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re: How many of you retirees still have a home mortgage (purposefully)? What is your mindset?
Posted on 7/18/21 at 9:06 am to Turf Taint
Posted on 7/18/21 at 9:06 am to Turf Taint
Not retired yet, but hope to in the next 10 years or so and I will definitely have the house paid off before then. But I don't care if the numbers say its a dumb thing to do. I like the piece of mind and knowledge of being debt free. That is worth far more to me than the time value of my money invested vs. paying off my low interest mortgage.
1
Posted on 7/18/21 at 10:05 am to jfw3535
Paid off my house and rental properties 10 years ago and kept making the payments into a group of mutual funds. Retired last year and couldn't be happier on where we are
financially. For me, the peace of mind of having no debt has been wonderful over the last 10 years.
financially. For me, the peace of mind of having no debt has been wonderful over the last 10 years.
Posted on 7/18/21 at 12:24 pm to sstig
Retired a few years back….house was paid off when I was early 40s and rentals and vacation paid with cash….but I am a simple person and had enough stress with my regular job so did not want additional stress…and maxed out the 401..
Every financial planer I have talked to and most publications recommend get rid of all debt before retirement if possible….stress and easier life planning…downsize early ( I have failed on this ;( and I regret it daily….
Then you just set your investment for income to cover required expense…luxury/ fun…car repurchase every set years and emergency…..
This is what I have done and I sleep well… also since I have it over funded it allows me to still invest a little when I see something I like ( this comes out of my luxury/fun income) ….and reallocate cash bonds or overfunded emergency when things like the covid March stock market crash happens ….
Retirement is wealth preservation and income production with some aspect invested for inflation also….
Every financial planer I have talked to and most publications recommend get rid of all debt before retirement if possible….stress and easier life planning…downsize early ( I have failed on this ;( and I regret it daily….
Then you just set your investment for income to cover required expense…luxury/ fun…car repurchase every set years and emergency…..
This is what I have done and I sleep well… also since I have it over funded it allows me to still invest a little when I see something I like ( this comes out of my luxury/fun income) ….and reallocate cash bonds or overfunded emergency when things like the covid March stock market crash happens ….
Retirement is wealth preservation and income production with some aspect invested for inflation also….
Posted on 7/18/21 at 1:02 pm to Turf Taint
I had the cash last year to pay my mortgage off in full but instead I did the smart thing and aped into stonks
Now I can pay my mortgage off times 4 but nah I’m good
Now I can pay my mortgage off times 4 but nah I’m good
Posted on 7/18/21 at 1:39 pm to Thecoz
I had to retire early because of medical issues. My house is paid off and bought 3 houses cash and will close on another this week. My stock portfolio is near 100% in stocks but rentals take the place of bonds. When I want to buy a new stock or increase any I own I sell something for the purchase. Do not need to worry about my investments because I can leave them until the recover when we have a correction. Notice I said when not if.
Posted on 7/18/21 at 8:02 pm to Paul Allen
quote:
Why wouldn’t you? That place is beautiful.
The medical system here needs big improvement and I have severe allergies which I thought would be better than ATL and did a lot of research on that. Juniper kicked my arse this spring but I'm not going back on allergy shots. Things like that, we have really enjoyed it here, like the 4x we had been to SF before we moved. We absolutely don't miss the idiot drivers in ATL and traffic congestion.
Posted on 7/18/21 at 8:27 pm to tirebiter
I’m still a young guy in my 30s and I do plan to have my mortgage paid off by retirement, so tifwiw. But the reality is that homes still have expenses, a mortgage is nothing more than an expense and people put a mortgage on some crazy pedestal it doesn’t deserve.
Your home will always have taxes, insurance, utilities, and upkeep expenses. Paid off is great, but those 4 don’t go away. It’s not like paying off your mortgage means your ‘expenses go away’. I used to be a huge debt free guy, but now I’m a huge ‘reduce expenses’ guy.
With the current interest rates, a mortgage is really nothing to worry about at all. I think you’d be better off paying a mortgage and being debt free otherwise then do something like a car payment.
