Should You Pay Off Your Mortgage Before You Retire? (inheritance, 2013, coverage)
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And some people can and do have both a pile of money AND a paid off house.
Now, now, let's not let our privilege show too strongly (let them eat cake, and all that)
So, true, but if we had "enough" money to take any financial action desired then the choice hardly matters. It is a choice that merits and requires more careful consideration if once made the choice might prevent you from doing something else that would be to your (greater?) benefit. Then the choice actually has real consequences rather than being a purely academic exercise of what we'd "rather" or "rather not" do.
Here's a contributing reason to our decision to not carry a mortgage, that I have not seen here yet...asset protection:
I am not a lawyer, but based upon my conversation with our Wills & Trust lawyer, (in Florida), in nearly all cases, (IRS is the exception) no creditor or legal claimant can seize your primary residence home, or any of the equity therein, as restitution. They can seize your non-retirement accout investments. So, our cash is safer in our home, than in an investment portfolio (unless its in IRA's and/or 401'ks, then it gets a legally murkier, but those account are still well-protected, in Florida).
Asset protection laws vary by state, so check the laws in your state, if you are unsure, &/or ask a lawyer to be sure.
Another factor in our decision to pay off our home, was because mortgage interest was no longer deductible for us, due to the higher threshold Americans must now reach in order to itemize.
Also, the portion of cash we used to buy/payoff the home, was a small part of our overall investible assets, so not having that cash invested, is a small opportunity cost to pay, for the peace of mind we have owning our home, & having the cash protected. We don't need the income that cash could earn, and with our time horizon, we don't want to risk losing a large portion of that cash when the next stock market collapse occurs. Safer investments, like CD's & Bonds, are paying so little right now, they wouldn't be higher than our mortgage rate. There's virtually no spread to make money off of.
A prior poster mentioned "liquidity" of homes versus other investments. In this housing market, most homes are extremely liquid, & since prices have been trending upward for so long, (since around 2009), most of us have gains, so we would not be forced to sell at a loss in any cash crunch we may encounter. Housing liquidity has never been better than it is now, in my lifetime, so locking up a lot of cash in my primary residence doesn't impede my ability to unlock it, as needed. Homes like ours, are selling in a week here in FLA, so that's liquid enough for us. I don't see that changing anytime soon, but we'll keep an eye on it for our heirs' sake. We could always get a home equity loan if we had some kind of cash crunch.
Lastly, our paid-off home is in a real estate trust, so it will go directly to our heirs, and not be exposed to government probate fees/taxes (which are massive rip-offs) & I'm not sure if you can do that with a home that is not paid off. That is another question to ask your lawyer.
Here's a contributing reason to our decision to not carry a mortgage, that I have not seen here yet...asset protection:
I am not a lawyer, but based upon my conversation with our Wills & Trust lawyer, (in Florida), in nearly all cases, (IRS is the exception) no creditor or legal claimant can seize your primary residence home, or any of the equity therein, as restitution. They can seize your non-retirement accout investments. So, our cash is safer in our home, than in an investment portfolio (unless its in IRA's and/or 401'ks, then it gets a legally murkier, but those account are still well-protected, in Florida).
Asset protection laws vary by state, so check the laws in your state, if you are unsure, &/or ask a lawyer to be sure.
Another factor in our decision to pay off our home, was because mortgage interest was no longer deductible for us, due to the higher threshold Americans must now reach in order to itemize.
Also, the portion of cash we used to buy/payoff the home, was a small part of our overall investible assets, so not having that cash invested, is a small opportunity cost to pay, for the peace of mind we have owning our home, & having the cash protected. We don't need the income that cash could earn, and with our time horizon, we don't want to risk losing a large portion of that cash when the next stock market collapse occurs. Safer investments, like CD's & Bonds, are paying so little right now, they wouldn't be higher than our mortgage rate. There's virtually no spread to make money off of.
A prior poster mentioned "liquidity" of homes versus other investments. In this housing market, most homes are extremely liquid, & since prices have been trending upward for so long, (since around 2009), most of us have gains, so we would not be forced to sell at a loss in any cash crunch we may encounter. Housing liquidity has never been better than it is now, in my lifetime, so locking up a lot of cash in my primary residence doesn't impede my ability to unlock it, as needed. Homes like ours, are selling in a week here in FLA, so that's liquid enough for us. I don't see that changing anytime soon, but we'll keep an eye on it for our heirs' sake. We could always get a home equity loan if we had some kind of cash crunch.
Lastly, our paid-off home is in a real estate trust, so it will go directly to our heirs, and not be exposed to government probate fees/taxes (which are massive rip-offs) & I'm not sure if you can do that with a home that is not paid off. That is another question to ask your lawyer.
asset protection from creditors is usually not a concern for most who either have cash to buy with or money to make extra payments vs investing it which is why you dont see it .
