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actually stocks are around their historical norm . profits have increased to the point they are pretty much at value . the s&p is at a p/e of 18.5 , the 25 year average is 19 so while high they are still no where near excessively high.
no one should buy equities without a long term commitment . even at 65 you have 30 years before needing that money to eat. there is no reason you should have to buy high and sell low ,
actually stocks are around their historical norm . profits have increased to the point they are pretty much at value . the s&p is at a p/e of 18.5 , the 25 year average is 19 so while high they are still no where near excessively high.
no one should buy equities without a long term commitment . even at 65 you have 30 years before needing that money to eat. there is no reason you should have to buy high and sell low ,
This was my take as well. There is a very strong argument that you can make far more with a safe, diversified portfolio of low fee funds than you will save by eliminating the interest on the mortgage. Plus you get the tax deduction if you are still itemizing. All of the math says take the mortgage and invest the inheritance.
But the OP now has the money in a passbook savings account paying probably less than 1% . Anyone willing to lose money to inflation and taxes by keeping such a large sum in a savings account obviously has a low risk tolerance. Not being critical, just stating the obvious. There is absolutely nothing wrong with being conservative if that's your nature. So as others have said do what allows you sleep at night. If you elect to pay off your mortgage, which is what we did by the way, there is absolutely nothing wrong with that decision.
Yes, you can make more money by investing, but there IS risk with it, despite those who say there is not. We have a dear friend, age 82, who lost half his money in the 2007-08 crash. The stocks have since risen again, but his income from them has not. Once a multi-millionaire, he now gets just enough to make ends meet, from that 'portfolio' of his. What has saved his skin is that he owns his home free and clear. If he did not -- if he had mortgaged it during the real estate "boom" -- he would be in real pickle now, and might actually lose the house. Certainly, he'd have had to sell it.
I am 67, and own our primary home in Maine free and clear. I also own our new vacation property in Tennessee, free and clear. Neither of these homes have ever had a mortgage. All our vehicles are owned without loans, and we have no credit-card or other debt. This may seem silly when interest rates are so low, but at least I know we have what we have, and we keep getting more as time goes by.
Why? Because we are able to SAVE big $$$ by not having any payments to make!
Yes, you can make more money by investing, but there IS risk with it, despite those who say there is not. We have a dear friend, age 82, who lost half his money in the 2007-08 crash. The stocks have since risen again, but his income from them has not. Once a multi-millionaire, he now gets just enough to make ends meet, from that 'portfolio' of his. What has saved his skin is that he owns his home free and clear. If he did not -- if he had mortgaged it during the real estate "boom" -- he would be in real pickle now, and might actually lose the house. Certainly, he'd have had to sell it.
I am 67, and own our primary home in Maine free and clear. I also own our new vacation property in Tennessee, free and clear. Neither of these homes have ever had a mortgage. All our vehicles are owned without loans, and we have no credit-card or other debt. This may seem silly when interest rates are so low, but at least I know we have what we have, and we keep getting more as time goes by.
Why? Because we are able to SAVE big $$$ by not having any payments to make!
Your friend needed his portfolio for income to live off of. The OP doesn't as like many forum members their pensions and SS exceed their expenses.
Yes, you can make more money by investing, but there IS risk with it, despite those who say there is not. We have a dear friend, age 82, who lost half his money in the 2007-08 crash. The stocks have since risen again, but his income from them has not. Once a multi-millionaire, he now gets just enough to make ends meet, from that 'portfolio' of his. What has saved his skin is that he owns his home free and clear. If he did not -- if he had mortgaged it during the real estate "boom" -- he would be in real pickle now, and might actually lose the house. Certainly, he'd have had to sell it.
Given the facts as you've laid them out (he still has the portfolio, but the income has been cut), this makes absolutely no sense whatsoever. Explain a scenario where what you've written could possibly happen, other than he continued to spend hundreds and hundreds of thousands of dollars each and every ear until his portfolio had dwindled away to almost nothing.
I guess my advice has not been very helpful. Clearly there are horror stories like the 82 year old man who lost all of his millions in the 2008 recession. I am not sure how he did that. Even if he had all of his millions in the stock market, at the worst he would only have lost about half. Within a couple of years he would have regained his investment and by now he would have about twice what he started with before the 2008 recession. He had to do a lot of bone-headed stunts to lose his money. Maybe he was taken in by con men or just plain decided to waste millions on purchases.
