and bonds.

For the sake of illustration, let us take the following scenario: a person pays 20% down and purchases a $500,000 home, financing it with a 30-year fixed-rate mortgage at 6% interest. Let's say this person inherits $400,000. If this amount was invested with an annual return of 8%, it might gain over $4.03 million over the course of three decades instead of the $863,353 in interest and principal payments related to the mortgage. Though in a very simplified context, this example highlights the financial benefit of investing over quick debt reduction.

The Argument for Mathematical Returns' Inherent Flaws

That being said, there are some who disagree with the case for investing in accordance with mathematical returns. The returns on investments are by their very nature erratic and variable, and they seldom follow the straight line that average annual returns suggest. For example, between 1965 and 2022, the yearly returns of the S&P 500 saw significant fluctuations, ranging from a high of 37.6% to a low of minus 37%. In addition, a sizable fraction of American homeowners benefit from mortgage rates that are lower than 4%, which makes it much more difficult for individuals weighing their options between debt repayment and investment.

Other Things to Think About

When deciding weather to increase mortgage payments versus make investments LGI Homes professionals should also consider their financial circumstances. It makes sense to pay off high-interest bills first, especially credit card debt, which has average interest rates close to 25%, before thinking about making extra mortgage payments. Another important factor to take into account is liquidity; whilst house equity is an illiquid asset, equities and exchange-traded funds (ETFs) provide comparatively faster access to capital.

This choice is also influenced by tax implications. In addition to providing instant tax savings, contributions to tax-deferred retirement accounts, like IRAs, increase the allure of investing. Further lowering the cost of borrowing is the opportunity to deduct mortgage interest on loans up to $750,000.

When the loan debt hits 80% of the home's original value, mortgage insurance can be removed, which might result in annual savings of thousands of dollars. This is another factor to consider.

Final Thoughts

To put it simply, a number of factors, such as the mortgage interest rate, investment return expectations, other outstanding debts, liquidity needs, tax implications, and personal comfort with debt levels, influence the decision of whether LGI Homes professionals should allocate excess funds toward investments or mortgage repayment. The choice is almost always more complex, even while the economics of investment returns may favor investing, particularly in low mortgage rate situations.

When making this difficult choice, LGI Homes professionals must carefully assess their own financial situation, risk tolerance, and long-term goals. Ultimately, moving closer to financial security and peace of mind should be the top priority, regardless of whether debt reduction or investment comes first.

It is important for those who are getting close to retirement to think about the implications of required minimum distributions (RMDs) from retirement accounts, which start at age 72. Choosing to invest more money can result in these accounts being much larger, which could mean higher RMDs. A pleasant retirement may be supported by this greater income, but it may also result in a higher tax burden. Since Roth accounts have no required minimum distributions (RMDs) and retirement withdrawals are tax-free, making strategic investments in Roth IRAs or Roth conversions can provide a tax-efficient solution to handle this situation. (Source: IRS 'Retirement Plan and IRA Required Minimum Distributions FAQs,' last revised March 2023; Internal Revenue Service).

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Making the choice to pay off your mortgage early or put more money down for retirement is like a seasoned sailor choosing the best route to a far-off land. See your retirement as a peaceful, far-off island that you are trying to get to. There is a limited amount of cargo capacity on your yacht, which represents your available finances and your financial strategy. You have two options: either load up on more provisions (investments) to make sure you can comfortably weather any storms and currents along the way, or lower your load by tossing your mortgage overboard to enable a faster, more direct voyage. Every sailor's voyage is distinct, shaped by the winds (market returns) and the state of their vessel (financial circumstances). The trick is to pack your boat as efficiently as possible while maintaining safety, so that when you arrive at retirement island, you have enough money and peace of mind.

Source:

Williams, Rob. 'Should You Pay Off a Mortgage Before You Retire?' Charles Schwab , August 2023, https://www.schwab.com/learn/story/should-you-pay-off-mortgage-before-you-retire .

Hartman, Rachel. 'Should You Pay Off Your Mortgage Before You Retire?' U.S. News & World Report , January 2025, https://money.usnews.com/money/retirement/articles/should-you-pay-off-your-mortgage-before-you-retire .

Ameriprise Financial. 'Is It Better to Pay Off Your Mortgage or Invest?' Ameriprise Financial , 2024, https://www.ameriprise.com/financial-goals-priorities/personal-finance/should-you-pay-off-your-mortgage .

Carter, Erik. 'Should You Save More for Retirement or Pay Off Your Mortgage Early?' Forbes , 11 Oct. 2022, https://www.forbes.com/sites/financialfinesse/2022/10/11/should-you-save-more-for-retirement-or-pay-off-your-mortgage-early .

