Quote:
Originally Posted by honobob
And with the Mortgage you have the advantage of the larger portfolio, The diversification of NOT having all the money tied up in an illiquid asset and invested in higher earning assets , and the ability to change course in response to changing economics.
Unfavorable sequences can and should be negated by having a proper withdrawal/investing plan.
Guess what? if there are unfavorable sequences the interest rates will be impacted and you can drop your mortgage expense even lower by refiing.

the numbers are what they are. a bigger portfolio with higher expenses does not always win because the declining balance creates a higher withdrawal rate which takes bigger hits in negative years.
you can throw the same numbers i used in firecalc and see the range of outcomes.
since the house , equity and appreciation is constant to both cases after 30 years we only have to see the difference in the two portfolio's.
so throwing the numbers in firecalc this is what we get.
firecalc is running 115 different 30 year actual cycles that happened already . that is every 30 year cycle since 1926 as it actually played out with no assumptions..
firecalc says the 2 million dollar portfolio with 73k in expenses ( 50k in general expenses and a 23k mortgage) will have a worst case scenario of being minus 101,047 dollars at the end of 30 years or a best case of 11,992,000. the average ending balance was 4,244,000
on the other hand it says taking that 1.60 million dollar portfolio with 50k general expenses and no mortgage would have a worst case of 690,000 left ( never ran out of money ) or best case 10,354,000 . average ending balance is 4,082,000
think about this now , looking at the average balance the difference would be 4% higher with the mortgage, a best case of 15% difference and a worst case in favor of no mortgage of being broke vs having 690k left ..
you never ran out of money not using the mortgage regardless of the sequence so the span is risking being broke before 30 years in which case you may get foreclosed on with the house as you can't make the payments either or being up 15%. that would be your span of risk.
your tax deduction if any on the interest will effect the numbers above in favor of the mortgage so that would be a plus .
but even so in the real world the differences translate out to a much lower number than our mind suggests and the mortgage carry's a risk of going broke vs just eeking out another 15% or so.
i know my life would be effected far more going broke in retirement than if i had an extra 15% more. not having any chance of having had a failed retirement at any point in our past is a no brainer for me. but you all have to make your own choice in your own situations..
i know i was shocked at how small the difference was in firecalc as well as the exposure to the possibilities of failure , i would have thought the mortgage would have been way farther a head over the best cases we had so far.,.