Author Topic: Race from $2M to $4M...and Beyond!  (Read 1427001 times)

EscapeVelocity2020

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Re: Race from $2M to $4M...and Beyond!
« Reply #7350 on: December 18, 2023, 07:11:37 PM »
My hot take on TLH is that it's relatively easy to account for (losses get carried forward each year on your returns, both short term and long term losses), you get an easy 3k offset of income each year, and if you ever sell and realize capital gains, you can save a ton on taxes.  The Mustachian Person Problem is that I haven't sold and realized much capital gains over the years, so I just have this really valuable accounting line item that I'll likely die with.  I stopped TLH years ago for this very reason (once I hit ~$100k).  There is no harm in building up these accounting losses, but I question how valuable they are for Mustachians, unless the plan is to spend the portfolio (which, let's be realistic, nobody in this thread seems to be doing)...  I'll personally get more valuable tax benefits and personal satisfaction out of a number of other tax strategies like a donor-advised fund or trust.

I 100% plan to sell a lot in my taxable brokerage beginning in 2025.  The idea is to spend most of it before I hit 59.5 12 years after FIRE.

ETA:  my $45,000 or so tax loss came from switching between a CA tax advantaged bond fund and a general US tax advantaged bond fund last year and switching my international fund between similar but different funds back in 2018.  I’ve only lost on paper since funds were invested the entire time.

It is interesting to hear from people who are making use of this strategy.  Very few people in this thread seem to ever sell their appreciated portfolio, instead living off of multiple other streams of income (dividends, interest, rentals, side hustles...).  Unfortunately you can't use the TLH to fully offset conversions to Roth (taxed as ordinary income) and there are also ACA considerations, so I'm interested to hear success stories!

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Re: Race from $2M to $4M...and Beyond!
« Reply #7351 on: December 18, 2023, 08:39:52 PM »
My hot take on TLH is that it's relatively easy to account for (losses get carried forward each year on your returns, both short term and long term losses), you get an easy 3k offset of income each year, and if you ever sell and realize capital gains, you can save a ton on taxes.  The Mustachian Person Problem is that I haven't sold and realized much capital gains over the years, so I just have this really valuable accounting line item that I'll likely die with.  I stopped TLH years ago for this very reason (once I hit ~$100k).  There is no harm in building up these accounting losses, but I question how valuable they are for Mustachians, unless the plan is to spend the portfolio (which, let's be realistic, nobody in this thread seems to be doing)...  I'll personally get more valuable tax benefits and personal satisfaction out of a number of other tax strategies like a donor-advised fund or trust.

I 100% plan to sell a lot in my taxable brokerage beginning in 2025.  The idea is to spend most of it before I hit 59.5 12 years after FIRE.

ETA:  my $45,000 or so tax loss came from switching between a CA tax advantaged bond fund and a general US tax advantaged bond fund last year and switching my international fund between similar but different funds back in 2018.  I’ve only lost on paper since funds were invested the entire time.

It is interesting to hear from people who are making use of this strategy.  Very few people in this thread seem to ever sell their appreciated portfolio, instead living off of multiple other streams of income (dividends, interest, rentals, side hustles...).  Unfortunately you can't use the TLH to fully offset conversions to Roth (taxed as ordinary income) and there are also ACA considerations, so I'm interested to hear success stories!

Well I have no ACA considerations (I get to keep FEHB) and I will have a pension so I’m not sure what if any conversions I will make to Roth since I will never be in a low tax bracket.  (I do have some Roth money from my yearly IRA funding).

I do make 100% of my fixed cost decisions on if I can sustain them with just my pension.  My taxable and retirement accounts are all for “lifestyle inflation.”

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Re: Race from $2M to $4M...and Beyond!
« Reply #7352 on: December 18, 2023, 08:52:18 PM »
re Tax lost harvesting:

It is interesting to hear from people who are making use of this strategy.  Very few people in this thread seem to ever sell their appreciated portfolio, instead living off of multiple other streams of income (dividends, interest, rentals, side hustles...).  Unfortunately you can't use the TLH to fully offset conversions to Roth (taxed as ordinary income) and there are also ACA considerations, so I'm interested to hear success stories!

Most of our stock and bond holdings are in 401Ks, so tax loss harvesting doesn't make any sense for those. (Correct me if I'm wrong!)

We have some in taxable accounts, but we don't need to spend that money and don't ever expect to need to at this point.   The overwhelmingly likely course of events is that they'll be inherited by our children and their taxable basis will be reset to their value at inheritance.

Not sure how many others are in the same boat, but I expect quite a few are.

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Re: Race from $2M to $4M...and Beyond!
« Reply #7353 on: December 18, 2023, 09:21:58 PM »
re Tax lost harvesting:

It is interesting to hear from people who are making use of this strategy.  Very few people in this thread seem to ever sell their appreciated portfolio, instead living off of multiple other streams of income (dividends, interest, rentals, side hustles...).  Unfortunately you can't use the TLH to fully offset conversions to Roth (taxed as ordinary income) and there are also ACA considerations, so I'm interested to hear success stories!

Most of our stock and bond holdings are in 401Ks, so tax loss harvesting doesn't make any sense for those. (Correct me if I'm wrong!)

We have some in taxable accounts, but we don't need to spend that money and don't ever expect to need to at this point.   The overwhelmingly likely course of events is that they'll be inherited by our children and their taxable basis will be reset to their value at inheritance.

Not sure how many others are in the same boat, but I expect quite a few are.

Yup.. We got too much money and too much income, together with $1900/month in ACA subsidies for the next 2.5 years.. RMD's are going to be murder if I live that long! We don't even have any kids to give it to, just Nieces and Nephews, some more deserving that others.

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Re: Race from $2M to $4M...and Beyond!
« Reply #7354 on: December 19, 2023, 05:27:24 AM »
My hot take on TLH is that it's relatively easy to account for (losses get carried forward each year on your returns, both short term and long term losses), you get an easy 3k offset of income each year, and if you ever sell and realize capital gains, you can save a ton on taxes.  The Mustachian Person Problem is that I haven't sold and realized much capital gains over the years, so I just have this really valuable accounting line item that I'll likely die with.  I stopped TLH years ago for this very reason (once I hit ~$100k).  There is no harm in building up these accounting losses, but I question how valuable they are for Mustachians, unless the plan is to spend the portfolio (which, let's be realistic, nobody in this thread seems to be doing)...  I'll personally get more valuable tax benefits and personal satisfaction out of a number of other tax strategies like a donor-advised fund or trust.

I 100% plan to sell a lot in my taxable brokerage beginning in 2025.  The idea is to spend most of it before I hit 59.5 12 years after FIRE.

ETA:  my $45,000 or so tax loss came from switching between a CA tax advantaged bond fund and a general US tax advantaged bond fund last year and switching my international fund between similar but different funds back in 2018.  I’ve only lost on paper since funds were invested the entire time.

It is interesting to hear from people who are making use of this strategy.  Very few people in this thread seem to ever sell their appreciated portfolio, instead living off of multiple other streams of income (dividends, interest, rentals, side hustles...).  Unfortunately you can't use the TLH to fully offset conversions to Roth (taxed as ordinary income) and there are also ACA considerations, so I'm interested to hear success stories!

Our taxable account (primarily VTSAX, but a couple legacy holdings with large gains) is going to be a primary source of funds for a number of years. The expected dividends will cover maybe 25% of our budget. We will use taxable sells to cover expenses that will also include Roth conversion taxes.

Depending on about 50 things, of which I understand maybe 4, we might use the taxable account for up to a decade, or even more, before getting into our tax advantaged accounts. It really depends on how the Roth conversion journey progresses.

I have put a lot of emphasis in building a taxable account balance over the years to provide flexibility. We are very fortunate that our incomes are high enough that tax advantaged have been maxed for some years.

Much Fishing to Do

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Re: Race from $2M to $4M...and Beyond!
« Reply #7355 on: December 19, 2023, 07:22:20 AM »
My hot take on TLH is that it's relatively easy to account for (losses get carried forward each year on your returns, both short term and long term losses), you get an easy 3k offset of income each year, and if you ever sell and realize capital gains, you can save a ton on taxes.  The Mustachian Person Problem is that I haven't sold and realized much capital gains over the years, so I just have this really valuable accounting line item that I'll likely die with.  I stopped TLH years ago for this very reason (once I hit ~$100k).  There is no harm in building up these accounting losses, but I question how valuable they are for Mustachians, unless the plan is to spend the portfolio (which, let's be realistic, nobody in this thread seems to be doing)...  I'll personally get more valuable tax benefits and personal satisfaction out of a number of other tax strategies like a donor-advised fund or trust.

I 100% plan to sell a lot in my taxable brokerage beginning in 2025.  The idea is to spend most of it before I hit 59.5 12 years after FIRE.

ETA:  my $45,000 or so tax loss came from switching between a CA tax advantaged bond fund and a general US tax advantaged bond fund last year and switching my international fund between similar but different funds back in 2018.  I’ve only lost on paper since funds were invested the entire time.

It is interesting to hear from people who are making use of this strategy.  Very few people in this thread seem to ever sell their appreciated portfolio, instead living off of multiple other streams of income (dividends, interest, rentals, side hustles...).  Unfortunately you can't use the TLH to fully offset conversions to Roth (taxed as ordinary income) and there are also ACA considerations, so I'm interested to hear success stories!

Our taxable account (primarily VTSAX, but a couple legacy holdings with large gains) is going to be a primary source of funds for a number of years. The expected dividends will cover maybe 25% of our budget. We will use taxable sells to cover expenses that will also include Roth conversion taxes.

Depending on about 50 things, of which I understand maybe 4, we might use the taxable account for up to a decade, or even more, before getting into our tax advantaged accounts. It really depends on how the Roth conversion journey progresses.

