I am fortunate enough to have accumulated enough assets through frugal living to pay off my mortgage after living in the house for only 8 years. However I am wondering, does it make sense. I thought the iTulip community could help me figure it out.

After paying off the house, I will have roughly 8 months of living expenses saved in a highly liquid account, with the balance of my assets in 401K/IRAs.

While paying the house off gives me security and a total monthly lower expense, it locks up a lot of cash into a highly illiquid asset. For all practical purposes, once the mortgage is retired the cash cannot be freed up again until sold. As much as I like security from paying off the mortgage, I like the idea of having complete flexibility over cash/asset.

However, if I choose not to pay off the mortgage, then there is the question of what do I do with the cash. Given the true rate of currency depreciation, cash is a terrible place to keep it and I will need to find alternatives. Given EJís recent commentary regarding the next 10 years, Iím not sure I can even find a suitable place to park it. Paying off the mortgage seems like the lower risk and guaranteed option.

Some additional stats:
Age: 38
Mortgage: 5.25% with 16 years left

Thoughts?