Advice needed re: retirement and large cash savings (psycho, smart, income)
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Nope! First, if I'm TRYING to out earn a 3.75-4.25% mortgage I'm probably not a good investor.
It depends on the market.
Quote:
Originally Posted by honobob
Second, I'll spend the first 15 years spending the $200,000 plus its earnings and inflation will take care of the last 15 years. OR sweet, sweet death.
If you spend your money, then the return on the investment is 0. Therefore you did not beat the mortgage rate.
Quote:
Originally Posted by honobob
Doesn't that sound better than plowing all that liquidity into an asset and then turn around and plow any savings into a low paying investment in small increments over 15+ years?
It depends on what your goals are. Some people place more emphasis on current lifestyle, others on security, and still others on leaving a legacy behind. The relative importance of those factors determines what strategy is best, not a "one size fits all" approach necessarily.
I tried it and I am not getting the results you claim. You said that your mortgage plus portfolio is a guaranteed win, which means it should in 100% of the runs maintain a positive net value after taking mortgage payments out. I put in $200K portfolio and for annual spending I used 12 * the monthly payment on a $200K 30-year mortgage at 3.75% APR. So this is $200K portfolio and $11,115 annual spending. It shows a couple of runs going negative before year 30, even after turning off the inflation adjustment to account for the fact that the mortgage payments are fixed in nominal terms.
Which is to say, your mortgage arbitrage is not guaranteed.
Remember paying off the mortgage means starting at -$200k. To do better, someone with a mortgage would do better if they beat that number after 30 years of payments.
It's ALWAYS better to pay off your mortgage... Isn't that a no-brainer?
Nope. None of the truisms are universal.
There are a LOT of very good reasons to have/keep or seek a new mortgage
at all ages and stages of life whether for personal use residence or as investment prop.
Of course the people who understand this are generally comfortable with OTHER
and BETTER and MORE LUCRATIVE investment models like stock market & bonds.
Remember paying off the mortgage means starting at -$200k. To do better, someone with a mortgage would do better if they beat that number after 30 years of payments.
No, you start with $200k in cash. You can either pay off the mortgage immediately and have $0, OR you can invest it and then pull the mortgage payments out of it each month. $200k initial, and draw out $11,115/year.
No, you start with $200k in cash. You can either pay off the mortgage immediately and have $0, OR you can invest it and then pull the mortgage payments out of it each month. $200k initial, and draw out $11,115/year.
If you spend your money, then the return on the investment is 0. Therefore you did not beat the mortgage rate.
It depends on what you spend your money on. I am planning on building a shop outbuilding on my ranch. It will cost me about $50,000, for nothing more than more space to piddle around. Yes, it will raise the eventual sale value of my home, if I live long enough to sell it. Meanwhile I'll be paying more property taxes, so it will be a continual drain on cash flow. The ROI will be more than zero, though.
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