I have put a lot of emphasis in building a taxable account balance over the years to provide flexibility. We are very fortunate that our incomes are high enough that tax advantaged have been maxed for some years.
I have about 60% of my investments are in taxable account (early career I only had access to IRAs which of course dont allow much to be saved and later in career when had a solo 401k had a few huge years).  I have a general plan to spend that till I start collecting SS around 67 or so and then use the retirement accounts after that, though I'm sure in practice it'll be much more complicated.

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Re: Race from $2M to $4M...and Beyond!
« Reply #7356 on: December 19, 2023, 07:31:52 AM »
Over the last 20 years or so, we have funded and drained our taxable accounts to pay for home repairs, replacement vehicles, tuition, etc. This year my spouse got a pretty big promotion. For the first time in about 14 years we will be making over six figures. Unfortunately, this is the kind of move that will keep him working OMY and beyond probably. We may add a little extra to our 529 plan. The irony is this promotion now disqualifies us for free college tuition. Ha.

farmecologist

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Re: Race from $2M to $4M...and Beyond!
« Reply #7357 on: December 19, 2023, 07:38:09 AM »
My hot take on TLH is that it's relatively easy to account for (losses get carried forward each year on your returns, both short term and long term losses), you get an easy 3k offset of income each year, and if you ever sell and realize capital gains, you can save a ton on taxes.  The Mustachian Person Problem is that I haven't sold and realized much capital gains over the years, so I just have this really valuable accounting line item that I'll likely die with.  I stopped TLH years ago for this very reason (once I hit ~$100k).  There is no harm in building up these accounting losses, but I question how valuable they are for Mustachians, unless the plan is to spend the portfolio (which, let's be realistic, nobody in this thread seems to be doing)...  I'll personally get more valuable tax benefits and personal satisfaction out of a number of other tax strategies like a donor-advised fund or trust.

I 100% plan to sell a lot in my taxable brokerage beginning in 2025.  The idea is to spend most of it before I hit 59.5 12 years after FIRE.

ETA:  my $45,000 or so tax loss came from switching between a CA tax advantaged bond fund and a general US tax advantaged bond fund last year and switching my international fund between similar but different funds back in 2018.  I’ve only lost on paper since funds were invested the entire time.

It is interesting to hear from people who are making use of this strategy.  Very few people in this thread seem to ever sell their appreciated portfolio, instead living off of multiple other streams of income (dividends, interest, rentals, side hustles...).  Unfortunately you can't use the TLH to fully offset conversions to Roth (taxed as ordinary income) and there are also ACA considerations, so I'm interested to hear success stories!

Our taxable account (primarily VTSAX, but a couple legacy holdings with large gains) is going to be a primary source of funds for a number of years. The expected dividends will cover maybe 25% of our budget. We will use taxable sells to cover expenses that will also include Roth conversion taxes.

Depending on about 50 things, of which I understand maybe 4, we might use the taxable account for up to a decade, or even more, before getting into our tax advantaged accounts. It really depends on how the Roth conversion journey progresses.

I have put a lot of emphasis in building a taxable account balance over the years to provide flexibility. We are very fortunate that our incomes are high enough that tax advantaged have been maxed for some years.

Us as well...the "basket" approach.  "Cash" accounts are key for engineering income for ACA subsidies, etc...  We have a sizeable cash account that is paying at a nice interest rate right now, and a sizeable taxable brokerage account.  The brokerage account will be partially converted to "cash" around a year before we retire.
 


couponvan

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Re: Race from $2M to $4M...and Beyond!
« Reply #7358 on: December 19, 2023, 12:15:02 PM »
We're still hanging out in this thread in the middle at basically a standstill for the next year or two.  We are cash flowing college of about $125K per year for two kids.  $3,000,000 X .04=$120,000.  All our extra $ is going to them and taxes! It's $ I feel good about investing in them.  I didn't like not working, but I also don't like working.  Go figure.  I'd rather be traveling and hanging out with friends than being a SAHM, but we need to simplify our lives a bunch before retirement. I "think" in 2 years we will be done.  That coincides with 55 and access to 401(k) money without penalties for me. 

I booked a family cruise next Christmas for $3,000 for 5 of us for 4 nights including tips and beverages.  I think I might actually save money by not hosting Christmas and making the cruise their Christmas present.  (I will have less people here to cook for, buy presents for, and not being home means I won't need to buy Christmas decorations.) DH and I have Hyatt hotel points we'll use to do a few other nights of hotels with club access so we will only need to come up with lunch $.

farmecologist

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Re: Race from $2M to $4M...and Beyond!
« Reply #7359 on: December 19, 2023, 12:54:47 PM »
We're still hanging out in this thread in the middle at basically a standstill for the next year or two.  We are cash flowing college of about $125K per year for two kids.  $3,000,000 X .04=$120,000.  All our extra $ is going to them and taxes! It's $ I feel good about investing in them.  I didn't like not working, but I also don't like working.  Go figure.  I'd rather be traveling and hanging out with friends than being a SAHM, but we need to simplify our lives a bunch before retirement. I "think" in 2 years we will be done.  That coincides with 55 and access to 401(k) money without penalties for me. 

I booked a family cruise next Christmas for $3,000 for 5 of us for 4 nights including tips and beverages.  I think I might actually save money by not hosting Christmas and making the cruise their Christmas present.  (I will have less people here to cook for, buy presents for, and not being home means I won't need to buy Christmas decorations.) DH and I have Hyatt hotel points we'll use to do a few other nights of hotels with club access so we will only need to come up with lunch $.


Hang in there with the college!  You are giving your kids an incredible gift compared to their peers ( i.e. - no student debt ).   That college bill though...ouch!  We were fortunate enough to save a substantial amount into 529 plans...but it never seems to be enough!

Both of our kids are graduating college this coming spring...yippee!  One from undergrad and one with a masters degree.  Big year!  We are hoping the undergrad will land a grad school gig that is fully paid + stipend.  He is in physics/astrophysics and has done very well..so we think he has a great chance.  The masters degree kid is working to become a therapist and should be able to land a decent job...as there is demand for it. 

EscapeVelocity2020

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Re: Race from $2M to $4M...and Beyond!
« Reply #7360 on: December 19, 2023, 01:24:23 PM »
We are finishing one college tuition after spring and starting our second, and final.  Fortunately the 529's are meeting the needs...  so it's like we are getting college for 50% off the sticker price!

Enjoying watching this next batch of FIRE (Millennial-Revolution, MadFIentist, GCC?) going through the parenting experience...

TempusFugit

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Re: Race from $2M to $4M...and Beyond!
« Reply #7361 on: December 19, 2023, 01:55:23 PM »

Welcome @TempusFugit  -- your situation has some similarities to mine and we're possibly on a similar timeline, although I'm currently battling OMY syndrome in my planning/analysis.    A spending of $85K is fantastic, but don't forget to keep in mind that, as a software engineer for a fortune 500 company for 25+ years, you will get social security as well!  Agree with @pecunia as well that, the bigger challenge may be -- retiring to what?   Which is where I've been doing some introspection over the past few months.   

Anyways, welcome and I look forward to sharing our experiences on this journey!

Thanks for the welcome @arcturus  Yeah, I’m using a 25% reduced SS benefit in my retirement planning tool just to be conservative. I’m guessing that congress will fund the gap when it hits in a few years, but as of now, the benefits will be cut absent new law.    I also have a small private pension that kicks in at 60 which will reduce my WR by about 1%.  It doesn’t have a cola, but it’s still nice to have. 

Indeed the challenge of what comes next is a huge factor in sticking around.  I’m currently single, so I don’t have big plans to travel the world or anything.  I’ve been lots of places and I love having had those experiences but I’m now more of a 3-4 day trip kind of person.   I’m putting in some spending for the first few years to cover one or two fairly expensive travel experiences but I really don’t have anything in particular in mind. 

I’ve been expanding my social network a bit over the past couple of years which is nice.  I’m not a huge extrovert but I do need a few days of socialization every week.  One advantage of retiring not-so-early is that lots of my friends are either retired already or are in the ramp down phase.  I think it would be more of a shock to retire much earlier when all of one’s contemporaries are mid-career and mid-child rearing. 

tooqk4u22

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Re: Race from $2M to $4M...and Beyond!
« Reply #7362 on: December 19, 2023, 04:04:00 PM »
We're still hanging out in this thread in the middle at basically a standstill for the next year or two.  We are cash flowing college of about $125K per year for two kids.  $3,000,000 X .04=$120,000.  All our extra $ is going to them and taxes! It's $ I feel good about investing in them.  I didn't like not working, but I also don't like working.  Go figure.  I'd rather be traveling and hanging out with friends than being a SAHM, but we need to simplify our lives a bunch before retirement. I "think" in 2 years we will be done.  That coincides with 55 and access to 401(k) money without penalties for me. 

I booked a family cruise next Christmas for $3,000 for 5 of us for 4 nights including tips and beverages.  I think I might actually save money by not hosting Christmas and making the cruise their Christmas present.  (I will have less people here to cook for, buy presents for, and not being home means I won't need to buy Christmas decorations.) DH and I have Hyatt hotel points we'll use to do a few other nights of hotels with club access so we will only need to come up with lunch $.


Hang in there with the college!  You are giving your kids an incredible gift compared to their peers ( i.e. - no student debt ).   That college bill though...ouch!  We were fortunate enough to save a substantial amount into 529 plans...but it never seems to be enough!

Both of our kids are graduating college this coming spring...yippee!  One from undergrad and one with a masters degree.  Big year!  We are hoping the undergrad will land a grad school gig that is fully paid + stipend.  He is in physics/astrophysics and has done very well..so we think he has a great chance.  The masters degree kid is working to become a therapist and should be able to land a decent job...as there is demand for it.

Skipping Christmas for a cruise can definitely save you money.....just don't do what they did in "Christmas with the Kranks"


My first of three is expected to start college next year, then the 2nd the following year and the 3rd 2 years after that.   It's just crazy math and not sure we have set enough aside but it's a large amount and much more than most.  Part of the reason I went back to work last year was to pad those accounts, which we have done.   It's my biggest money thing I think about, once the kids are off rhe payroll I am confident we have enough.

