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re: Retirement: Owning home in full vs Not Owning in full
Posted on 7/6/25 at 12:15 pm to Artificial Ignorance
Posted on 7/6/25 at 12:15 pm to Artificial Ignorance
The invest vs payoff mortgage question only has a "right" answer once one of the options is no longer there.
12% returns are great, but that is not going to be the case every year.
Whats happens when your first 10 years of retirement are another "lost decade" like the early 2000s?
The smart answer is work another few years - however long it takes to payoff the mortgage. Your wealth will continue to grow exponentially in that time. After that you can do whatever you want.
12% returns are great, but that is not going to be the case every year.
Whats happens when your first 10 years of retirement are another "lost decade" like the early 2000s?
The smart answer is work another few years - however long it takes to payoff the mortgage. Your wealth will continue to grow exponentially in that time. After that you can do whatever you want.
1
Posted on 7/6/25 at 12:29 pm to Artificial Ignorance
quote:I'd keep that. Depending on your tax bracket, cost of carry on that 2.8% rate may be significantly lower. Stay invested. Use the extra funds to drive down risk.
mortgage (2.8%)
Posted on 7/6/25 at 12:31 pm to Artificial Ignorance
Thinking you are still paying principal…. So you are paying out x every month that you could be using.
Yea you may pay $2k in interest but make $4k, but is the principal you are paying more than the $2k difference?
Yea you may pay $2k in interest but make $4k, but is the principal you are paying more than the $2k difference?
Posted on 7/6/25 at 12:45 pm to GEAUXT
The money is already in-hand to payoff mortgage. The option to payoff or keep investing is also in-hand. Hence the post.
A big reason we invested this way was the value of time. Can now retire 7-10yrs early.
Time is now more valuable than money.
Feeling of never having to work again is immeasurable. Our peace of mind comes from owning/controlling our time.
PS. This is not a FIRE scenario, ie, eating Ramen noodles until stool turns white stuff. Blessed to be able to keep same level of lifestyle that has been a really nice one.
Ownership of home is now a balance sheet item. Either in the home asset (paid off) or in investment portfolio. Hence this post.
Investment portfolio risked to the black swan level (P10) for next 40yrs still covers lifetime of retirement essential and non essential expenses, including mortgage P&I, at 130%.
Worst case is abysmal and is still projected to last 40yrs at 4% rule. Tariff shock of April 2025 reinforced my confidence.
quote:
The smart answer is work another few years - however long it takes to payoff the mortgage.
A big reason we invested this way was the value of time. Can now retire 7-10yrs early.
Time is now more valuable than money.
Feeling of never having to work again is immeasurable. Our peace of mind comes from owning/controlling our time.
PS. This is not a FIRE scenario, ie, eating Ramen noodles until stool turns white stuff. Blessed to be able to keep same level of lifestyle that has been a really nice one.
Ownership of home is now a balance sheet item. Either in the home asset (paid off) or in investment portfolio. Hence this post.
quote:
Whats happens when your first 10 years of retirement are another "lost decade" like the early 2000s?
Investment portfolio risked to the black swan level (P10) for next 40yrs still covers lifetime of retirement essential and non essential expenses, including mortgage P&I, at 130%.
Worst case is abysmal and is still projected to last 40yrs at 4% rule. Tariff shock of April 2025 reinforced my confidence.
Posted on 7/6/25 at 12:51 pm to Artificial Ignorance
I'm not sure the reason for the thread as you clearly already have your mind made up on the path forward.
It's good to have a financial plan, and yours certainly isn't wrong.
It's good to have a financial plan, and yours certainly isn't wrong.
Posted on 7/6/25 at 1:46 pm to Artificial Ignorance
We restructured everything back around 2015 to have our home and rental unit paid off when I retired so we had either a) a home to stay in that was paid for or b) two assets we could sell to buy a paid for home. The thought was to minimize overhead.
ETA: my mortgage is around 2.9% so no way I’m paying it off early…but it should be paid when I’m 61 ish so it’s not an issue.
ETA: my mortgage is around 2.9% so no way I’m paying it off early…but it should be paid when I’m 61 ish so it’s not an issue.
This post was edited on 7/6/25 at 8:00 pm
Posted on 7/6/25 at 2:08 pm to GEAUXT
I appreciate diverse thinking on this subject. Helps me hold mirror up to my point of view and decision. Did we miss anything? Etc.
Valuable just the same.
Thank you for your input!
Valuable just the same.
Thank you for your input!
Posted on 7/6/25 at 2:16 pm to Artificial Ignorance
Again, I'd keep the low interest mortgage.
If using 4% SWR you're already conservative (Bengen has updated his rule.of thumb to 4.7%)
Did you account for SS, many early retirees assume it away(another layer of conservative)
What is your allocation,presumably not 100% equities?
One worst case scenario is massive inflation in which case your mortgage is a hedge if you have any retirement income sources that adjust w inflation.
