Author Topic: Too Old  (Read 1008 times)

gsx1138

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Too Old
« on: June 11, 2019, 06:19:11 AM »
I'm sure the "too old" question has been asked to death but I really do feel like I'm behind the curve and as I near 50 I just woke up.  I have a PERS retirement through the State of Washington that will actually cover my retirement.  I'm not counting on SS to even be available.  My home is currently worth about 220k and I have 170k left on my mortgage at 4.5%.  I have a roof loan of $6000 left which I plan on paying off by the end of the year or earlier.  Should I take the 4k I have in savings and open up a VTSAX account or pay off my debt?  Should I pay off, or down, my mortgage and then invest.  I'm trying to slow working between 57 and 60.  I'm wondering how much money an investment will actually make before I plan on retiring.

koshtra

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Re: Too Old
« Reply #1 on: June 11, 2019, 06:51:03 AM »
Why aren't you counting on Social Security? That seems silly.

When you're starting late you're not going to cash in on the huge appreciation you could see if you had five decades to let your stash grow, but most of the principles are the same anyway. The critical thing is reducing your spending. That has to happen in any case: that's how you buy your freedom.

I don't think it matters a whole lot whether you pay off the mortgage or start growing the stash; 4.5 percent isn't horrible. Whatever motivates you more.

reeshau

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Re: Too Old
« Reply #2 on: June 11, 2019, 06:52:34 AM »
This seems to be a small question wrapped up in some bigger things you are thinking about.  You might consider posting a full case study, to get informed opinions.

To the question at hand:  you talk about $4k in savings.  Is this all the cash you have?  If you do not have a separate emergency fund of 3-6 months of expenses in cash, I suggest you keep that in cash, and work to pay off your debts from cash flow.  (all the tips and tricks you learn here)  If you really think you are 10-12 years from desired retirement, the worst thing that could happen is some kind of emergency that put your dream back some time.  (think of that roof loan.  If you had it in cash at the time, it would be history now)

SeattleCPA

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Re: Too Old
« Reply #3 on: June 11, 2019, 07:18:41 AM »
I'm sure the "too old" question has been asked to death but I really do feel like I'm behind the curve and as I near 50 I just woke up.  I have a PERS retirement through the State of Washington that will actually cover my retirement.

So, the way I'd see this is, you prepared for your retirement without actually realizing it. Seriously. Good job.


I'm not counting on SS to even be available.

That's overly pessimistic. If you want to objectively reflect the problems with Social Security's baby boomer finances, I think you assume that you only get 76% of the benefits the system "promised"...

Source: https://www.ssa.gov/policy/docs/ssb/v70n3/v70n3p111.html

My home is currently worth about 220k and I have 170k left on my mortgage at 4.5%.  I have a roof loan of $6000 left which I plan on paying off by the end of the year or earlier.  Should I take the 4k I have in savings and open up a VTSAX account or pay off my debt?  Should I pay off, or down, my mortgage and then invest.  I'm trying to slow working between 57 and 60.  I'm wondering how much money an investment will actually make before I plan on retiring.

Personally? With retirement close at hand and the PERS system and SSI providing you with what you need, I'd say taking the guaranteed 4.5% surely tax-free return on paying off mortgage makes sense. Very easy to do, too.

PDXTabs

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Re: Too Old
« Reply #4 on: June 11, 2019, 08:59:02 AM »
I'm sure the "too old" question has been asked to death but I really do feel like I'm behind the curve and as I near 50 I just woke up.

Other people posted lots of good points. I thought that I should just add that if you worked until 62 (when you can pull SS for the first time) you still have over 12 years to save and invest. Not at all "too old."

gsx1138

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Re: Too Old
« Reply #5 on: June 11, 2019, 09:50:10 AM »
Thank you for the responses.  I am currently hyper focused on finishing off the last of my debt and paying off my mortgage.  I just wanted to make sure I wasn't so focused that I couldn't see other options.  Just the thought of not paying $1,600 a month and being able to put that money elsewhere gets me all giddy.  Realizing that I would be fine at the retirement age of 65 took a massive weight off of me.

FIRE 20/20

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Re: Too Old
« Reply #6 on: June 11, 2019, 10:30:30 AM »
It looks like you got what you needed, but I wanted to add a few things.  First, if you're 50 something catastrophic would have to happen (and it might) for Social Security to not be there for you.  To be honest, I'd have a lot more faith in Social Security than any state's pension.  I think it would be a good idea to calculate how much you'll get from Social Security and, as SeattleCPA said just multiply it by 76% (I use 70%, but whatever) to get a pessimistic view of what you'll get.
Second, I recommend looking at the Investment order thread.  https://forum.mrmoneymustache.com/investor-alley/investment-order/
Third, I wans to reiterate what reeshau said.  Write up a case study.  It's entirely possible that you could shave 6 months, 1 year, or even 5 years off your time to retirement depending on how open you are to trying to cut expenses and how much fat there is in your budget. 

When do you qualify for PERS?  It's entirely possible that you could save 1/3 of your post-tax income for the next 10 years to fund the 5 years from 60-65 (if that's when you get PERS).  If PERS covers your spending then SS, which is likely to be significant, could give you a bunch of fun money. 

Congrats!  It sounds like you're in good shape, but you might be able to still get to an early retirement - possibly while you're still in your 50s!

FIREstache

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Re: Too Old
« Reply #7 on: June 11, 2019, 07:15:23 PM »

I'm in my 50's, and I expect SS to pay approx 100% of the promised benefit, however, it is more heavily taxed every year because the tax thresholds are not indexed to inflation.  I certainly wouldn't ignore it anymore than I would ignore my brokerage account, IRA, or retirement plan.

Note, I'm talking about SS, not SSI, which was also mentioned.

vand

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Re: Too Old
« Reply #8 on: June 12, 2019, 03:22:25 AM »
Pay off your home first, or at least heavily prioritise it. Being brutally honest, you are 50 and only own 23% of your home, and are already planning retirement..  better get on with it then.

You don't have a long time to invest.  You don't want to go into retirement with the overhead of an ongoing loan against your home.

If markets crash in the next few years and you have the chance to buy in cheaply with higher expected future returns, then you can reassess, but at this point you are crazy to want to prioritize investing over paying off your home.
« Last Edit: June 12, 2019, 03:30:02 AM by vand »

Financial.Velociraptor

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Re: Too Old
« Reply #9 on: June 12, 2019, 09:31:45 AM »
The "math" suggests you are better off keeping the mortgage.  I was quite aware of that when I made the decision to pay off my home before investing any taxable money, (I didn't  max 401(k) but I did get the full match).  I do not regret the decision.  It put my mind greatly at ease and I find that more valuable than another 50-70 thousand I might have now.  Paying off the house is really a personal values question to me.  Know thyself!

If I had it to do again, I would stash the money for my mortgage payoff in closed end municipal bond funds.  Unfortunately, I wasn't aware of that option at the time.  I'd still have the flexibility of cashing out the bonds for (whatever) and retain the home mortgage interest deduction (worth less now thanks to Trumponomics).  IIM is paying 4.64%, IQI is paying 5.16%, NEA is paying 4.71%, and NVG is paying 4.96%.  Search for more muni CEFs at: https://www.cefconnect.com/closed-end-funds-screener.  All of that would be federal tax exempt, is well diversified, and highly resistant to default, and all four have a higher interest rate than your mortgage (win-win).  In the event of a market crash, these names will likely attract some "safe haven" interest.  Oh yeah, they all pay interest on a monthly basis making for smooth budgeting.