TempusFugit

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Re: Race from $2M to $4M...and Beyond!
« Reply #7363 on: December 19, 2023, 04:42:40 PM »


Welcome @TempusFugit from me as well! 

Thought I'd chime in because my situation is similar, but we are a bit ahead of you.  I'm also a "tech guy" working for a megacorp...for 31 years now.  I'm pretty much burned out, don't have the will to "keep up" anymore like I used to, and am battling MASSIVE motivation issues.  The company may likely say "bye-bye" before I do.  However, I am targeting early 2025...when I will also turn 55 years old, because there are a few additional benefits at my megacorp when you reach that age.

Luckily, since we are almost at "and beyond" territory in terms of savings, I could very well pull the trigger whenever I want to.   The brokerage (stock trading) account has done MUCH better than anticipated this year due to some "lucky" trades...and is the reason the "and beyond" goal is sight.   And I agree with @arcturus...don't forget about Social Security...it ends up to be a substantial amount of cash, especially for those who have had long careers in highly compensated fields.

One thing I've discovered is that pulling the trigger on early retirement is harder than I thought it would be.   OMY syndrome is a very real thing...but I'm getting to the point when cutting the cord with the corporate world will happen sooner rather than later.

One more thing...I heartily recommend https://ficalc.app/ for retirement planning....perhaps the best free tool I have found.  It allows you to play around with many things, including many different withdrawal strategies, etc...

Thanks for the welcome and the tool reference, @farmecologist

My motivation has also suffered the past couple of years.  Now that I am so close to having no more financial excuses to delay a change, it’s harder to care about projects that are going to take a couple of years.  There are lots of changes at my company that will affect lots of people - in a couple of years.  Heck, they may throw me out earlier than I expect to leave as part of all the cost cutting. 

I don’t think I’ll ever make it to the “…and beyond” territory, at least not until inflation makes it a much less impressive level! 

EscapeVelocity2020

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Re: Race from $2M to $4M...and Beyond!
« Reply #7364 on: December 19, 2023, 06:00:03 PM »
...
I’ve been expanding my social network a bit over the past couple of years which is nice.  I’m not a huge extrovert but I do need a few days of socialization every week.  One advantage of retiring not-so-early is that lots of my friends are either retired already or are in the ramp down phase.  I think it would be more of a shock to retire much earlier when all of one’s contemporaries are mid-career and mid-child rearing.

I've always admired FIRE's in their 30's being willing to forge the path, I don't necessarily think it's the easiest and most preferential route to go even when you can...  maybe after a generation it will be more straightforward...

Midwest_Handlebar

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Re: Race from $2M to $4M...and Beyond!
« Reply #7365 on: December 19, 2023, 07:10:43 PM »
...
I’ve been expanding my social network a bit over the past couple of years which is nice.  I’m not a huge extrovert but I do need a few days of socialization every week.  One advantage of retiring not-so-early is that lots of my friends are either retired already or are in the ramp down phase.  I think it would be more of a shock to retire much earlier when all of one’s contemporaries are mid-career and mid-child rearing.

I've always admired FIRE's in their 30's being willing to forge the path, I don't necessarily think it's the easiest and most preferential route to go even when you can...  maybe after a generation it will be more straightforward...

I retired @ 39 and am a pretty solid introvert. Actually one of my main motivators was not having to socialize with most of my coworkers. I was in corporate finance/accounting the whole time and had 2-3 years that I liked the majority of my coworkers.

2sk22

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Re: Race from $2M to $4M...and Beyond!
« Reply #7366 on: December 20, 2023, 04:24:04 AM »
We’re also flirting with “Beyond” territory, though I’m 60 and DWis a few years younger. I was really losing motivation and becoming super cynical, anxious and depressed at mini-megacorp where I had been for a long time. I had intentions to FIRE, but kids are expensive(!) and hedonic adaptation has see in. I changed jobs and it relieved most of the cynicism and anxiety and almost all the depression.

I’m having fun enough with the work to keep doing it. It’s amazing at this stage how much the stach grows every year with the combination of contributions and even modest gains. I don’t know if I’ll go all the way to 55 like the recent posters, but I’m pretty sure I won’t go beyond that.

As we start the new year, we’re going to update our estate planning and arrange a session with a financial planner (fee only) to get some different perspectives on what’s next. With our “safe” withdrawal rate in the six figures now, and social security out there eventually (maybe?), it would be worth considering our options. Meanwhile it’s kids’ sports all the time, and that’s fun and active and social and community-building.

I made it to age 57 at mega corp before I got burnt out and quit. I moved to a startup which was way more fun but even that helped for only about a year. I finally quit at age 58. Now, I can't handle the thought of paid work in any form.

Morgan Housel said recently in his podcast that one of the key rules of investing is to let money do its compounding magic as long as  possible. The main advantage you get from saving now is that you are allowing the money you invested twenty years ago more time to grow.

jeroly

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Re: Race from $2M to $4M...and Beyond!
« Reply #7367 on: December 20, 2023, 05:17:09 AM »
We’re also flirting with “Beyond” territory, though I’m 60 and DWis a few years younger. I was really losing motivation and becoming super cynical, anxious and depressed at mini-megacorp where I had been for a long time. I had intentions to FIRE, but kids are expensive(!) and hedonic adaptation has see in. I changed jobs and it relieved most of the cynicism and anxiety and almost all the depression.

I’m having fun enough with the work to keep doing it. It’s amazing at this stage how much the stach grows every year with the combination of contributions and even modest gains. I don’t know if I’ll go all the way to 55 like the recent posters, but I’m pretty sure I won’t go beyond that.

As we start the new year, we’re going to update our estate planning and arrange a session with a financial planner (fee only) to get some different perspectives on what’s next. With our “safe” withdrawal rate in the six figures now, and social security out there eventually (maybe?), it would be worth considering our options. Meanwhile it’s kids’ sports all the time, and that’s fun and active and social and community-building.
Benjamin Button, is that you?

;-)

Welcome to the thread, Taran Ben!

Taran Wanderer

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Re: Race from $2M to $4M...and Beyond!
« Reply #7368 on: December 20, 2023, 05:47:45 PM »
Oops! Fifty, not sixty! And I’ve been here a while. Just kinda introverted.

Turtle

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Re: Race from $2M to $4M...and Beyond!
« Reply #7369 on: December 21, 2023, 08:54:50 AM »
Oops! Fifty, not sixty! And I’ve been here a while. Just kinda introverted.

I had guessed that might be it.  Typos are so easy to make.

Taran Wanderer

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Re: Race from $2M to $4M...and Beyond!
« Reply #7370 on: December 21, 2023, 09:47:05 AM »
Oops! Fifty, not sixty! And I’ve been here a while. Just kinda introverted.

I had guessed that might be it.  Typos are so easy to make.

Especially with “old” eyes on a small screen!

jeroly

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Re: Race from $2M to $4M...and Beyond!
« Reply #7371 on: December 21, 2023, 03:21:43 PM »
Oops! Fifty, not sixty! And I’ve been here a while. Just kinda introverted.
Sorry for my reciprocal confusion - I lost the thread so to speak, confusing TempusFugit's introductory post with yours.

BlueHouse

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Re: Race from $2M to $4M...and Beyond!
« Reply #7372 on: December 21, 2023, 05:00:38 PM »
My hot take on TLH is that it's relatively easy to account for (losses get carried forward each year on your returns, both short term and long term losses), you get an easy 3k offset of income each year, and if you ever sell and realize capital gains, you can save a ton on taxes.  The Mustachian Person Problem is that I haven't sold and realized much capital gains over the years, so I just have this really valuable accounting line item that I'll likely die with.  I stopped TLH years ago for this very reason (once I hit ~$100k).  There is no harm in building up these accounting losses, but I question how valuable they are for Mustachians, unless the plan is to spend the portfolio (which, let's be realistic, nobody in this thread seems to be doing)...  I'll personally get more valuable tax benefits and personal satisfaction out of a number of other tax strategies like a donor-advised fund or trust.

I 100% plan to sell a lot in my taxable brokerage beginning in 2025.  The idea is to spend most of it before I hit 59.5 12 years after FIRE.

ETA:  my $45,000 or so tax loss came from switching between a CA tax advantaged bond fund and a general US tax advantaged bond fund last year and switching my international fund between similar but different funds back in 2018.  I’ve only lost on paper since funds were invested the entire time.

It is interesting to hear from people who are making use of this strategy.  Very few people in this thread seem to ever sell their appreciated portfolio, instead living off of multiple other streams of income (dividends, interest, rentals, side hustles...).  Unfortunately you can't use the TLH to fully offset conversions to Roth (taxed as ordinary income) and there are also ACA considerations, so I'm interested to hear success stories!

I guess I'm too late to TLH.  I've been buying over the past 20 years...so the gains far outweigh the losses.  Am I missing something or did I just learn about TLH too late for it to help me? 

Dicey

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Re: Race from $2M to $4M...and Beyond!
« Reply #7373 on: December 21, 2023, 11:08:26 PM »
Morgan Housel said recently in his podcast that one of the key rules of investing is to let money do its compounding magic as long as  possible. The main advantage you get from saving now is that you are allowing the money you invested twenty years ago more time to grow.
IMO, this is the most compelling reason not to prepay your affordable, low-interest, fixed-rate, tax deductible mortgage. I'm not against paying off one's mortgage, but doing that first and saving for retirement later means you lose out on a shitload of compounding magic. You actually have to earn and save more hard-earned dollars if you put the mortgage cart before the compound interest horse.

jeroly

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Re: Race from $2M to $4M...and Beyond!
« Reply #7374 on: December 22, 2023, 06:55:38 AM »
Morgan Housel said recently in his podcast that one of the key rules of investing is to let money do its compounding magic as long as  possible. The main advantage you get from saving now is that you are allowing the money you invested twenty years ago more time to grow.
IMO, this is the most compelling reason not to prepay your affordable, low-interest, fixed-rate, tax deductible mortgage. I'm not against paying off one's mortgage, but doing that first and saving for retirement later means you lose out on a shitload of compounding magic. You actually have to earn and save more hard-earned dollars if you put the mortgage cart before the compound interest horse.