Reading the discussions on this forum it is clear that many posters have no idea about investing, no idea of risk and certainly no idea of diversification. Making decisions based solely on feelings is something I tried to stop doing at the age of about 12. It is clear that many people make decisions that if not based solely on emotion are no better than those of Mr 82-year-old Senile. It might be time for some to congratulate themselves for making it this far in life. Before retirement it would be best to pay off the mortgage, prepay their burial costs, and put the rest in an annuity. No worries. You can sleep good at night. Of course, you are likely to have less than half the money you could have had, but that is irrelevant for those who cannot follow even simple investment planning, cannot manage their money, and do not trust anyone else.
This was my take as well. There is a very strong argument that you can make far more with a safe, diversified portfolio of low fee funds than you will save by eliminating the interest on the mortgage. Plus you get the tax deduction if you are still itemizing. All of the math says take the mortgage and invest the inheritance.
But the OP now has the money in a passbook savings account paying probably less than 1% . Anyone willing to lose money to inflation and taxes by keeping such a large sum in a savings account obviously has a low risk tolerance. Not being critical, just stating the obvious. There is absolutely nothing wrong with being conservative if that's your nature. So as others have said do what allows you sleep at night. If you elect to pay off your mortgage, which is what we did by the way, there is absolutely nothing wrong with that decision.
Spoken like a true risk taker. Which is fine. But there is still risk involved, where you can still lose a portion of your investment in a down market. A paid off mortgage? Ive never heard of a situation where you would get your mortgage back in a down market.
Investments are risky, theres no arguing that. You can lose your investment. For someone totally risk averse, a paid off mortgage makes far more sense. And less sleepless nights.
I guess my advice has not been very helpful. Clearly there are horror stories like the 82 year old man who lost all of his millions in the 2008 recession. I am not sure how he did that. Even if he had all of his millions in the stock market, at the worst he would only have lost about half. Within a couple of years he would have regained his investment and by now he would have about twice what he started with before the 2008 recession. He had to do a lot of bone-headed stunts to lose his money. Maybe he was taken in by con men or just plain decided to waste millions on purchases.
Reading the discussions on this forum it is clear that many posters have no idea about investing, no idea of risk and certainly no idea of diversification. Making decisions based solely on feelings is something I tried to stop doing at the age of about 12. It is clear that many people make decisions that if not based solely on emotion are no better than those of Mr 82-year-old Senile. It might be time for some to congratulate themselves for making it this far in life. Before retirement it would be best to pay off the mortgage, prepay their burial costs, and put the rest in an annuity. No worries. You can sleep good at night. Of course, you are likely to have less than half the money you could have had, but that is irrelevant for those who cannot follow even simple investment planning, cannot manage their money, and do not trust anyone else.
Is it possible that they no real portfolio to have experience with? Consider the data and how many have at least 200k in their portfolio to have to plan for?
[quote=carnivalday;39247738]Spoken like a true risk taker. Which is fine. But there is still risk involved, where you can still lose a portion of your investment in a down market. A paid off mortgage? Ive never heard of a situation where you would get your mortgage back in a down market.
Investments are risky, theres no arguing that. You can lose your investment. For someone totally risk averse, a paid off mortgage makes far more sense. And less sleepless nights.[/QUOTE
why should anyone have lost money in diversified funds if they matched long term investments to long term time frames ? it makes no sense unless they did the wrong thing and bailed and ran , tried to time things or mismatched time frames.
even a 65 year old has money they are not eating with for 15-30 years.
diversified investments may be volatile but if held long term they have NEVER been risky.
you couldn't even find one 30 year period in history a retiree could have been 100% invested in the s&p 500 and not produce at least success rates in the 90% range drawing 4% inflation adjusted .
on the other hand the failures on bonds and cash doing the same thing are horrible with unacceptable rates of failure.
while I am not saying retirees should be 100% equities the fact is over long periods of time equities have been the safest investment .
folks confuse risk with volatility.
.
Last edited by mathjak107; 04-16-2015 at 02:11 PM..
Is it possible that they no real portfolio to have experience with? Consider the data and how many have at least 200k in their portfolio to have to plan for?
more a case of listening to other mis-informed people who did badly by their own actions and then parroting the event.
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