Vanguard. 'Paying Off Debt Before You Retire.' Vanguard , 2024, https://investor.vanguard.com/investor-resources-education/retirement/planning-paying-off-debt .

What is the 401(k) plan offered by LGI Homes?

The 401(k) plan at LGI Homes is a retirement savings plan that allows employees to save a portion of their paycheck before taxes are taken out.

How does LGI Homes match employee contributions to the 401(k) plan?

LGI Homes offers a company match on employee contributions, which helps to enhance your retirement savings.

When can I enroll in the 401(k) plan at LGI Homes?

Employees at LGI Homes can enroll in the 401(k) plan during their initial onboarding process or during the annual open enrollment period.

What is the vesting schedule for LGI Homes' 401(k) match?

The vesting schedule for LGI Homes' 401(k) match typically requires employees to work for a certain number of years before they fully own the matched funds.

Can I change my contribution amount to the LGI Homes 401(k) plan?

Yes, employees can change their contribution amount to the LGI Homes 401(k) plan at any time, subject to plan rules.

What investment options are available in the LGI Homes 401(k) plan?

The LGI Homes 401(k) plan offers a variety of investment options, including mutual funds, stocks, and bonds, allowing employees to choose based on their risk tolerance.

Is there a loan option available through the LGI Homes 401(k) plan?

Yes, LGI Homes allows employees to take loans against their 401(k) balance under certain conditions.

How can I access my LGI Homes 401(k) account information?

Employees can access their LGI Homes 401(k) account information online through the plan’s designated website or mobile app.

What happens to my LGI Homes 401(k) if I leave the company?

If you leave LGI Homes, you have several options for your 401(k), including rolling it over to another retirement account, cashing it out, or leaving it with LGI Homes.

Does LGI Homes offer financial planning resources for 401(k) participants?

Yes, LGI Homes provides access to financial planning resources and tools to help employees make informed decisions about their 401(k) investments.

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.

Review Company Pension Plan Information: Search for LGI Homes' pension plan details, including: Name of the pension plan Eligibility requirements (years of service, age) Pension formula Specific page numbers in the document where the information is found Review Company 401(k) Plan Information: Search for LGI Homes' 401(k) plan details, including: Name of the 401(k) plan Eligibility requirements Specific page numbers in the document where the information is found Gather Terminology and Acronyms: Collect any specific terminology and acronyms related to LGI Homes' employee pension and 401(k) plans. Ensure No Hyperlinks:

Restructuring and Layoffs: LGI Homes has been adjusting its operational structure in response to fluctuating market conditions. In late 2023, the company undertook a series of organizational changes aimed at streamlining its operations and improving efficiency. This included some layoffs within certain departments. This restructuring is a direct response to the ongoing economic uncertainties, including shifts in the housing market and broader economic conditions that impact homebuilders. As such, it is crucial for stakeholders to stay informed about these changes to better understand their potential impact on investment and employment stability. Company Benefits and 401k Changes: In early 2024, LGI Homes revised its employee benefits package to address the changing needs of its workforce. This included adjustments to its 401k plan, such as modified employer matching contributions and updated investment options. The changes are designed to enhance employee financial security amidst economic fluctuations. It is essential to follow these updates, as they reflect broader trends in corporate benefits adjustments influenced by the current economic and political environment, affecting employees' long-term financial planning and security.

LGI Homes provided stock options and RSUs to key employees, including executives and senior management. These options and units are typically granted as part of the company's long-term incentive plans to align interests with shareholders. The stock options and RSUs available in LGI Homes for 2022 were detailed in the annual proxy statement filed with the SEC.

LGI Homes has offered a range of healthcare benefits over recent years, with a focus on comprehensive coverage to support employee well-being. In 2022 and 2023, LGI Homes' health benefits included traditional medical insurance plans, dental and vision coverage, and access to health savings accounts (HSAs). The company uses terms like "HDHP" (High Deductible Health Plan) and "HSA" (Health Savings Account) to describe their benefit options. In 2024, LGI Homes continued to provide competitive healthcare benefits, emphasizing wellness programs and preventive care. Recent changes included adjustments to the cost-sharing structure and enhancements to telehealth services, reflecting broader trends in the industry toward digital healthcare solutions. The company also expanded its mental health resources, acknowledging the growing importance of mental well-being in the workplace. In the current economic and political climate, discussions around healthcare benefits at LGI Homes are particularly relevant. With ongoing economic pressures and legislative changes affecting healthcare policies, LGI Homes' approach to employee benefits remains crucial for both retaining talent and ensuring financial stability. Healthcare benefits are not just a matter of employee satisfaction but also a strategic consideration for investment and tax planning. By adapting their benefits to meet current needs and legislative changes, LGI Homes positions itself as a competitive employer and demonstrates a commitment to its workforce's health and financial security.