While I am in general not an advocate for paying off your mortgage, it's certainly a form of investing - your home equity (and NW) grows with each prepayment.  It compounds as well, in that the interest charged on your balance reduces. In fact it's a form of risk-free investing, like buying a CD or a T-bill.

However, just like those other risk-free investments, it's not always the best strategy...

- If your expected return from a riskier investment is high enough then it's worth taking the risk in, say, stocks, instead of prepaying

- If you can't tie up your money safely but might need access to it (e.g. if you don't have a big enough emergency fund)

- If prevailing interest rates rise, then having the mortgage balance higher is better - you may be able to find other risk free investments paying more than your mortgage interest rate.

markbike528CBX

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Re: Race from $2M to $4M...and Beyond!
« Reply #7375 on: December 22, 2023, 07:48:31 AM »
My hot take on TLH is that it's relatively easy to account for (losses get carried forward each year on your returns, both short term and long term losses), you get an easy 3k offset of income each year, and if you ever sell and realize capital gains, you can save a ton on taxes.  The Mustachian Person Problem is that I haven't sold and realized much capital gains over the years, so I just have this really valuable accounting line item that I'll likely die with.  I stopped TLH years ago for this very reason (once I hit ~$100k).  There is no harm in building up these accounting losses, but I question how valuable they are for Mustachians, unless the plan is to spend the portfolio (which, let's be realistic, nobody in this thread seems to be doing)...  I'll personally get more valuable tax benefits and personal satisfaction out of a number of other tax strategies like a donor-advised fund or trust.

I 100% plan to sell a lot in my taxable brokerage beginning in 2025.  The idea is to spend most of it before I hit 59.5 12 years after FIRE.

ETA:  my $45,000 or so tax loss came from switching between a CA tax advantaged bond fund and a general US tax advantaged bond fund last year and switching my international fund between similar but different funds back in 2018.  I’ve only lost on paper since funds were invested the entire time.

It is interesting to hear from people who are making use of this strategy.  Very few people in this thread seem to ever sell their appreciated portfolio, instead living off of multiple other streams of income (dividends, interest, rentals, side hustles...).  Unfortunately you can't use the TLH to fully offset conversions to Roth (taxed as ordinary income) and there are also ACA considerations, so I'm interested to hear success stories!

I guess I'm too late to TLH.  I've been buying over the past 20 years...so the gains far outweigh the losses.  Am I missing something or did I just learn about TLH too late for it to help me?
If your income is low enough (capital gains taxed at 0%), then you can capital gains harvest.  It essentially raises your basis cost, lowering future capital gains and therefor taxes on those gains.

https://www.bogleheads.org/wiki/Tax_gain_harvesting#:~:text=Tax%20gain%20harvesting%2C%20as%20opposed,specific%20time%20for%20tax%20purposes.

oldmannickels

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Re: Race from $2M to $4M...and Beyond!
« Reply #7376 on: December 22, 2023, 08:55:16 AM »
My hot take on TLH is that it's relatively easy to account for (losses get carried forward each year on your returns, both short term and long term losses), you get an easy 3k offset of income each year, and if you ever sell and realize capital gains, you can save a ton on taxes.  The Mustachian Person Problem is that I haven't sold and realized much capital gains over the years, so I just have this really valuable accounting line item that I'll likely die with.  I stopped TLH years ago for this very reason (once I hit ~$100k).  There is no harm in building up these accounting losses, but I question how valuable they are for Mustachians, unless the plan is to spend the portfolio (which, let's be realistic, nobody in this thread seems to be doing)...  I'll personally get more valuable tax benefits and personal satisfaction out of a number of other tax strategies like a donor-advised fund or trust.

I 100% plan to sell a lot in my taxable brokerage beginning in 2025.  The idea is to spend most of it before I hit 59.5 12 years after FIRE.

ETA:  my $45,000 or so tax loss came from switching between a CA tax advantaged bond fund and a general US tax advantaged bond fund last year and switching my international fund between similar but different funds back in 2018.  I’ve only lost on paper since funds were invested the entire time.

It is interesting to hear from people who are making use of this strategy.  Very few people in this thread seem to ever sell their appreciated portfolio, instead living off of multiple other streams of income (dividends, interest, rentals, side hustles...).  Unfortunately you can't use the TLH to fully offset conversions to Roth (taxed as ordinary income) and there are also ACA considerations, so I'm interested to hear success stories!

I guess I'm too late to TLH.  I've been buying over the past 20 years...so the gains far outweigh the losses.  Am I missing something or did I just learn about TLH too late for it to help me?

you can sell specific lots of shares that are in a loss position. Let's say you own 5,000 shares, 4,900 are in a gain position and 100 are in a loss position. You could try to isolate the 100 shares in a specific lot to generate a loss.

secondcor521

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Re: Race from $2M to $4M...and Beyond!
« Reply #7377 on: December 22, 2023, 09:02:20 AM »
you can sell specific lots of shares that are in a loss position. Let's say you own 5,000 shares, 4,900 are in a gain position and 100 are in a loss position. You could try to isolate the 100 shares in a specific lot to generate a loss.

Indeed you can.

Be sure to set your cost basis method to "specific ID" before actually selling the shares.  Most brokerages I've seen do not use this method by default.  Not switching before the sale can result in a tax situation that you don't expect and is probably less optimal.

Dicey

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Re: Race from $2M to $4M...and Beyond!
« Reply #7378 on: December 22, 2023, 10:38:17 AM »
Morgan Housel said recently in his podcast that one of the key rules of investing is to let money do its compounding magic as long as  possible. The main advantage you get from saving now is that you are allowing the money you invested twenty years ago more time to grow.
IMO, this is the most compelling reason not to prepay your affordable, low-interest, fixed-rate, tax deductible mortgage. I'm not against paying off one's mortgage, but doing that first and saving for retirement later means you lose out on a shitload of compounding magic. You actually have to earn and save more hard-earned dollars if you put the mortgage cart before the compound interest horse.

While I am in general not an advocate for paying off your mortgage, it's certainly a form of investing - your home equity (and NW) grows with each prepayment.  It compounds as well, in that the interest charged on your balance reduces. In fact it's a form of risk-free investing, like buying a CD or a T-bill.

However, just like those other risk-free investments, it's not always the best strategy...

- If your expected return from a riskier investment is high enough then it's worth taking the risk in, say, stocks, instead of prepaying

- If you can't tie up your money safely but might need access to it (e.g. if you don't have a big enough emergency fund)

- If prevailing interest rates rise, then having the mortgage balance higher is better - you may be able to find other risk free investments paying more than your mortgage interest rate.
I do not disagree. I have recently been told by a mod to tone it down (in much harsher words) so I was treading very carefully. IRL, I'm a die hard fan of the DPOYM Club.

farmecologist

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Re: Race from $2M to $4M...and Beyond!
« Reply #7379 on: December 22, 2023, 12:29:29 PM »
Morgan Housel said recently in his podcast that one of the key rules of investing is to let money do its compounding magic as long as  possible. The main advantage you get from saving now is that you are allowing the money you invested twenty years ago more time to grow.
IMO, this is the most compelling reason not to prepay your affordable, low-interest, fixed-rate, tax deductible mortgage. I'm not against paying off one's mortgage, but doing that first and saving for retirement later means you lose out on a shitload of compounding magic. You actually have to earn and save more hard-earned dollars if you put the mortgage cart before the compound interest horse.

While I am in general not an advocate for paying off your mortgage, it's certainly a form of investing - your home equity (and NW) grows with each prepayment.  It compounds as well, in that the interest charged on your balance reduces. In fact it's a form of risk-free investing, like buying a CD or a T-bill.

However, just like those other risk-free investments, it's not always the best strategy...

- If your expected return from a riskier investment is high enough then it's worth taking the risk in, say, stocks, instead of prepaying

- If you can't tie up your money safely but might need access to it (e.g. if you don't have a big enough emergency fund)

- If prevailing interest rates rise, then having the mortgage balance higher is better - you may be able to find other risk free investments paying more than your mortgage interest rate.
I do not disagree. I have recently been told by a mod to tone it down (in much harsher words) so I was treading very carefully. IRL, I'm a die hard fan of the DPOYM Club.

I'm not.  Paying off the mortgage was one of the best best things we ever did.  BUT...we used a stock option windfall to pay it off.  Everyone and their mother was telling us to "invest" the proceeds instead.   But guess what?  If we would have invest it, it would have been in the months leading up to the 2008-2009 financial crisis...and we all know how that turned out.  So we "lucked out".  And in hindsight, paying it off was one our better financial decisions, and it is just nice to have it paid off.   We like simplicity in our finances, and having debt hanging around isn't in our wheelhouse.

Point is, timing can be everything...and nothing, and often comes down to "luck". 

However, to each their own...we all have different thoughts, plans, and situations!  One stance certainly doesn't fit all.
 
« Last Edit: December 22, 2023, 12:32:33 PM by farmecologist »

farmecologist

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Re: Race from $2M to $4M...and Beyond!
« Reply #7380 on: December 22, 2023, 12:34:47 PM »
you can sell specific lots of shares that are in a loss position. Let's say you own 5,000 shares, 4,900 are in a gain position and 100 are in a loss position. You could try to isolate the 100 shares in a specific lot to generate a loss.

Indeed you can.

Be sure to set your cost basis method to "specific ID" before actually selling the shares.  Most brokerages I've seen do not use this method by default.  Not switching before the sale can result in a tax situation that you don't expect and is probably less optimal.

Also, all of the brokerages I have been associated with allow you to modify the tax lot method even after the sale...so all is not necessarily lost if a mistake is made.


