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)
Reply Start New Thread
 
Old 12-07-2009, 02:31 PM
 
71,587 posts, read 71,751,865 times
Reputation: 49194

Advertisements

the biggest risk i see is rising mortgage rates. with the 10 year bonds interest rate up from last year and the 30 year bond up a whopping 70% in rates since january there is huge investor pressure on longer term rates to push them up.

mortgages follow mostly where mortgage back securities go and they themselves tend to track closely to the 10 year bond.

the fed is artificially manipulating the MBS market to break that link to our bonds.

just last week in one afternoon the fed dumped a trillion bucks into the mbs market to keep investors from bidding the rates way higher

dont forget a mortgage rising 1% on a 400,000 buck mortgage is the same rise in monthly cost as if the house rose 10% to 440,000 dollars at the lower rate
Reply With Quote Quick reply to this message

 
Old 12-07-2009, 03:11 PM
 
8,197 posts, read 11,915,499 times
Reputation: 17984
Quote:
Originally Posted by mathjak107 View Post
the biggest risk i see is rising mortgage rates. with the 10 year bonds interest rate up from last year and the 30 year bond up a whopping 70% in rates since january there is huge investor pressure on longer term rates to push them up.
Absolutely!

The yield on the 30 year bond already is up to roughly 4.4% in this historically low interest rate environment. It is only going to go in one direction from here. I would definitely stay relatively liquid at this point in time. The antithesis of liquidity is burying your money in the backyard; i.e., paying cash for a house.
Reply With Quote Quick reply to this message
 
Old 12-07-2009, 04:00 PM
 
4,089 posts, read 4,720,645 times
Reputation: 1251
Need more info. How old are you? What percent of your net worth donyou propose to tie up in the house? What state do you live in and what is your expected tax rate there? What do you expect your retirement AGI to look like?

In general if you have good credit you could easily find a 5% mortgage right now. You have to tax affect that, so it is maybe 3.5 to 4% effective. If you find tax free munis at 5%, you are ahead. There are some out there depending on what state you live in.

The other gamble is will rates stay low. If you drop your money in the bank you might get 15 basis points. CD's are paying a little more LT, but the ST rates are crappy.

Guess I would need more info before making a decision.
Reply With Quote Quick reply to this message
 
Old 12-07-2009, 04:28 PM
 
Location: Grove City, Ohio
10,133 posts, read 12,387,762 times
Reputation: 13976
Quote:
Originally Posted by thrillobyte View Post
Read this thread. It will give you some warnings about the risks of investing in retirement communities that are on the verge of bankruptcy, just in case you're considering that route.

Active Adult - very large down payment???
Nothing better than owning your own house, however humble it may be, and being debt free.

The big ones left are cost of property tax and homeowners insurance.

My wife and I have looked at it and while results vary around the country we figure we can live pretty good on a combined retirement income of $2,200.

Why invest when paying off the house will save you $300, $500, $700 or even more a month in expenses? It's like gaining an income that won't fluctuate.
Reply With Quote Quick reply to this message
 
Old 12-07-2009, 04:41 PM
 
Location: Miami, FL / Raleigh, NC
980 posts, read 1,928,495 times
Reputation: 606
Quote:
Originally Posted by nicet4 View Post
Nothing better than owning your own house, however humble it may be, and being debt free.

The big ones left are cost of property tax and homeowners insurance.

My wife and I have looked at it and while results vary around the country we figure we can live pretty good on a combined retirement income of $2,200.

Why invest when paying off the house will save you $300, $500, $700 or even more a month in expenses? It's like gaining an income that won't fluctuate.
I agree. Especially with this unstable economy I will not gamble on other investments nearing retirement instead of paying off a house cash. Peace of mind of paying off a mortgage and knowing that no matter the income coming in that whatever the mortgage payment is or was is not an expense anymore. Now, if I had my primary residence paid off and still had plenty of money left, I would consider investing some of that money.
Furthermore, if one owns their home free and clear and does not live in an area with high property taxes, basically any entry level job can pay for the taxes and bills in the event that one loses their job prior to retiring.