I am not at all concerned about asset protection from creditors and if this is a concern, it might be a good idea to find solutions. We have an "umbrella" policy which is a low cost and high coverage policy providing substantial protections beyond the typical home and auto insurance.
In addition to Medicare we pay for supplemental medical and LTC coverage. We have budgeted and set aside money for additional choices such as a CCRC buy in.
Sure your house may be protected from creditors BUT that is a poor solution especially if they get everything else and you are down to a house you cannot afford to live in.
Since your remaining mortgage before paying it off was small, it hardly made a difference either way.
Sure the housing market is strong and prices are way up. It still takes many months to sell a house at least in this area. Even after a firm offer from a qualified buyer, it is rare to see a house close in under 4 months. After her husband died, my sister had a dire need to sell her house. It took her over a year. She had to downsize, clean/paint, etc and during that process she had some major medical issues. She was down to borrowing from her kids and I also made a contribution so she could get by.
I am not at all concerned about asset protection from creditors and if this is a concern, it might be a good idea to find solutions. We have an "umbrella" policy which is a low cost and high coverage policy providing substantial protections beyond the typical home and auto insurance.
In addition to Medicare we pay for supplemental medical and LTC coverage. We have budgeted and set aside money for additional choices such as a CCRC buy in.
Sure your house may be protected from creditors BUT that is a poor solution especially if they get everything else and you are down to a house you cannot afford to live in.
Since your remaining mortgage before paying it off was small, it hardly made a difference either way.
Sure the housing market is strong and prices are way up. It still takes many months to sell a house at least in this area. Even after a firm offer from a qualified buyer, it is rare to see a house close in under 4 months. After her husband died, my sister had a dire need to sell her house. It took her over a year. She had to downsize, clean/paint, etc and during that process she had some major medical issues. She was down to borrowing from her kids and I also made a contribution so she could get by.
We have an "umbrella" policy which is a low cost and high coverage policy providing substantial protections beyond the typical home and auto insurance.
Yep, and umbrella policies really aren't that expensive.
A long time ago someone put it to me this way: how much do you think your insurance company will be willing to fight to avoid paying out millions of dollars to someone? A hell of a lot, and they've got herds of attorneys that specialize in it.
Our goal was to retire with zero debt, period. I don't have the time or ambition to chase pennies I might have earned investing the money we used to pay off the house. It wouldn't have been life-changing money even under the best scenario, so instead I'll sleep better at night knowing I don't owe anyone a mortgage payment tomorrow.
Yep, and umbrella policies really aren't that expensive.
A long time ago someone put it to me this way: how much do you think your insurance company will be willing to fight to avoid paying out millions of dollars to someone? A hell of a lot, and they've got herds of attorneys that specialize in it.
the person who brought up asset protection was referring to creditors for the most part .
i have never made a financial decision based on creditors and i think most of us could say the same.
when i say creditors i mean people you owe money to , not law suits you lost or medicaid claims
asset protection from creditors is usually not a concern for most who either have cash to buy with or money to make extra payments vs investing it which is why you dont see it .
I disagree, especially for high net worth individuals like myself. It is my #1 concern....protecting what we have.
Most bankrupcies in America are due to medical bills incurred by Seniors. Protecting assets from those creditors is key, in the states that allow it. (Florida is amongst the best states in legally protecting its seniors). That is one of my biggest concerns...the cracks & crevices in our health insurance policies. A traumatic injury or illness can rack up Millions in hospital bills.
The other risk is our college aged Son. Everything he does, or fails to do, it still legally on us as parents. We have done everything possible to shield this liability, but its impossible to be 100% safe, even with the $5M personal liability insurance umbrella we have. There are always loopholes in insurance policies.
Then, I happen to own a company, so there's more legal risk. The corporate veil helps a lot there though, so long as its guarded, and not compromised. Again, business owners can never to 100% safe from lawyers.
The more wealth you have earned/saved, the more precautions you must take to protect it, because there are always others who want to take it from you, and their lawyers. Once your wealth gets into the 7 figures, you are walking around with a huge target on your back...beware! "Only the paranoid survive".
meh , we are a relatively higher net worth retired couple and we have medicare , a good supplement , liability insurance and a great long term care partnership plan with our state .
medical bills are the least of our concerns..
both of us were hospitalized for weeks for covid and the bills were 250k .. no biggie , our share was under 1k for both of us
. most of our share was for the ambulances we used
remember this discussion pertains to retirement
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(let them eat cake, and all that)
"Only the paranoid survive".