Dicey

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Re: Race from $2M to $4M...and Beyond!
« Reply #7381 on: December 22, 2023, 03:13:44 PM »
Morgan Housel said recently in his podcast that one of the key rules of investing is to let money do its compounding magic as long as  possible. The main advantage you get from saving now is that you are allowing the money you invested twenty years ago more time to grow.
IMO, this is the most compelling reason not to prepay your affordable, low-interest, fixed-rate, tax deductible mortgage. I'm not against paying off one's mortgage, but doing that first and saving for retirement later means you lose out on a shitload of compounding magic. You actually have to earn and save more hard-earned dollars if you put the mortgage cart before the compound interest horse.

While I am in general not an advocate for paying off your mortgage, it's certainly a form of investing - your home equity (and NW) grows with each prepayment.  It compounds as well, in that the interest charged on your balance reduces. In fact it's a form of risk-free investing, like buying a CD or a T-bill.

However, just like those other risk-free investments, it's not always the best strategy...

- If your expected return from a riskier investment is high enough then it's worth taking the risk in, say, stocks, instead of prepaying

- If you can't tie up your money safely but might need access to it (e.g. if you don't have a big enough emergency fund)

- If prevailing interest rates rise, then having the mortgage balance higher is better - you may be able to find other risk free investments paying more than your mortgage interest rate.
I do not disagree. I have recently been told by a mod to tone it down (in much harsher words) so I was treading very carefully. IRL, I'm a die hard fan of the DPOYM Club.

I'm not.  Paying off the mortgage was one of the best best things we ever did.  BUT...we used a stock option windfall to pay it off.  Everyone and their mother was telling us to "invest" the proceeds instead.   But guess what?  If we would have invest it, it would have been in the months leading up to the 2008-2009 financial crisis...and we all know how that turned out.  So we "lucked out".  And in hindsight, paying it off was one our better financial decisions, and it is just nice to have it paid off.   We like simplicity in our finances, and having debt hanging around isn't in our wheelhouse.

Point is, timing can be everything...and nothing, and often comes down to "luck". 

However, to each their own...we all have different thoughts, plans, and situations!  One stance certainly doesn't fit all.
Had you invested along mustachian guidelines in things such as ETFs, your funds would have come roaring back, and then some. OTOH, using a windfall to pay off a mortgage, assuming your retirement savings are on track, isn't the worst option, particularly as mortage rates were in the low-to-mid-sixes during that time.

Dicey

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Re: Race from $2M to $4M...and Beyond!
« Reply #7382 on: December 22, 2023, 03:49:47 PM »
May I please point out that I consider the mortgage/no mortgage debate rather moot for this group?

If you've managed to get here with $2M+ in liquid assets, it doesn't really matter. You're going to be fine.

Hitting $2M is much more impressive than killing a mortgage in all but the very highest of COLAs.




Fomerly known as something

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Re: Race from $2M to $4M...and Beyond!
« Reply #7383 on: December 22, 2023, 05:47:07 PM »
My favorite boss in the office is retiring in a month from our federal jobs.  He was offered a “retirement job” at a major US bank for essentially 2x his current salary.  It’s “an offer he couldn’t refuse.”  It has me reflecting on what I would do if I was offered something similar, and one more year in general even at my current pay. 

At the end of the day, while I’m sure I could find a use for the extra money, a slightly nicer house, spending a bit more on my normal purchases maybe pulling the trigger on a hotel that costs $1000 a night just because, I really don’t see how it would change my overall enjoyment of life.  It’s amazing what understanding the concept of enough will do for one’s finances. 

arcturus

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Re: Race from $2M to $4M...and Beyond!
« Reply #7384 on: December 24, 2023, 08:49:12 AM »
Morgan Housel said recently in his podcast that one of the key rules of investing is to let money do its compounding magic as long as  possible. The main advantage you get from saving now is that you are allowing the money you invested twenty years ago more time to grow.
IMO, this is the most compelling reason not to prepay your affordable, low-interest, fixed-rate, tax deductible mortgage. I'm not against paying off one's mortgage, but doing that first and saving for retirement later means you lose out on a shitload of compounding magic. You actually have to earn and save more hard-earned dollars if you put the mortgage cart before the compound interest horse.

While I am in general not an advocate for paying off your mortgage, it's certainly a form of investing - your home equity (and NW) grows with each prepayment.  It compounds as well, in that the interest charged on your balance reduces. In fact it's a form of risk-free investing, like buying a CD or a T-bill.

However, just like those other risk-free investments, it's not always the best strategy...

- If your expected return from a riskier investment is high enough then it's worth taking the risk in, say, stocks, instead of prepaying

- If you can't tie up your money safely but might need access to it (e.g. if you don't have a big enough emergency fund)

- If prevailing interest rates rise, then having the mortgage balance higher is better - you may be able to find other risk free investments paying more than your mortgage interest rate.
I do not disagree. I have recently been told by a mod to tone it down (in much harsher words) so I was treading very carefully. IRL, I'm a die hard fan of the DPOYM Club.

I'm not.  Paying off the mortgage was one of the best best things we ever did.  BUT...we used a stock option windfall to pay it off.  Everyone and their mother was telling us to "invest" the proceeds instead.   But guess what?  If we would have invest it, it would have been in the months leading up to the 2008-2009 financial crisis...and we all know how that turned out.  So we "lucked out".  And in hindsight, paying it off was one our better financial decisions, and it is just nice to have it paid off.   We like simplicity in our finances, and having debt hanging around isn't in our wheelhouse.

Point is, timing can be everything...and nothing, and often comes down to "luck". 

However, to each their own...we all have different thoughts, plans, and situations!  One stance certainly doesn't fit all.

Ok, I'll wade into these (treacherous) waters.....I think I can get past the mental hurdle of having a mortgage in retirement, because after all, you always owe someone for shelter -- whether its rent, property taxes, utilities, mortgage, etc.  So I can get past the mental concept of having a mortgage.   But here is where I struggle with it: 

My challenge is that the mortgage payment "crowds out" other money from the retirement budget.  For example, if my SWD is 4% and my effective combined tax rate is 17%, my mortgage rate would need to be incredibly low not to crowd more money out of the monthly budget than the amount of spend enabled by having the extra invested assets that the mortgage enables.   I've done some simplistic math to look at this, and believe I'm thinking about this problem correctly, but would ask others to chime in if I'm thinking about it the wrong way.

Very simplistically -- a $250K mortgage at 4.5% would result in a $1,267 mortgage payment.  If I say 70% of this is interest and therefore tax deductible, then the after-tax payment is $1,116 (assumes a 17% effective tax rate).   But, in order to make a $1,116 payment, I would need to have $403K in invested assets, assuming a 4% withdrawal rate and the same 17% effective tax rate.   Even at a 6% withdrawal rate, I would need $269K in invested assets.  Both amounts are more than the amount of additional invested assets I gain by virtue of having the mortgage.  Now, it starts to work better at lower mortgage interest rates, but they need to be really low (like 2% or less).

Am I thinking about this the wrong way?   I would be happy to be wrong, as it would make one of my potential RE scenarios easier to close.   But at the moment, I have a view that the most efficient approach is to minimize or eliminate the mortgage.   I can also take this to a different thread if desired.  Hope everyone is off to a good start in their holiday season, and here's to hoping I haven't derailed the thread here!  :-)

Louise

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Re: Race from $2M to $4M...and Beyond!
« Reply #7385 on: December 24, 2023, 09:00:52 AM »
Morgan Housel said recently in his podcast that one of the key rules of investing is to let money do its compounding magic as long as  possible. The main advantage you get from saving now is that you are allowing the money you invested twenty years ago more time to grow.
IMO, this is the most compelling reason not to prepay your affordable, low-interest, fixed-rate, tax deductible mortgage. I'm not against paying off one's mortgage, but doing that first and saving for retirement later means you lose out on a shitload of compounding magic. You actually have to earn and save more hard-earned dollars if you put the mortgage cart before the compound interest horse.

While I am in general not an advocate for paying off your mortgage, it's certainly a form of investing - your home equity (and NW) grows with each prepayment.  It compounds as well, in that the interest charged on your balance reduces. In fact it's a form of risk-free investing, like buying a CD or a T-bill.

However, just like those other risk-free investments, it's not always the best strategy...

- If your expected return from a riskier investment is high enough then it's worth taking the risk in, say, stocks, instead of prepaying

- If you can't tie up your money safely but might need access to it (e.g. if you don't have a big enough emergency fund)

- If prevailing interest rates rise, then having the mortgage balance higher is better - you may be able to find other risk free investments paying more than your mortgage interest rate.
I do not disagree. I have recently been told by a mod to tone it down (in much harsher words) so I was treading very carefully. IRL, I'm a die hard fan of the DPOYM Club.

I'm not.  Paying off the mortgage was one of the best best things we ever did.  BUT...we used a stock option windfall to pay it off.  Everyone and their mother was telling us to "invest" the proceeds instead.   But guess what?  If we would have invest it, it would have been in the months leading up to the 2008-2009 financial crisis...and we all know how that turned out.  So we "lucked out".  And in hindsight, paying it off was one our better financial decisions, and it is just nice to have it paid off.   We like simplicity in our finances, and having debt hanging around isn't in our wheelhouse.

Point is, timing can be everything...and nothing, and often comes down to "luck". 

However, to each their own...we all have different thoughts, plans, and situations!  One stance certainly doesn't fit all.

Ok, I'll wade into these (treacherous) waters.....I think I can get past the mental hurdle of having a mortgage in retirement, because after all, you always owe someone for shelter -- whether its rent, property taxes, utilities, mortgage, etc.  So I can get past the mental concept of having a mortgage.   But here is where I struggle with it: 

My challenge is that the mortgage payment "crowds out" other money from the retirement budget.  For example, if my SWD is 4% and my effective combined tax rate is 17%, my mortgage rate would need to be incredibly low not to crowd more money out of the monthly budget than the amount of spend enabled by having the extra invested assets that the mortgage enables.   I've done some simplistic math to look at this, and believe I'm thinking about this problem correctly, but would ask others to chime in if I'm thinking about it the wrong way.