If using 4% SWR you're already conservative (Bengen has updated his rule.of thumb to 4.7%)
Did you account for SS, many early retirees assume it away(another layer of conservative)
What is your allocation,presumably not 100% equities?
One worst case scenario is massive inflation in which case your mortgage is a hedge if you have any retirement income sources that adjust w inflation.
Posted on 7/6/25 at 2:38 pm to ItzMe1972
quote:
The problem with a paid off house is rising insurance and property taxes --- That's true whether it's paid off or not.
My answer to this question was always that I would keep a low interest note in order to use cash elsewhere. In the last 5+ years one of my houses in Florida has seen the insurances triple. I would consider paying off the house to self insure with that particular property.
Posted on 7/6/25 at 3:01 pm to Motownsix
Self insuring is an interesting tactic and might make a compelling case for payoff. Makes some sense if you've got multiple residences. Dont think it would ever work for the peace of mind advocates.
ETA: had a friend get primary home hit w a Cat 5 hurricane in FL followed by earthquake following month rendering rental home in AK unliveable. Without insurance he'd have been F'd despite the geographic diversification.
ETA: had a friend get primary home hit w a Cat 5 hurricane in FL followed by earthquake following month rendering rental home in AK unliveable. Without insurance he'd have been F'd despite the geographic diversification.
This post was edited on 7/6/25 at 3:07 pm
Posted on 7/6/25 at 4:10 pm to TorchtheFlyingTiger
quote:
If using 4% SWR you're already conservative (Bengen has updated his rule.of thumb to 4.7%) Did you account for SS, many early retirees assume it away(another layer of conservative) What is your allocation,presumably not 100% equities?
SS at 70yo. Pension at 60yo (covers 66% retirement expenses) so SS risk not big concern.
Nest egg:
53% equities, 37% bonds, 10% cash equiv.
RE et al assets out of this scope.
Posted on 7/6/25 at 4:38 pm to Artificial Ignorance
You’re probably just had a great run up in account value in the past month and past couple years. Buying out your mortgage would be a good way to reduce the downside risk on that run up
Posted on 7/6/25 at 5:45 pm to Upperdecker
quote:
You’re probably just had a great run up in account value in the past month and past couple years. Buying out your mortgage would be a good way to reduce the downside risk on that run up
Protecting against the downside risk in asset allocation.
Most significant contributors to current value came from n in (1 + k)^n as in 30 years of time. 2008-10 and 2020-to date are disproportionate.
Hoping for similar time frame retirement so upside is not to be ignored, no?
Posted on 7/6/25 at 6:07 pm to Artificial Ignorance
I retired in 2022 with a 15 year mortgage at 2.75%. Instead of paying off my house I invested the proceeds from my paid off house into the market and worst case scenario I have had at least 4.3% ROI in t-bills or greater on stocks. I don’t see any need to pay off the balance on my mortgage as the worst case scenario has me covered through retirement with just my t bills and some passive income in real estate investments.
In short if the market tanks and you still have plenty of money to pay off your mortgage and live comfortably then no need to pay off early with a 2.8% mortgage.
In short if the market tanks and you still have plenty of money to pay off your mortgage and live comfortably then no need to pay off early with a 2.8% mortgage.
Posted on 7/6/25 at 7:28 pm to Doctor Strangelove
We have this thread every few months. It’s so overdone at this point.
Posted on 7/6/25 at 7:56 pm to Artificial Ignorance
I'm retired with mortgage. If I wouldn't take such a huge hit in taxes (pulling from IRA) then I would probably pay it off because cash flow is king. Because my retirement income is large enough and I have enough wealth put aside, I just keep paying the mortgage until I reach 59.5 or decide to get rid of it. I'm trying to talk the wife into a super-accelerated payoff plan, but she's got other things she wants to spend money on right now (outdoor kitchen, new car, blah blah blah).
Posted on 7/6/25 at 8:50 pm to RoyalWe
@royalwe you dont have to wait to 59.5 if you really want to tap IRA without penalty. You could use 72(t). Just have to commit to it and take your annual withdrawals without fail.
Posted on 7/6/25 at 8:57 pm to Artificial Ignorance
You're already very conservatively allocated w nearly 50% bonds/cash plus a pension which is comparable to another conservative income producing asset. All the more reason not to stash more in home equity doing nothing for you when you need substantial allocation in equities to avoid premature depletion in a long retirement scenario.
All the better if the pension is inflation adjusted as the mortgage (P/I) will remain static while pension adjusts up.
All the better if the pension is inflation adjusted as the mortgage (P/I) will remain static while pension adjusts up.
Posted on 7/6/25 at 9:26 pm to Artificial Ignorance
I paid mine off, but I respect that others might make a different decision.
Posted on 7/6/25 at 9:30 pm to TorchtheFlyingTiger
Yes, I'm aware. I withdraw more than a 72(t) would allow.
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