The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: celticblue on June 13, 2018, 06:38:12 PM
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hi,
I have a fully funded offset mortgage in the UK (meaning I owe 200, 000 dollars but have an account containing 200,000 dollars where the savings interest forgone offsets the mortgage interest).
I am wondering whether I should be using it as a tool in my FIRE plans.
I am recently FIRE and intend to use proceeds from selling other home to fund a 3 year CD ladder with 3 years of expenses to reduce Sequence of Return Risks.
The rest of my stash is 80:20 stocks to bonds. Or will be with home proceeds
Should I have a strategy for dipping into the mortgage offset account? How and when should I do this? Is this already mitigating SORR ? I have not given it much thought but as I am now recently FIRE and about to get the proceeds from selling USA home, move to UK and set up the pipeline that funds my expenses I wanted to ask. I wonder if I am missing a trick or even something obvious?. The mortgage offset account is a variable interest rate currently around 4%.
Any advice from the wise crowd?
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Hello there. Do you intend to live in this house as your PPOR?
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Yes. I will be living in the home with the offset mortgage as my primary, and only , residence
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I'm really envious about offset accounts.
I wouldn't put that much in an offset account if I thought I could get significantly more by investing it in, say, Vanguard's VTSAX and VTIAX.
I would put my cash emergency fund in it because, hey, a 4% fixed return is pretty good when you need the advantages of cash flexibility and security.
But $200,000 is an awful lot of cash, particularly when it could be earning 10% on average elsewhere.
Unless I knew of a specific need for that much cash, I would put all but the cash portion of my emergency fund in the market.
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So, would it make more sense to forget about having 3 years expenses in a CD, put that same money in the market and then just withdraw from the mortgage offset account to cover the 2-3 years of a bear market if it happens ?
Would this in itself be my protection for sequence of returns risks over this first 10 years of Fire as we crest on the second longest bull market?
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How many months / years of expenses would you have saved on the offset in an ideal scenario?
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In my mind I think 3 years would get me through the worst part of a bear market. i have approx 3 years equivalent of expenses in my offset account
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[Only my opinion]
I think then this money parked on the offset is just fine. 3 years worth of life expenses is a lot ! But if it's what's helping you sleeping at night then this is the right decision.