Very simplistically -- a $250K mortgage at 4.5% would result in a $1,267 mortgage payment.  If I say 70% of this is interest and therefore tax deductible, then the after-tax payment is $1,116 (assumes a 17% effective tax rate).   But, in order to make a $1,116 payment, I would need to have $403K in invested assets, assuming a 4% withdrawal rate and the same 17% effective tax rate.   Even at a 6% withdrawal rate, I would need $269K in invested assets.  Both amounts are more than the amount of additional invested assets I gain by virtue of having the mortgage.  Now, it starts to work better at lower mortgage interest rates, but they need to be really low (like 2% or less).

Am I thinking about this the wrong way?   I would be happy to be wrong, as it would make one of my potential RE scenarios easier to close.   But at the moment, I have a view that the most efficient approach is to minimize or eliminate the mortgage.   I can also take this to a different thread if desired.  Hope everyone is off to a good start in their holiday season, and here's to hoping I haven't derailed the thread here!  :-)

We do not have a mortgage and I'm happy we do not. Our mortgage payment was around 1060/mo. Our house wasn't super expensive, so I'm not convinced it made a huge difference. We did invest our mortgage payment after we paid it off too. There are advantages to having a lower income (reduced property taxes, ACA, FAFSA). I don't participate in any mortgage payoff debates because spouse and I are very happy to have a paid off place to live. Besides, it's such a low percentage of our NW anyway since we stayed in our starter home.

2sk22

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Re: Race from $2M to $4M...and Beyond!
« Reply #7386 on: December 24, 2023, 01:12:07 PM »
My favorite boss in the office is retiring in a month from our federal jobs.  He was offered a “retirement job” at a major US bank for essentially 2x his current salary.  It’s “an offer he couldn’t refuse.”  It has me reflecting on what I would do if I was offered something similar, and one more year in general even at my current pay. 

At the end of the day, while I’m sure I could find a use for the extra money, a slightly nicer house, spending a bit more on my normal purchases maybe pulling the trigger on a hotel that costs $1000 a night just because, I really don’t see how it would change my overall enjoyment of life.  It’s amazing what understanding the concept of enough will do for one’s finances.

I came close to this situation earlier this year. I was offered a position at the company I last worked (a startup) doing much what I did except that it would be part time. I was slightly tempted for perhaps a few minutes but I turned it down. I have come to value my independence too much to go back to my pre-retirement life.

jeroly

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Re: Race from $2M to $4M...and Beyond!
« Reply #7387 on: December 24, 2023, 05:34:15 PM »
Morgan Housel said recently in his podcast that one of the key rules of investing is to let money do its compounding magic as long as  possible. The main advantage you get from saving now is that you are allowing the money you invested twenty years ago more time to grow.
IMO, this is the most compelling reason not to prepay your affordable, low-interest, fixed-rate, tax deductible mortgage. I'm not against paying off one's mortgage, but doing that first and saving for retirement later means you lose out on a shitload of compounding magic. You actually have to earn and save more hard-earned dollars if you put the mortgage cart before the compound interest horse.

While I am in general not an advocate for paying off your mortgage, it's certainly a form of investing - your home equity (and NW) grows with each prepayment.  It compounds as well, in that the interest charged on your balance reduces. In fact it's a form of risk-free investing, like buying a CD or a T-bill.

However, just like those other risk-free investments, it's not always the best strategy...

- If your expected return from a riskier investment is high enough then it's worth taking the risk in, say, stocks, instead of prepaying

- If you can't tie up your money safely but might need access to it (e.g. if you don't have a big enough emergency fund)

- If prevailing interest rates rise, then having the mortgage balance higher is better - you may be able to find other risk free investments paying more than your mortgage interest rate.
I do not disagree. I have recently been told by a mod to tone it down (in much harsher words) so I was treading very carefully. IRL, I'm a die hard fan of the DPOYM Club.

I'm not.  Paying off the mortgage was one of the best best things we ever did.  BUT...we used a stock option windfall to pay it off.  Everyone and their mother was telling us to "invest" the proceeds instead.   But guess what?  If we would have invest it, it would have been in the months leading up to the 2008-2009 financial crisis...and we all know how that turned out.  So we "lucked out".  And in hindsight, paying it off was one our better financial decisions, and it is just nice to have it paid off.   We like simplicity in our finances, and having debt hanging around isn't in our wheelhouse.

Point is, timing can be everything...and nothing, and often comes down to "luck". 

However, to each their own...we all have different thoughts, plans, and situations!  One stance certainly doesn't fit all.

Ok, I'll wade into these (treacherous) waters.....I think I can get past the mental hurdle of having a mortgage in retirement, because after all, you always owe someone for shelter -- whether its rent, property taxes, utilities, mortgage, etc.  So I can get past the mental concept of having a mortgage.   But here is where I struggle with it: 

My challenge is that the mortgage payment "crowds out" other money from the retirement budget.  For example, if my SWD is 4% and my effective combined tax rate is 17%, my mortgage rate would need to be incredibly low not to crowd more money out of the monthly budget than the amount of spend enabled by having the extra invested assets that the mortgage enables.   I've done some simplistic math to look at this, and believe I'm thinking about this problem correctly, but would ask others to chime in if I'm thinking about it the wrong way.

Very simplistically -- a $250K mortgage at 4.5% would result in a $1,267 mortgage payment.  If I say 70% of this is interest and therefore tax deductible, then the after-tax payment is $1,116 (assumes a 17% effective tax rate).   But, in order to make a $1,116 payment, I would need to have $403K in invested assets, assuming a 4% withdrawal rate and the same 17% effective tax rate.   Even at a 6% withdrawal rate, I would need $269K in invested assets.  Both amounts are more than the amount of additional invested assets I gain by virtue of having the mortgage.  Now, it starts to work better at lower mortgage interest rates, but they need to be really low (like 2% or less).

Am I thinking about this the wrong way?   I would be happy to be wrong, as it would make one of my potential RE scenarios easier to close.   But at the moment, I have a view that the most efficient approach is to minimize or eliminate the mortgage.   I can also take this to a different thread if desired.  Hope everyone is off to a good start in their holiday season, and here's to hoping I haven't derailed the thread here!  :-)
What you're missing is that part of that after-tax payment of $1,116 (or whatever, depending on your individual tax situation) is the 30% of the $1,267, or $380, that constitutes repayment, i.e. a form of investment. It's not a drain on your investments, just a transfer into a reduction of your mortgage debt. So you're really looking at the rest of the payment versus the SWR's 4% and it is a better comparison.

Edited to add:  I'm somewhat neutral on the topic.  In principle it seems to make sense to maintain a mortgage when the interest rate is considerably below your expected rate on your alternative investments, to pay it off when its interest rate is not much lower or in fact higher than alternative investments, and to keep a watchful eye as to whether to refinance.  However I also recognize that emotion comes into play - being in debt can take a psychological toll on some.  I personally paid off a mortgage when the mortgage servicers were being jerky - being able to pay off the mortgage was in a sense 'fu money' for me.
« Last Edit: December 24, 2023, 05:41:41 PM by jeroly »

Dancin'Dog

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Re: Race from $2M to $4M...and Beyond!
« Reply #7388 on: December 25, 2023, 08:35:28 AM »
This seems like an odd thread to be asking the mortgage payoff question.  I'd think you would have made that decision long ago. 

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Re: Race from $2M to $4M...and Beyond!
« Reply #7389 on: December 25, 2023, 09:26:41 AM »
you can sell specific lots of shares that are in a loss position. Let's say you own 5,000 shares, 4,900 are in a gain position and 100 are in a loss position. You could try to isolate the 100 shares in a specific lot to generate a loss.

Indeed you can.

Be sure to set your cost basis method to "specific ID" before actually selling the shares.  Most brokerages I've seen do not use this method by default.  Not switching before the sale can result in a tax situation that you don't expect and is probably less optimal.

I'm really hesitant to do this because I keep thinking I'll screw something up. 

I have to go into the 22% tax bracket to have enough income to qualify for ACA (stay off medicaid, but stay low enough for subsidies).  It's a big tax cliff for me if I don't get that ACA subsidy.   I think I still have about $5K of room to stay under the subsidy cliff and also under the cap gains limit.  I also want to sell some TSLA stock that I bought before the stock splits.  So for every share I sell now, it has a cap gain of about $200/share.  Does that count toward earned income?  AGI? MAGI? 

I also need to consider whether I'm being stupid (elitist) by refusing to go onto Medicaid. 

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Re: Race from $2M to $4M...and Beyond!
« Reply #7390 on: December 25, 2023, 09:56:45 AM »
I also want to sell some TSLA stock that I bought before the stock splits.  So for every share I sell now, it has a cap gain of about $200/share.  Does that count toward earned income?  AGI? MAGI? 

No, it's unearned income.

Yes, it counts towards AGI.  Yes, it counts towards MAGI (and thus affects ACA subsidies).

arcturus

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Re: Race from $2M to $4M...and Beyond!
« Reply #7391 on: December 26, 2023, 07:11:17 AM »
Good points, @jeroly, thanks for correcting my thinking on it.  So I guess one could say that any time your after tax mortgage rate is lower than your SWD it could make financial sense to have the mortgage in retirement.   I am still inclined to think of it as something I'd prefer not to have hanging over my head in retirement, because while I definitely understand your point, the principal amount is less liquid than the remainder of my retirement savings so somehow it still feels like an "expense" even though I understand that is nonsense.

@Dancin'Dog, sorry to have not lived up to your expectations!  I am in this thread with ~$2.6M in invested assets, still have a mortgage (because its a ~3.5%, why pay off while in "accumulation" mode??)  and have historically thought of my next pre-retirement step on the real-estate front would be to downsize on the house and then use this opportunity to become mortgage free, freeing up that monthly cash for other retirement spend.   Given the recent state of the real-estate market around these parts, its got me re-considering whether this strategy is achievable.  Good housing is scarce and prices are very high.    Hence, my query, albeit somewhat misplaced on this thread.   But, alas, apparently I should have made this decision long ago!

farmecologist

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Re: Race from $2M to $4M...and Beyond!
« Reply #7392 on: December 29, 2023, 08:32:52 AM »
Morgan Housel said recently in his podcast that one of the key rules of investing is to let money do its compounding magic as long as  possible. The main advantage you get from saving now is that you are allowing the money you invested twenty years ago more time to grow.
IMO, this is the most compelling reason not to prepay your affordable, low-interest, fixed-rate, tax deductible mortgage. I'm not against paying off one's mortgage, but doing that first and saving for retirement later means you lose out on a shitload of compounding magic. You actually have to earn and save more hard-earned dollars if you put the mortgage cart before the compound interest horse.

