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My husband and I built our home in 1990. We saved like crazy to purchase our $65,000 lot and were left with a mortgage of $100,000 initially at 11%. Every time the mortgage rates dropped 2 points we refinanced 3 times with lowest rate 6% and paid off the home in 10 years instead of 20. The year after the mortgage was paid off my 49 year old husband died. Having the mortgage paid off when my husband died and being in my mid 40s in a job with steady salary growth I was able to remain in and maintain my home.
Whatever retirement decisions you make, the sad fact is that at some point you or your spouse will be widowed and you need to factor into your plans how loosing the deceased spouse's SS and possibly their pension or part of it will financially impact the surviving spouse.
which is why lots of thought has to go in to when to take social security since survivor benefits are based on it. have the husband take it at 62 and die and his widow taking survivor benefits at 60 can see a 48% cut from what the widow would have got had they both not filed early.
I cannot imagine retirement with a mortgage in place. I guess to us it was part of the freedom of retirement knowing we don't owe a car payment, mortgage or any loans...We pay off our credit cards in full every month. We don't believe there should be ANY debt what so ever going into retirement.
We refinanced in 2009 for a 30-year mortgage. My husband and I aren't retiring until (at the earliest) 2034 and we pay extra towards our principal every month so that the mortgage will come to an end around March 2034. We'll only be saving 5 years of interest, but it's better than nothing AND will be nice to be mortgage-free once we retire.
Sell the house and get something smaller and more affordable. Houses are big expenses, and will continue to suck up your money. Not only that but the big impetus to purchase a house used to be inflation in housing prices. That has disappeared. Why stick all that money into an investment that will not appreciate and will in fact depreciate, and cost you maint. money to keep up.
I cannot imagine retirement with a mortgage in place. I guess to us it was part of the freedom of retirement knowing we don't owe a car payment, mortgage or any loans...We pay off our credit cards in full every month. We don't believe there should be ANY debt what so ever going into retirement.
I can't imagine paying off the mortgage in retirement, since my investments yield more on my original investment through dividends than the mortgage rate. If I have $4,000 per month in portfolio income I'm not going to sweat $1,500 in mortgage payments, since those payments will eventually pay off the house. At that time, I'll have the pile of investments PLUS a paid off house.
(I'm not to $4,000 per month in portfolio income yet, but I plan to be. And part of that is NOT sending extra money off to the mortgage company.)
BUT you are doing what feels right to you, you can afford to run your life that way, so congratulations. I would not prescribe my way to you, nor would I adopt your way. Being able to sleep at night is very, very important; I sleep just fine and everybody should conduct themselves to improve their own ability to sleep at night.
Sell the house and get something smaller and more affordable. Houses are big expenses, and will continue to suck up your money. Not only that but the big impetus to purchase a house used to be inflation in housing prices. That has disappeared. Why stick all that money into an investment that will not appreciate and will in fact depreciate, and cost you maint. money to keep up.
Whaaaaaat? We bought our last house for $280,000 sold it 10 years later for $600,000. I'd hardly call that depreciation. Seriously, this is the first time I've ever heard anyone say real estate was a bad investment. In Texas maybe? Certainly not in California!
I can't imagine paying off the mortgage in retirement, since my investments yield more on my original investment through dividends than the mortgage rate. If I have $4,000 per month in portfolio income I'm not going to sweat $1,500 in mortgage payments, since those payments will eventually pay off the house. At that time, I'll have the pile of investments PLUS a paid off house.
This gets at the heart of what I was originally asking. Maybe it should have been posted to the investment forum, because it wasn't really intended to be about how much I can afford to live on in retirement. It was about what would be the better return in the long run. Assuming one has plenty of equity in a home, the interest rate is under 4%, and mortgage interest can be written off as a tax deduction, wouldn't I be making more money if I invested the extra money we have each month instead of throwing it at our mortgage?
So far the only caveat I've read in that equation is risk. Though when the mortgage bubble burst, my home lost as much value as my 401K. All of them rebounded over the long run though, so if you are talking about long-term investing, I'm not even sure if risk is that big an issue.
Scenario: A couple is 55 with the goal of retiring in 10 years at 65. Currently paying $1,500 a month mortgage on a single family home with no HOA. Interest rate is 3.75% They have excess cash to work with each year. Should they:
1) Put that cash toward their mortgage with the goal of paying it off completely by the time they retire.
2) Put that cash in investment accounts while making the regular mortgage payments and then, the year they are planning to retire, refinance the balance of the mortgage back out to 30 years (assume the same or better interest rate), reducing their mortgage from $1500 a month to $500 a month.
3) Put that cash in investment accounts, leave their mortgage alone and continue paying $1,500 a month mortgage for the first 10 years of their retirement. The house would be paid off when they turn 75.
My husband likes #1. But I think there are tax benefits to #2, particularly if the excess cash we would have spent paying down the mortgage went into a Roth IRA.
Thoughts?
Unless that home is on the water somewhere it is very likely to be worth less in five years than it is now. That's the reality in most of our country today. (North Dakota and a few areas excepted) I recommend #1. You want to be debt free ASAP in this economy. There are 92,000,000 Americans of working age in our country who are not working. Our government is taking in only 42% of what they are spending per year. We will soon be just like Greece or Zimbabwe. If you intend to stay in the USA with what we face, get debt free and invest in the five G's. God, gold, guns grub and ground.
I can't imagine paying off the mortgage in retirement, since my investments yield more on my original investment through dividends than the mortgage rate. If I have $4,000 per month in portfolio income I'm not going to sweat $1,500 in mortgage payments, since those payments will eventually pay off the house. At that time, I'll have the pile of investments PLUS a paid off house.
(I'm not to $4,000 per month in portfolio income yet, but I plan to be. And part of that is NOT sending extra money off to the mortgage company.)
BUT you are doing what feels right to you, you can afford to run your life that way, so congratulations. I would not prescribe my way to you, nor would I adopt your way. Being able to sleep at night is very, very important; I sleep just fine and everybody should conduct themselves to improve their own ability to sleep at night.
most small investors stink at investing according to the tracking of inflow and outflow money by Morningstar and Ibbotson.
unless you have the pucker factor , ability and most important the discipline to invest on your own that route may be the worst choice.
very few will have the discipline to invest that money regularly.
while I don't give one on one advice I would be very careful giving folks advice to invest on their own knowing little about them .
Last edited by mathjak107; 03-09-2015 at 09:04 AM..
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