Paying off my primary residence by the age of 55 is my goal. Once that goal is achieved, I will focus on other financial goals.
Reply With Quote Quick reply to this message
 
Old 12-07-2009, 04:42 PM
 
4,089 posts, read 4,720,645 times
Reputation: 1251
One other option is to just rent.
Reply With Quote Quick reply to this message
 
Old 12-07-2009, 04:50 PM
 
29,782 posts, read 34,871,258 times
Reputation: 11705
Quote:
Originally Posted by mathjak107 View Post
we recently had to make that decision and while long term there is no question i would have done many times better taking the mortgage and investing elsewhere we opted to pay cash. it was very tempting to take a mortgage at these historically low rates. but i dont look at the 2 as if they were the same or interchangeable.. my home is my home and where i invest is a different mindset.

the rules of the game changed as we got closer to retiring: for us its no longer about growing richer,its about not growing poorer. WE ALREADY WON THE GAME SO WHY KEEP PLAYING. we made it to the point of being able to pull the plug on working. . its now about putting as much as we can in our financial lives not only on auto-pilot but only taking just enough risk to meet our income goals and to keep risk as low as we can to meet those goals.

owning our home outright is such a comforting feeling when you enter retirement with one of the biggest costs out of the way and off the radar...

its just making it easier for me not to fear giving up the old paycheck.

while its only a psycological feeling i find that feeling of owning my home outright priceless.

people also need that extra discipline to invest that money and not spend it , as well as having the stomach to tolerate the markets themselves.

everyone thinks they have a high tolerance for risk until the downturns..

just make sure you dont leave yourself house rich and cash poor either. that makes for a pretty miserable retirement too

Great quote and advice for this thread and others. At a point it is no longer about getting richer but not growing poorer. That is the answer to a few questions I have asked in other threads and even started a thread or so about. The counter view of getting a mortgage and investing has merit but for many your point wins. For others it doesn't. It is perhaps not the math but mind set and goal that prevails for each of us.
Reply With Quote Quick reply to this message
 
Old 12-07-2009, 04:52 PM
 
Location: Forests of Maine
30,682 posts, read 49,455,573 times
Reputation: 19134
I am very happy that I bought our retirement property with cash in 2005.

No mortgage here
Reply With Quote Quick reply to this message
 
Old 12-07-2009, 04:58 PM
 
71,587 posts, read 71,751,865 times
Reputation: 49194
theoretically renting and investing the difference will give you the biggest pile of money at the end of the game .. my house which i bought in 1987 and sold right before the bust was worth about 325% more than i paid here in nyc.

my funds i started at that time were up over 1300% and have since rolled back to up about 1100 % in the downturn.... actually i could have subtracted all the rent i would have paid for 20 years and still had enough left to buy 2 homes.

the problem is most folks dont have the discipline to invest the money they didnt spend on the down payment or any cost differences in the early years between renting and buying.


here in nyc it takes on average about 10 years before the rent is higher then the cost of buying in alot of cases ..

at least if folks buy a home they get a consolation prize namely the house..

but unfourtunely most of those who rent will just rent a nicer apartment or drive a better car or just plain speculate with the money and the end result is they have nothing at the end of the game.


it matters not if you rent and invest as the higher return will pay your higher living costs at the end but the big question is do you have the discipline to do it.

owning your home outright = lower returns -lower housing costs
renting and investing = higher returns and higher housing costs

Last edited by mathjak107; 12-07-2009 at 05:30 PM..
Reply With Quote Quick reply to this message
 
Old 12-07-2009, 05:00 PM
 
71,587 posts, read 71,751,865 times
Reputation: 49194
Quote:
Originally Posted by TuborgP View Post
Great quote and advice for this thread and others. At a point it is no longer about getting richer but not growing poorer. That is the answer to a few questions I have asked in other threads and even started a thread or so about. The counter view of getting a mortgage and investing has merit but for many your point wins. For others it doesn't. It is perhaps not the math but mind set and goal that prevails for each of us.
well said as well


i think what i find so comforting is that being new to retiring soon im still soooooo nervous about the no more paycheck thing. but at least i dont have to pay a mortgage

if i had a mortgage and invested even more of my cash id be sooooooooo nervous about the no pay check as well as the additional worrys of the markets and owing money on the house.


remember , i have been an investor for decades , i have dabbled in all kinds of stuff and taken all kinds of risks, but those days are now behind me and everything i do and plan is about lessening my risk while giving me the biggest bang for that risk leve that i want to assume and meet the returns i need for a lifetime of income . thats the point i stop..


my plan calls for certain things to be in place... a paid off home, a paid off car, investments that generate what i need to meet income goals in place and a risk level im comfortable with , life insurance for tax planning and eventually long term care insurance in place are all part of my checklist. all are important to us and pulling from anyone to feed another is not something i would do. giving up the paid house for more investments and more at risk is not part of my master plan.

Last edited by mathjak107; 12-07-2009 at 05:55 PM..
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