While I am in general not an advocate for paying off your mortgage, it's certainly a form of investing - your home equity (and NW) grows with each prepayment.  It compounds as well, in that the interest charged on your balance reduces. In fact it's a form of risk-free investing, like buying a CD or a T-bill.

However, just like those other risk-free investments, it's not always the best strategy...

- If your expected return from a riskier investment is high enough then it's worth taking the risk in, say, stocks, instead of prepaying

- If you can't tie up your money safely but might need access to it (e.g. if you don't have a big enough emergency fund)

- If prevailing interest rates rise, then having the mortgage balance higher is better - you may be able to find other risk free investments paying more than your mortgage interest rate.
I do not disagree. I have recently been told by a mod to tone it down (in much harsher words) so I was treading very carefully. IRL, I'm a die hard fan of the DPOYM Club.

I'm not.  Paying off the mortgage was one of the best best things we ever did.  BUT...we used a stock option windfall to pay it off.  Everyone and their mother was telling us to "invest" the proceeds instead.   But guess what?  If we would have invest it, it would have been in the months leading up to the 2008-2009 financial crisis...and we all know how that turned out.  So we "lucked out".  And in hindsight, paying it off was one our better financial decisions, and it is just nice to have it paid off.   We like simplicity in our finances, and having debt hanging around isn't in our wheelhouse.

Point is, timing can be everything...and nothing, and often comes down to "luck". 

However, to each their own...we all have different thoughts, plans, and situations!  One stance certainly doesn't fit all.
Had you invested along mustachian guidelines in things such as ETFs, your funds would have come roaring back, and then some. OTOH, using a windfall to pay off a mortgage, assuming your retirement savings are on track, isn't the worst option, particularly as mortage rates were in the low-to-mid-sixes during that time.

Don't really agree with you on the "investing" topic....timing is everything.   Absolutely nobody anticipated the crash back then and were in "irrational exuberance" mode.   It would have taken years to get back to principle if we would have invested leading up to the crash.  I do agree that DCA is a great way to go though...just not for us.  Paying off the mortgage had intangible benefits as well.  Like I said, I like things simple, and not having debt to worry about is great.

Just pointing out that paying off the mortgage can be a great thing to do, giving the circumstances.   Not to be an ass...but from your many, many prior posts on the topic, you seem to preach not paying off the mortgage to nearly everyone.  That seems like a really dangerous bias...

But hey, we can agree to disagree...so lets do that.


farmecologist

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Re: Race from $2M to $4M...and Beyond!
« Reply #7393 on: December 29, 2023, 08:38:34 AM »
Morgan Housel said recently in his podcast that one of the key rules of investing is to let money do its compounding magic as long as  possible. The main advantage you get from saving now is that you are allowing the money you invested twenty years ago more time to grow.
IMO, this is the most compelling reason not to prepay your affordable, low-interest, fixed-rate, tax deductible mortgage. I'm not against paying off one's mortgage, but doing that first and saving for retirement later means you lose out on a shitload of compounding magic. You actually have to earn and save more hard-earned dollars if you put the mortgage cart before the compound interest horse.

While I am in general not an advocate for paying off your mortgage, it's certainly a form of investing - your home equity (and NW) grows with each prepayment.  It compounds as well, in that the interest charged on your balance reduces. In fact it's a form of risk-free investing, like buying a CD or a T-bill.

However, just like those other risk-free investments, it's not always the best strategy...

- If your expected return from a riskier investment is high enough then it's worth taking the risk in, say, stocks, instead of prepaying

- If you can't tie up your money safely but might need access to it (e.g. if you don't have a big enough emergency fund)

- If prevailing interest rates rise, then having the mortgage balance higher is better - you may be able to find other risk free investments paying more than your mortgage interest rate.
I do not disagree. I have recently been told by a mod to tone it down (in much harsher words) so I was treading very carefully. IRL, I'm a die hard fan of the DPOYM Club.

I'm not.  Paying off the mortgage was one of the best best things we ever did.  BUT...we used a stock option windfall to pay it off.  Everyone and their mother was telling us to "invest" the proceeds instead.   But guess what?  If we would have invest it, it would have been in the months leading up to the 2008-2009 financial crisis...and we all know how that turned out.  So we "lucked out".  And in hindsight, paying it off was one our better financial decisions, and it is just nice to have it paid off.   We like simplicity in our finances, and having debt hanging around isn't in our wheelhouse.

Point is, timing can be everything...and nothing, and often comes down to "luck". 

However, to each their own...we all have different thoughts, plans, and situations!  One stance certainly doesn't fit all.

Ok, I'll wade into these (treacherous) waters.....I think I can get past the mental hurdle of having a mortgage in retirement, because after all, you always owe someone for shelter -- whether its rent, property taxes, utilities, mortgage, etc.  So I can get past the mental concept of having a mortgage.   But here is where I struggle with it: 

My challenge is that the mortgage payment "crowds out" other money from the retirement budget.  For example, if my SWD is 4% and my effective combined tax rate is 17%, my mortgage rate would need to be incredibly low not to crowd more money out of the monthly budget than the amount of spend enabled by having the extra invested assets that the mortgage enables.   I've done some simplistic math to look at this, and believe I'm thinking about this problem correctly, but would ask others to chime in if I'm thinking about it the wrong way.

Very simplistically -- a $250K mortgage at 4.5% would result in a $1,267 mortgage payment.  If I say 70% of this is interest and therefore tax deductible, then the after-tax payment is $1,116 (assumes a 17% effective tax rate).   But, in order to make a $1,116 payment, I would need to have $403K in invested assets, assuming a 4% withdrawal rate and the same 17% effective tax rate.   Even at a 6% withdrawal rate, I would need $269K in invested assets.  Both amounts are more than the amount of additional invested assets I gain by virtue of having the mortgage.  Now, it starts to work better at lower mortgage interest rates, but they need to be really low (like 2% or less).

Am I thinking about this the wrong way?   I would be happy to be wrong, as it would make one of my potential RE scenarios easier to close.   But at the moment, I have a view that the most efficient approach is to minimize or eliminate the mortgage.   I can also take this to a different thread if desired.  Hope everyone is off to a good start in their holiday season, and here's to hoping I haven't derailed the thread here!  :-)

Totally agree with you here...but like @Dicey said, this thread likely isn't the best arena to discuss in detail.  However, I do feel it is a relevant discussion to have.  And there are large threads already devoted to the topic.

Dicey

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Re: Race from $2M to $4M...and Beyond!
« Reply #7394 on: December 29, 2023, 09:28:57 AM »
FFS, I've been meaning to follow up on this, but I'm doing a "forum lite" week, as we're on a trip. The response above is so off the mark that apparently now is the time to elaborate.

As I mentioned upthread, I believe this topic is less of a concern for this group. Frankly, though some believe one should always have a mortgage, I do not fully subscribe to that theory, particularly for the folks racing from $2M to $4M...and Beyond!

The reason to hold a long, low, fixed-rate rate mortgage on an affordable home, in a country where mortgages are tax-advantaged, is that it allows you to invest in equities which will compound, resulting in a higher net worth faster than paying off the mortgage before maxing out every other investment option first.

The average shlub is assumed to be an idiot who will blow every spendable cent. (See: Dave Ramsey or Suze Orman for endless examples.) These people may never have the means to retire, let alone early. For them, the goal of paying off the mortgage is not unreasonable. At least they'll have something.

Mustachians are smarter more financially literate than that and know how to save and invest.

Since the goal of MMM, and by extension this forum, is to retire early, holding on to a mortgage (with the caveats listed above) is a smart strategy. Mortgages, if managed correctly, are a powerful tool for building wealth. The sooner you start investing, the faster compound interest will begin to do the heavy lifting. Waiting to invest until the mortgage is paid off simply means it's going to take longer, and you'll have to earn more money (i.e. work longer) to reach FIRE.

If you're on this forum, you're here to strategize so that you can at least reach FI efficiently. Ignoring the leverage a good mortgage creates over the imagined way it's going to "feel" to "kill the mortgage" before filling every other investment option makes so little sense that the blowback continues to surprise me.

Again, I don't believe this discussion is necessary in this group, but the recent scorn that's been directed my way is ironic, given that it's happening on this forum.

For the love of Dog, can we send this discussion back to the DPOYM thread, where both sides of the question are addressed? 

arcturus

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Re: Race from $2M to $4M...and Beyond!
« Reply #7395 on: December 29, 2023, 10:15:46 AM »
I think we're in violent agreement on the topic of a mortgage being a valuable tool for building wealth, which I have done, and continue to do, as I still owe (too much IMO) on my current house.   I understand my topic has been voted off the island.  If I need advice on said topic again, I will promptly move it to DPOYM with haste!  Topic closed.

In the spirit of moving to other topics, November and December have certainly been a breath of fresh air -- have they not?   Allowing me to close the year at ~$2.6 invested and ~$3.2 with home equity (may still be slightly conservative on the home equity estimate in this crazy RE market, where pricing your home seems to be more art than science).  When I look back at my annual goals, I am almost exactly 1 year behind now.  But given the depth of 2022, I'll take it for sure and its better than I would have anticipated.   

I trust that everyone on this thread has also had some really positive moves over the past 2 months....here's to continued positive movement in 2024!

farmecologist

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Re: Race from $2M to $4M...and Beyond!
« Reply #7396 on: December 29, 2023, 01:57:32 PM »
FFS, I've been meaning to follow up on this, but I'm doing a "forum lite" week, as we're on a trip. The response above is so off the mark that apparently now is the time to elaborate.

