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I had a relative (former CEO of a fortune 500 company). He retired and built a ridiculous mansion, carried a 4.5mm mortgage on it. Investment guys convinced him to leave money invested with them instead of paying off the mortgage being the rate of return was going to exceed the cost of the mortgage interest.
10 years in, guess what? The net after taxes earnings was within a few dollars of the mortgage interest. The jam: Housing market shifted and the house was much harder to sell than expected. Suddenly those $23,000 a month mortgage payments were starting to add up! Guy with no mortgage doesn't sweat as much as a guy losing $766 a day.
If I had a choice, no mortgage vs. mortgage I'd rather be the guy with more options and less payments!
LOL, I was waiting for the "I know a guy who lost it all because they had a million dollar mortgage" story.
Gimme a break.
and the highlighted is simply ridiculous over simplification. Now in the interest of full disclosure most retirees I know don't have a "ridiculous" mansion.
I have a mortgage, I'm not sweating a darn thing. If the market changes most retirees I know with a mortgage will simply re-evaluate.
right now in this market my investments are making 2X what my mortgage cost me. Now I totally admit I don't run with the multi million dollar crowd. my mortgage is 200K. I can easily pay that off if the proverbial crap hits the fan.
right now my goal is to increase my networth. taking my money out of investments just under the illusion that it's safer to have no money is silly.
But i will say if you sleep better feeling that way. go for it.
Now as to "poverty" in ones old age, the problem with these types of discussion is that in general
The causes of poverty are varied and complicated. We have deep generational poverty issues. Here in Philadelphia one (and only one) issue we are seeing is the result of the opiod crisis. We have grandmothers who were just making it, now suddenly raising grandbabies because the parents O.D. and they didn't want kid to go into the foster system.
I had a previous neighbor, her and her husband where doing ok until this happened. now she's 67 with a 10 and 7 year old.
Just an example. they did not live beyond their means, no mercedes, no I phones.
I'm 65, retired 4.5 years ago and I DO have a mortgage- the rate on the mortgage was 3% and my investments return 65% annually on average- no-brainer. Monthly payment (P&I only, no escrow) is $700, so very manageable.
From the whiny posts I see on FB every time an article or retirement is included in my "Suggested" feed, the biggest mistake is thinking you can live on SS only. The average monthly SS check is something like $1,400 and many people are complaining that it's not enough. Well, it isn't. It was meant to be part of a "three-legged stool"- SS, private pension and personal savings. OK, private pensions are going away but that means you need to save even harder. What's worse is when a married couple has SS as their only income and one of them dies. Suddenly the household income is reduced by 1/3.
Second biggest mistake: taking SS at 62 when you have no other sources of income.
Third: thinking you can work as long as you want. Health issues, corporate politics and changes in the economy can put you out of a job far earlier than expected, with no prospects of getting a decent replacement.
Quote:
Originally Posted by Minervah
Well, I've told my story before, so briefly. My union scammed it's members out of my biggest savings amount, my 401k.
Sorry, but I haven't seen this story before- can you briefly explain how that happened? Wouldn't it have been managed by a separate financial institution and thus not under the control of the union?
I'm 65, retired 4.5 years ago and I DO have a mortgage- the rate on the mortgage was 3% and my investments return 65% annually on average- no-brainer. Monthly payment (P&I only, no escrow) is $700, so very manageable.
From the whiny posts I see on FB every time an article or retirement is included in my "Suggested" feed, the biggest mistake is thinking you can live on SS only. The average monthly SS check is something like $1,400 and many people are complaining that it's not enough. Well, it isn't. It was meant to be part of a "three-legged stool"- SS, private pension and personal savings. OK, private pensions are going away but that means you need to save even harder. What's worse is when a married couple has SS as their only income and one of them dies. Suddenly the household income is reduced by 1/3.
Second biggest mistake: taking SS at 62 when you have no other sources of income.
Third: thinking you can work as long as you want. Health issues, corporate politics and changes in the economy can put you out of a job far earlier than expected, with no prospects of getting a decent replacement.
65% average returns huh. Are you invested with Bernie Madoff.
Too many variables. From chronic underemployment, to early dementia making one unemployable to the mind boggling f I have a dime in my pocket, I’m spending 15 cents... for each one of those I’ve known, I’ve known another one just like it who managed to come out okay. Just like I knew the people who had it all and it slipped away.
I had a relative (former CEO of a fortune 500 company). He retired and built a ridiculous mansion, carried a 4.5mm mortgage on it. Investment guys convinced him to leave money invested with them instead of paying off the mortgage being the rate of return was going to exceed the cost of the mortgage interest.
10 years in, guess what? The net after taxes earnings was within a few dollars of the mortgage interest. The jam: Housing market shifted and the house was much harder to sell than expected. Suddenly those $23,000 a month mortgage payments were starting to add up! Guy with no mortgage doesn't sweat as much as a guy losing $766 a day.
If I had a choice, no mortgage vs. mortgage I'd rather be the guy with more options and less payments!
In California, you can walk away with the huge mortgage, but no so much if paid down the mortgage.
A friend of mine is in the same situation that Minervah described: She worked for many years for a union (not just in a union job, but actually FOR a union in a desk job) that went bust due to criminal mismanagement/theft of the pension fund by the Powers That Be. After years of court battles a settlement was reached whereby everyone who had been covered by the pension fund got something like 2 cents on the dollar.
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Solly says — Be nice!
