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It may have come into being then, but it was another decade or more before it was widespread. Older workers often had pensions and younger workers grew up with 401Ks being the norm, but this particular age group that is nearing retirement fell into the gap in between. Pensions stopped being offered and when the 401k was new, people didn't know if they should participate because they didn't know if they could trust the program, couldn't be sure that it wouldn't change or be discontinued. HR folks often didn't have answers and didn't explain it well. I don't think it's entirely fair to blame them when the long time rules changed on them.
Anyone who chooses not to save for their future, bears the blame. A tax advantaged retirement plan is certainly not a requirement for one to invest for their future. There was no rule that changed that prevented people from saving for their future.
The standard deduction for 2023 is only $13,850. For easy math purposes, let's assume property taxes are $3,850, which means we only need to come up with $10K more to exceed the standard deduction. At 2.75%, that would require a mortgage of about $370K. Not to mention medical costs (high for retired people), charitable donations, etc. So yes, it's probably going to be a wash for most people, but it's still a factor worth considering -especially for folks with larger mortgages.
Regardless, pulling money out of investments to pay off a low interest rate mortgage doesn't make financial sense in most cases.
In my case, SS alone covers my entire house payment (not just P&I) and leaves an equal amount for other things. I can easily live without touching my investments at all, so there is nothing to be gained from paying off my mortgage.
That’s for 40% of the filing statuses. For the other 60%, it’s significantly greater. And since you mentioned retired, it’s greater still.
My point still stands. It’s a lot more difficult to deduct mortgage interest now then it was before the significant increase in the standard deduction.
Suppose you don't have a mortgage at 2.75 percent. Suppose it's higher. Suppose you don't make 5% on your money because the market crashes, and I don't know of any fixed non risk accounts that guarantees a 5% return. If you known of one and can hook me up I wouldn't appreciate that information.
We can suppose and give hypotheticals until the cows come home. But, there one thing that's certain, if my bills are paid and I'm not in debt, I have more money in my pocket.
I never said paying off a mortgage never makes sense. Sometimes it does, but many older folks were able to take advantage of historically low mortgage rates and paying off such a mortgage would be silly except in exceptional circumstances.
Your last sentence - "We can suppose and give hypotheticals until the cows come home. But, there one thing that's certain, if my bills are paid and I'm not in debt, I have more money in my pocket." is unequivocally false in that its simply not true in every case. For example, you can either have a paid off house worth $400K or $400K in investments, but a mortgage on your home. In either case, you have the same amount of net worth. But you would have much more "cash in your pocket" with a mortgage. The difference is that when you have a mortgage and $400K, you're getting ROI on the house appreciation and the investment. With no mortgage, you're only getting ROI on house appreciation. That's not hypothetical, it's fact. Paying off a mortgage (or any loan) feels good, but might not always be the best financial decision.
Anyone who chooses not to save for their future, bears the blame. A tax advantaged retirement plan is certainly not a requirement for one to invest for their future. There was no rule that changed that prevented people from saving for their future.
That's in part true, but it's not quite so easy. Medicare only pays for part of health care, supplements are expensive and even with them, many don't cover dental, hearing, vision, orthotics and so forth. According to the Fidelity Retiree Health Care Cost Estimate, in 2023 a single person age 65 may need about $157,500 saved just to cover health care expenses in retirement. For an average retired couple age 65 in 2023 its $315,000 saved.
Nursing home care in a decent place can run $9,000 a month. Need dementia care and its more.
Couple that with financial illiteracy and there is a perfect storm. Most folks can even tell the difference between yield and return; a stock, a bond and a CD let alone the effects of compounding interest.
That’s for 40% of the filing statuses. For the other 60%, it’s significantly greater. And since you mentioned retired, it’s greater still.
My point still stands. It’s a lot more difficult to deduct mortgage interest now then it was before the significant increase in the standard deduction.
You're correct, obviously. I was simply pointing out that the mortgage interest deduction should be a factor in any decision regarding paying off one's mortgage. Any financial advisor will tell you this. Nothing I've posted applies to all circumstances - maybe not even most circumstances. I was responding to the notion that not paying off one's mortgage in retirement is always a bad idea. It's the same type of thinking that makes some folks think that being debt free is an aspirational goal. Having a positive net worth is an aspirational goal. Being debt free when you have the opportunity to leverage other people's money (i.e, low interest loans) is not something one should aspire to. Certain types of debt are actually good.
I never said paying off a mortgage never makes sense. Sometimes it does, but many older folks were able to take advantage of historically low mortgage rates and paying off such a mortgage would be silly except in exceptional circumstances.
Your last sentence - "We can suppose and give hypotheticals until the cows come home. But, there one thing that's certain, if my bills are paid and I'm not in debt, I have more money in my pocket." is unequivocally false in that its simply not true in every case. For example, you can either have a paid off house worth $400K or $400K in investments, but a mortgage on your home. In either case, you have the same amount of net worth. But you would have much more "cash in your pocket" with a mortgage. The difference is that when you have a mortgage and $400K, you're getting ROI on the house appreciation and the investment. With no mortgage, you're only getting ROI on house appreciation. That's not hypothetical, it's fact. Paying off a mortgage (or any loan) feels good, but might not always be the best financial decision.
I asked the same question... why is it "bad news"?
Somehow we have this utopian idea of retirement at 65 (or whatever age) and we don't work anymore. I get that people won't be doing construction work at that age, but hopefully after living life for many years - people will be pointed towards work that is meaningful that they can do.
I don't plan on retiring unless my health mandates that I can't work.
At 67 I am a Commercial Electrician with lot of life and ability left.
I often outwork the younger guys and two years found out that I had been doing it with a broken back I was not aware of.
Determination is the root of how you spend you older years.
There are others besides myself as well.
I personally have little compassion for this topic. Life is about choices, and choices have consequences. If you are 50-60 years into the workforce, and you have saved nothing or were under employed all those years, there’s only have one person to blame.
401K came into being in 1978 and grew in popularity.
I have both a 401K and a pension. I signed up for my 401K when I was with the company for 1 year (probationary period) and that was mid 80's.
When 401s were available to different people varies very widely.
In my trade it was unheard of for many years until some Contractors began to get on board with it.
I got in as soon as it was there for me to.
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