Trying to develop a 5 - 7 year plan prior to retirement

[Bette]

Originally Posted by GeoffD

There isn't enough information to answer this. What is the value of the home as a percentage of net worth? What income sources are there beyond a retirement nest egg and a Social Security check?

Unless there's a big pension check coming, that house had better be a fairly small fraction of net worth. If it's 1/3 or more and there's no pension coming, the real question in this thread needs to be "do I need to sell this house with the mortgage now?"

Right now, I'm unemployed. In theory, I can declare myself "retired". The value of my paid-for home is low compared to my total net worth and it has fairly low cost of ownership. The fact that my house is paid for ensures I'll have a roof over my head for the rest of my life. It's the real estate part of a balanced portfolio. If the stock market crashes and my investment portfolio is cut in half, I still have that same roof over my head. For me, that peace of mind knowing I have a place to live outweighs optimizing the return on my investment portfolio.

The primary home has a mortgage and we have no intentions of moving right now - maybe in 7 years if the neighborhood changes. I don't know where we would go - we have great neighbors - friendly place.

We got into a discussion with other people about either paying off the home (not necessarily our home) or just paying the mortgage and investing the money. The group was all in their 50's and 60's - answers split right down the middle. Only one of 8 couples has a pension. All have mortgages. All have children; some still have elderly parents (we just lost the last one).

We will have no pension but we have real estate and some investments. We will have social security of about 55K for 2 of us - maybe more than that. We are trying to increase our W2 checks to increase the Social Security.

We have other real estate we could sell if we needed cash, however, I really like having real estate and it's doing well where we live so I consider it a long term investment.

[Nightengale212]

Originally Posted by Bette

We will have no pension but we have real estate and some investments. We will have social security of about 55K for 2 of us - maybe more than that. We are trying to increase our W2 checks to increase the Social Security.

Bette, although this is a subject that few want to even think about or even discuss, but having already faced this myself, the day will come when "we" will become a "me" for you or your spouse. Loosing a spouse can happen anytime without warning as it did for me, and as we age the chances of that happening increases. So financial planning for that "when" not "if" event is very important.

I am not sure what your age is, I suspect around mine early 60s, and from reading some of your other posts I believe you and possibly your husband also are both still working and self employed. If that is the case, ask your self the question if either of you passes away tomorrow what financial and other decisions can be made today that will make life easier for the surviving spouse. You note that your combined income from Social Security will be around 55K and you are both trying to increase your incomes to increase that benefit. Being both at the tail end of your working lives, if both already have a solid 35 year work income record, even with enhancing your incomes for the next several years this is not going to move the SS needle up that much that will make a significant difference unless one of both of you work to and collect your 32% higher age 70 benefit. Several posters here made the choice to do that to primarily provide that higher benefit for their spouses in the event they predeceased them. This most certainly helps a surviving spouse who say took a lower SS benefit at age 62. Just for example the lower earning spouse took their age 62 reduced benefit which was $12,000, and their spouse delayed to take their age 70 higher benefit which was $38,000. If the higher benefit spouse passes at age 72, the lower benefit spouse can jump to the higher spouse's benefit. If the lower benefit spouse dies first the higher benefit spouse stays the same. Neither spouse will collect both benefits, but the lower benefit spouse in this example will enhance their own benefit by $26,000 which could mean for them the ability to thrive and not just barely survive which is a consideration when they are left with few or no other sources of income to live on.

Lots of issues need to be considered when planning for retirement, and the one that should never be put on the back burner is the planning for the financial needs of the surviving spouse.

[dbsteel]

Originally Posted by Bette

Question:

Is it better to focus on paying off a primary home or saving the money if you have extra? Current mortgage rate is at 3.875% (30 year fixed)


Back Story:

I know several couples who have paid off their homes and when they went to get student loans for their college aged children, they were rejected due to the home being paid off.

Is there anything if your income is around 60-70K per year that would reject you from some kind of funding if you need help? (Thinking healthcare......not sure) - this income is an estimate for retirement years. That is not the income at the present time.

There are a lot of arguments for always having a mortgage if the rates are as low as they are right now. The stock market has returned for me far more than my 4% mortgage rate. As long as you don't just throw away the excess that you would be using to pay off the house early.