As I mentioned upthread, I believe this topic is less of a concern for this group. Frankly, though some believe one should always have a mortgage, I do not fully subscribe to that theory, particularly for the folks racing from $2M to $4M...and Beyond!

The reason to hold a long, low, fixed-rate rate mortgage on an affordable home, in a country where mortgages are tax-advantaged, is that it allows you to invest in equities which will compound, resulting in a higher net worth faster than paying off the mortgage before maxing out every other investment option first.

The average shlub is assumed to be an idiot who will blow every spendable cent. (See: Dave Ramsey or Suze Orman for endless examples.) These people may never have the means to retire, let alone early. For them, the goal of paying off the mortgage is not unreasonable. At least they'll have something.

Mustachians are smarter more financially literate than that and know how to save and invest.

Since the goal of MMM, and by extension this forum, is to retire early, holding on to a mortgage (with the caveats listed above) is a smart strategy. Mortgages, if managed correctly, are a powerful tool for building wealth. The sooner you start investing, the faster compound interest will begin to do the heavy lifting. Waiting to invest until the mortgage is paid off simply means it's going to take longer, and you'll have to earn more money (i.e. work longer) to reach FIRE.

If you're on this forum, you're here to strategize so that you can at least reach FI efficiently. Ignoring the leverage a good mortgage creates over the imagined way it's going to "feel" to "kill the mortgage" before filling every other investment option makes so little sense that the blowback continues to surprise me.

Again, I don't believe this discussion is necessary in this group, but the recent scorn that's been directed my way is ironic, given that it's happening on this forum.

For the love of Dog, can we send this discussion back to the DPOYM thread, where both sides of the question are addressed?

I'm assuming the "scorn" you mentioned was because of my response.  No disrespect, but I disagree with many of your views on mortgages, and in my view you have come off a bit biased in the past in other threads.  However, that is ok...we can disagree.

My largest quibble regarding mortgages post-retirement is the fact you need "income" to service the debt...and that can affect many things, most notably engineering income for ACA benefits, etc...  Like I have mentioned many times, I'll pretty much always vouch for simplicity in finances, especially in early retirement. 

But yeah...let's move this over to the mortgage-specific threads.  I'd vote for the PYOM thread...haha.


farmecologist

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Re: Race from $2M to $4M...and Beyond!
« Reply #7397 on: December 29, 2023, 02:04:40 PM »

In the spirit of moving to other topics, November and December have certainly been a breath of fresh air -- have they not?   Allowing me to close the year at ~$2.6 invested and ~$3.2 with home equity (may still be slightly conservative on the home equity estimate in this crazy RE market, where pricing your home seems to be more art than science).  When I look back at my annual goals, I am almost exactly 1 year behind now.  But given the depth of 2022, I'll take it for sure and its better than I would have anticipated.   

I trust that everyone on this thread has also had some really positive moves over the past 2 months....here's to continued positive movement in 2024!

Yep...the stock market moves over the last couple months have been nothing short of extraordinary, especially since many didn't expect it.  JPOW's hint of rate cuts were a face punch to the bears.  Since yields should be dropping next year, our holdings in Vanguard Wellesley should be well positioned as well.

I also actively trade stocks, which I'll admit isn't for the feint of heart.  However, it is a side gig hobby for me at this point, and I hit "multi baggers" in a couple holdings ( ALT for one ).   

All in all, this boosted us up to around 3.4 invested...and around 3.9 including the paid off house.   Just about at the "and beyond" threshold!

Fomerly known as something

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Re: Race from $2M to $4M...and Beyond!
« Reply #7398 on: December 29, 2023, 02:17:26 PM »
FFS, I've been meaning to follow up on this, but I'm doing a "forum lite" week, as we're on a trip. The response above is so off the mark that apparently now is the time to elaborate.

As I mentioned upthread, I believe this topic is less of a concern for this group. Frankly, though some believe one should always have a mortgage, I do not fully subscribe to that theory, particularly for the folks racing from $2M to $4M...and Beyond!

The reason to hold a long, low, fixed-rate rate mortgage on an affordable home, in a country where mortgages are tax-advantaged, is that it allows you to invest in equities which will compound, resulting in a higher net worth faster than paying off the mortgage before maxing out every other investment option first.

The average shlub is assumed to be an idiot who will blow every spendable cent. (See: Dave Ramsey or Suze Orman for endless examples.) These people may never have the means to retire, let alone early. For them, the goal of paying off the mortgage is not unreasonable. At least they'll have something.

Mustachians are smarter more financially literate than that and know how to save and invest.

Since the goal of MMM, and by extension this forum, is to retire early, holding on to a mortgage (with the caveats listed above) is a smart strategy. Mortgages, if managed correctly, are a powerful tool for building wealth. The sooner you start investing, the faster compound interest will begin to do the heavy lifting. Waiting to invest until the mortgage is paid off simply means it's going to take longer, and you'll have to earn more money (i.e. work longer) to reach FIRE.

If you're on this forum, you're here to strategize so that you can at least reach FI efficiently. Ignoring the leverage a good mortgage creates over the imagined way it's going to "feel" to "kill the mortgage" before filling every other investment option makes so little sense that the blowback continues to surprise me.

Again, I don't believe this discussion is necessary in this group, but the recent scorn that's been directed my way is ironic, given that it's happening on this forum.

For the love of Dog, can we send this discussion back to the DPOYM thread, where both sides of the question are addressed?

I'm assuming the "scorn" you mentioned was because of my response.  No disrespect, but I disagree with many of your views on mortgages, and in my view you have come off a bit biased in the past in other threads.  However, that is ok...we can disagree.

My largest quibble regarding mortgages post-retirement is the fact you need "income" to service the debt...and that can affect many things, most notably engineering income for ACA benefits, etc...  Like I have mentioned many times, I'll pretty much always vouch for simplicity in finances, especially in early retirement. 

But yeah...let's move this over to the mortgage-specific threads.  I'd vote for the PYOM thread...haha.

And that is where personal finance is personal.  I had a paid off mortgage in 2016, it was meh.  I felt much better after in 2017 when on my next house I took out a mortgage and invested the rest.

I now have the largest mortgage I’ve ever had in my life by at least double, and it’s a 30 year one at that.  One I’m carrying into RE next year on year 4 of the mortgage.  I could pay it off tomorrow.  But it is a cost I’m willing to allocate for housing.  Of course, ACA and trying to manufacture low income so I can get a subsidy is not something I’m going to worry about, especially since I’m in this thread. 

ETA: and it’s DPOYM because we have been told not to post in the pay off your mortgage threads.

farmecologist

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Re: Race from $2M to $4M...and Beyond!
« Reply #7399 on: December 29, 2023, 02:31:34 PM »
FFS, I've been meaning to follow up on this, but I'm doing a "forum lite" week, as we're on a trip. The response above is so off the mark that apparently now is the time to elaborate.

As I mentioned upthread, I believe this topic is less of a concern for this group. Frankly, though some believe one should always have a mortgage, I do not fully subscribe to that theory, particularly for the folks racing from $2M to $4M...and Beyond!

The reason to hold a long, low, fixed-rate rate mortgage on an affordable home, in a country where mortgages are tax-advantaged, is that it allows you to invest in equities which will compound, resulting in a higher net worth faster than paying off the mortgage before maxing out every other investment option first.

The average shlub is assumed to be an idiot who will blow every spendable cent. (See: Dave Ramsey or Suze Orman for endless examples.) These people may never have the means to retire, let alone early. For them, the goal of paying off the mortgage is not unreasonable. At least they'll have something.

Mustachians are smarter more financially literate than that and know how to save and invest.

Since the goal of MMM, and by extension this forum, is to retire early, holding on to a mortgage (with the caveats listed above) is a smart strategy. Mortgages, if managed correctly, are a powerful tool for building wealth. The sooner you start investing, the faster compound interest will begin to do the heavy lifting. Waiting to invest until the mortgage is paid off simply means it's going to take longer, and you'll have to earn more money (i.e. work longer) to reach FIRE.

If you're on this forum, you're here to strategize so that you can at least reach FI efficiently. Ignoring the leverage a good mortgage creates over the imagined way it's going to "feel" to "kill the mortgage" before filling every other investment option makes so little sense that the blowback continues to surprise me.

Again, I don't believe this discussion is necessary in this group, but the recent scorn that's been directed my way is ironic, given that it's happening on this forum.

For the love of Dog, can we send this discussion back to the DPOYM thread, where both sides of the question are addressed?

I'm assuming the "scorn" you mentioned was because of my response.  No disrespect, but I disagree with many of your views on mortgages, and in my view you have come off a bit biased in the past in other threads.  However, that is ok...we can disagree.

My largest quibble regarding mortgages post-retirement is the fact you need "income" to service the debt...and that can affect many things, most notably engineering income for ACA benefits, etc...  Like I have mentioned many times, I'll pretty much always vouch for simplicity in finances, especially in early retirement. 

But yeah...let's move this over to the mortgage-specific threads.  I'd vote for the PYOM thread...haha.

And that is where personal finance is personal.  I had a paid off mortgage in 2016, it was meh.  I felt much better after in 2017 when on my next house I took out a mortgage and invested the rest.

I now have the largest mortgage I’ve ever had in my life by at least double, and it’s a 30 year one at that.  One I’m carrying into RE next year on year 4 of the mortgage.  I could pay it off tomorrow.  But it is a cost I’m willing to allocate for housing.  Of course, ACA and trying to manufacture low income so I can get a subsidy is not something I’m going to worry about, especially since I’m in this thread. 

ETA: and it’s DPOYM because we have been told not to post in the pay off your mortgage threads.

Hmm ok.  However, plenty of high net worth mustachians engineer their income for ACA subsidies.  Not sure where you got the idea they don't.  Having as little "income" as possible ( and fewer things to pay for...like mortgages ) is key do doing that.