Your home will always have taxes, insurance, utilities, and upkeep expenses. Paid off is great, but those 4 don’t go away. It’s not like paying off your mortgage means your ‘expenses go away’. I used to be a huge debt free guy, but now I’m a huge ‘reduce expenses’ guy.
With the current interest rates, a mortgage is really nothing to worry about at all. I think you’d be better off paying a mortgage and being debt free otherwise then do something like a car payment.
Posted on 7/18/21 at 8:31 pm to tigersfan1989
quote:
The 50% bond allocation is being held while you have a 2.5% mortgage which to me doesn’t make much sense. Why wouldn’t you just payoff the mortgage instead of trying to beat a small spread between a mortgage and a bond.
That's why people should buy lower rated bonds during market stress, even HQ TIPS can get hammered depending on circumstance. Bought a lot of TIPS in late 2008 at significant discounts as they got hit nearly as badly as HY bonds as there was very little liquidity for many forms of fixed income other than T bonds. Still have those in tax advantaged accounts, added a significant amount of HY bonds in March/April 2020 for same reason. People need to have a longer term perspective of what they will need need at "X" date and what types of assets and buy when on sale, not just equities. I'm just under 65% stocks now but that might change. Even I-bonds were at 3.54% in May, but that's not going to take someone very far.
Posted on 7/18/21 at 9:12 pm to Thecoz
Every financial planer I have talked to and most publications recommend get rid of all debt before retirement if possible….stress and easier life planning…downsize early ( I have failed on this ;( and I regret it daily….
----
Can you elaborate?
Posted on 7/18/21 at 9:54 pm to ItzMe1972
Failed on the downsizing… I ( that is the key word there) had planned on selling my primary older house and getting a smaller house…
Planned on just moving into a patio home on a golf course…
Married… and learned to pick my battles…
Still working on it..but I envy those that moved into a new smaller place with less headaches and let the golf course cut the grass they look out on…
Planned on just moving into a patio home on a golf course…
Married… and learned to pick my battles…
Still working on it..but I envy those that moved into a new smaller place with less headaches and let the golf course cut the grass they look out on…
Posted on 7/18/21 at 11:08 pm to Thecoz
Also. Downsizing in your 60s is easier than in your 80s when you sometimes get forced into it…and all those family heirlooms you think your kids want….they don’t…
go for it early with a new house so less stuff breaking and wearing out..
Smaller utilities etc…I know guys that sold their primary houses and paid more for their retirement house but it was in a location that offered more vacation feel than raising family stuff like schools etc…
But “ where will the kids and grandkids stay”……hmmm in a hotel?????
go for it early with a new house so less stuff breaking and wearing out..
Smaller utilities etc…I know guys that sold their primary houses and paid more for their retirement house but it was in a location that offered more vacation feel than raising family stuff like schools etc…
But “ where will the kids and grandkids stay”……hmmm in a hotel?????
Posted on 7/19/21 at 10:39 am to Turf Taint
Retirement is 4 years away. Built new home cash last year on acreage. Zero debt w/ savings and 401k. Plan on buying a new truck before retirement and pay cash. I want peace of mind when I pull the plug on working.
Posted on 7/19/21 at 12:30 pm to kywildcatfanone
quote:
kywildcatfanone
Dad?
quote:
However, the wife and I have no heirs
Posted on 7/19/21 at 12:50 pm to Turf Taint
quote:
That peace of mind is hard to ignore no matter what financials say.
Not having a note is pretty cool, I’m sure, but calling it peace of mind is misleading to me. There are more scenarios where you run out of money without a mortgage than with one.
Posted on 7/19/21 at 9:07 pm to Turf Taint
Just sold the home we raised our kids in and bought a smaller house with the cash and pocketed the extra $300,000.
Have no debt anymore.
No college loans for wife or kids.
No car payments.
Have another two rental properties that are paid off and generating money as well.
Wife and I are in our 50’s but I plan to work for 25 more years. I love my job.
I sleep so much better these past few months with no mortgage. I don’t care about the financial loss that I may be taking over the next 25 years.
