U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Retirement
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
 
Old 04-21-2015, 02:52 PM
 
7,803 posts, read 4,399,284 times
Reputation: 11604

Advertisements

You're paying interest on that mortgage? If your expenses are covered and you have the extra cash to pay it off, most experts agree that any "tax savings" aren't worth carrying a mortgage; most even advise you to pay toward the principal and get rid of it early if at all possible (I did).

But, once THAT'S done, what do you do with extra money? Yeah, it's a good problem to have.
Reply With Quote Quick reply to this message

 
Old 04-21-2015, 03:37 PM
 
29,789 posts, read 34,889,516 times
Reputation: 11715
Quote:
Originally Posted by ncole1 View Post
Ok, I did not literally mean $0 in cash, total. I meant that there might be liquid assets elsewhere in addition to the $200k, but they are not part of the analysis since whatever happens to them is independent of your decision to pay the mortgage off or not.

Obviously having $0 remaining would be bad, this is not under dispute.
I figured that's what you meant as I have a sense about your thinking from the investment forum. I was speaking more generally when I responded to you as the discussion is all over the place at different points. I should have been more specific in my response and context of what I was responding to. There is another level to this discussion about how much is enough with a pension and SS covering expenses and we won't dare discuss that here.
Reply With Quote Quick reply to this message
 
Old 04-21-2015, 06:05 PM
 
6,307 posts, read 4,752,208 times
Reputation: 12914
Quote:
Originally Posted by otterhere View Post
You're paying interest on that mortgage? If your expenses are covered and you have the extra cash to pay it off, most experts agree that any "tax savings" aren't worth carrying a mortgage; most even advise you to pay toward the principal and get rid of it early if at all possible (I did).

But, once THAT'S done, what do you do with extra money? Yeah, it's a good problem to have.
I have not had any "experts" advise me to sell off a low interest mortgage. I recently completed an annual financial review and my advisor did not even consider that possibility. If I had wanted to pay off my mortgage earlier, I could have paid cash. I briefly considered a 15 year mortgage but it is likely that interest rates are going to be low for quite a few years. That is not likely to be the case for the entire 30 year mortgage.

Now I have the best of both worlds. The cash I did not spend on the mortgage is growing faster than the cost of the mortgage. So my mortgage costs are covered and I am getting additional returns on top of those costs.
Reply With Quote Quick reply to this message
 
Old 04-21-2015, 06:08 PM
 
6,307 posts, read 4,752,208 times
Reputation: 12914
Quote:
Originally Posted by ncole1 View Post
When you are on the home page for FIREcalc, look near the top, you'll see several tabs. Click on the tab called "Spending Models". Near the top, you will see a selection for inflation options: PPI, CPI, or a specified annual rate. Choose the specified annual rate option, and enter 0.0%.
I changed that from the default which I believe was 3% to 0% and I got exactly the same firecalc results. Just to be sure I increased the inflation rate to 10% and the results did not change. Something is definitely wrong with the model.
Reply With Quote Quick reply to this message
 
Old 04-21-2015, 06:43 PM
 
2,844 posts, read 1,011,377 times
Reputation: 3284
Quote:
Originally Posted by jrkliny View Post
I have not had any "experts" advise me to sell off a low interest mortgage. I recently completed an annual financial review and my advisor did not even consider that possibility. If I had wanted to pay off my mortgage earlier, I could have paid cash. I briefly considered a 15 year mortgage but it is likely that interest rates are going to be low for quite a few years. That is not likely to be the case for the entire 30 year mortgage.

Now I have the best of both worlds. The cash I did not spend on the mortgage is growing faster than the cost of the mortgage. So my mortgage costs are covered and I am getting additional returns on top of those costs.
I think a lot has to do with your mortgage's interest rate. If you got it at the low values we had recently then investment interest would be higher than your mortgage interest so it's a better deal. On the other hand I understand those that psychologically would feel better not having a mortgage
Reply With Quote Quick reply to this message
 
Old 04-22-2015, 12:12 AM
 
Location: SF Bay & Diamond Head
1,779 posts, read 1,421,180 times
Reputation: 1971
Quote:
Originally Posted by otterhere View Post
But, once THAT'S done, what do you do with extra money? Yeah, it's a good problem to have.
See, that's the situation! The tax benefit is only a small portion of the benefit of keeping the mortgage. Think about the liquidity and the inflation hedge AND the extra money! Spend some of it! No prize for prepaying your living expense for the next 100 years when you're only gonna be around 15-20!
Reply With Quote Quick reply to this message
 
Old 04-22-2015, 01:48 AM
 
71,737 posts, read 71,853,273 times
Reputation: 49294
Quote:
Originally Posted by Beach Sportsfan View Post
I think a lot has to do with your mortgage's interest rate. If you got it at the low values we had recently then investment interest would be higher than your mortgage interest so it's a better deal. On the other hand I understand those that psychologically would feel better not having a mortgage
a lot just has to do with the fact many folks simply have goals of having a paid off home- period.

many ear mark money for different goals in life , when they have the money that goal is met and on to the next one.

what they don't do is stick the carrot on the stick , throw the money back in the risk pool and chase the elusive gain forever potentially blowing meeting that goal.

while striving for a goal investing aggressively and going for the gold is okay . if things go wrong it does not matter since they don't have the money yet any way so if they have to wait longer to meet that goal no problem.

but having the funds to complete that goal and getting trapped in a down turn or worse losing money after you made it to that goal may not be something some folks want to do.

Last edited by mathjak107; 04-22-2015 at 02:08 AM..
Reply With Quote Quick reply to this message
 
Old 04-22-2015, 06:07 AM
 
6,307 posts, read 4,752,208 times
Reputation: 12914
Quote:
Originally Posted by mathjak107 View Post
....

what they don't do is stick the carrot on the stick , throw the money back in the risk pool and chase the elusive gain forever potentially blowing meeting that goal.
..... in a down turn or worse losing money after you made it to that goal may not be something some folks want to do.
You spent years making substantial and risky investments in commercial real estate. Your words of caution make perfect sense for someone who has chased the carrot on the stick. Unfortunately your words are unlikely to be helpful to the vast majority of people. For a great many people, the idea of buying a diversified, balanced mutual fund seems way too risky. Most people are already way too risk averse for their own good. If they do invest, emotions are likely to take over and they panic at the first market correction. Then there is the outdated advice about putting investment money in bonds when you retire. That made sense in the good old days when most people barely lived to retirement age.
Reply With Quote Quick reply to this message
 
Old 04-22-2015, 06:20 AM
 
Location: Loudon, TN
5,794 posts, read 4,848,703 times
Reputation: 19498
And when bonds made a decent return.
Reply With Quote Quick reply to this message
 
Old 04-22-2015, 08:49 AM
 
12,708 posts, read 9,987,127 times
Reputation: 9521
Quote:
Originally Posted by jrkliny View Post
I changed that from the default which I believe was 3% to 0% and I got exactly the same firecalc results. Just to be sure I increased the inflation rate to 10% and the results did not change. Something is definitely wrong with the model.
That's unfortunate, and oddly I just tried exactly what you did and the calculator seems to work just fine for me. All I can say is there must be a bug in something somewhere.
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Retirement
Follow City-Data.com founder on our Forum or

All times are GMT -6.

2005-2019, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top