Planning my expenses has never been easier. My wife and I have an extra $3500 to spend every month with no mortgage.
Have no debt anymore.
No college loans for wife or kids.
No car payments.
Have another two rental properties that are paid off and generating money as well.
Wife and I are in our 50’s but I plan to work for 25 more years. I love my job.
I sleep so much better these past few months with no mortgage. I don’t care about the financial loss that I may be taking over the next 25 years.
Planning my expenses has never been easier. My wife and I have an extra $3500 to spend every month with no mortgage.
Posted on 7/19/21 at 9:44 pm to slackster
quote:
There are more scenarios where you run out of money without a mortgage than with one
Why would that be? Either your nest egg can handle the outflow / expenses (with and without mortgage) or it cannot
If ex 3% of nest egg can cover annual retirement expenses, including mortgage, and nest egg earns roughly 3% or more per year, you ain’t running out of money.
Posted on 7/20/21 at 7:07 am to Thecoz
quote:
Planned on just moving into a patio home on a golf course…
THIS is my plan as well. I'm 51 and would like to retire in the next 5-7 years. I have enough equity in my current home that I think I can downsize and then live off of the difference at least until I hit 59-1/2 -- when I can start withdrawing from my retirement plans (IRA at that point). My plan is to start SS at age 62. Between the income from my IRA and my SS, I figure I can take in about 80% of my current salary, my IRA will still be growing, and I will no longer have a house note (and zero debt). I'll be living better than I do now. Of course, I'll be playing A LOT more golf.
Like others have stated, peace of mind in having a house paid off is more important than making a little money in the market hoping it doesn't crash.
Posted on 7/20/21 at 10:35 am to slackster
quote:
calling it peace of mind is misleading to me
It absolutely is, but its also a mind frame and that may not be all that bad psychologically.
Here's the thing with a home and here are some relative monthly expenses:
1.) Mortgage - Principle - $1350
2.) Mortgage - Interest - $400
3.) Mortgage - Insurance - $250
4.) Maintenance and Upgrades - $500
5.) Utilities - $400
Total With Mortgage = $2900
Total without mortgage interest = $2500
Total without mortgage principle included = $1150
The only point, is its really just a mind game. A roof over your head is always going to cost you money. But in reality, "being debt free without a mortgage" is only really saving you your mortgage interest every year. The principle is a wash, everything else is still there.
Just food for thought.
ETA: Now, I definitely don't think anyone should get a new mortgage or go out and get one with a paid off home. But I'm also not sure, especially with interest rates under 4% if its worth paying it off early.
This post was edited on 7/20/21 at 10:39 am
Posted on 7/20/21 at 11:13 am to Turf Taint
quote:
Why would that be? Either your nest egg can handle the outflow / expenses (with and without mortgage) or it cannot
If ex 3% of nest egg can cover annual retirement expenses, including mortgage, and nest egg earns roughly 3% or more per year, you ain’t running out of money.
Well yeah, if you’re making more than your expenses over time then you’re fine regardless. However, in the scenarios where you run out, having a mortgage usually nets you more time than paying off that mortgage.
If you’ve got a $600k nest egg where you need $4k/mth and it’s earning 5.5%, you can draw for 249 months before you run out. Let’s assume you’ve got 20 years left on your 3.5%/30yr mortgage, you’d still owe about $172k and you’d have $1000 P&I payments. You pay off your home, so now you need $3k/mth but have $428,000 left to grow. Now you run out in 228 months. That’s nearly 2 years of flexibility lost on a 20ish year draw. That’s not nearly as insignificant as most folks seem to think.
Posted on 7/20/21 at 11:43 am to slackster
quote:
Peace of mind
Yes, hear your point now. In the case where nest egg principle is needed to cover retirement expenses, using other people's money is a necessary tool. Stated differently, a mortgage offers more peace of mind than a fully owned home.
In this case, presume maintaining or perhaps regular refinancing of the mortgage (continuing to extend its term) is the "peace of mind" solution?
Hard to imagine being 90yo and refinancing for another 30-years (w/PMI I suppose!), but the financial math would likely say right decision for peace of mind.
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