Author Topic: mortgage paid off - green light for FIRE just went ON  (Read 8919 times)

PeteD01

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mortgage paid off - green light for FIRE just went ON
« on: December 16, 2014, 01:32:17 PM »
Just paid off my mortgage.
Hunkered down for 19 months with a savings rate of 85%.
24 weeks to fill up the bucket to live off for the next two years and then it is FIRE.
There is is nothing financial in the way anymore

rocksinmyhead

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #1 on: December 16, 2014, 01:56:24 PM »
Wow!!! Congrats!

Chranstronaut

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #2 on: December 16, 2014, 01:58:58 PM »
WOOHOO! Way to go!

OddOne

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #3 on: December 16, 2014, 02:02:04 PM »
Winner! You are impressive!

Exflyboy

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #4 on: December 16, 2014, 02:02:47 PM »
Dayum!!!... WTG

Frank

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #5 on: December 16, 2014, 02:34:07 PM »
Welcome to the Paid-Off Mortgage Club, enjoy your stay!

OutBy40

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #6 on: December 16, 2014, 02:42:58 PM »
Just paid off my mortgage.
Hunkered down for 19 months with a savings rate of 85%.
24 weeks to fill up the bucket to live off for the next two years and then it is FIRE.
There is is nothing financial in the way anymore

Kick ass!  Well done, and a big congratulations. 

Jon_Snow

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #7 on: December 16, 2014, 04:01:32 PM »
Congrats... mortgage payoff set us off on a turbocharged path to FIRE as well.

brooklynmoney

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #8 on: December 16, 2014, 08:09:43 PM »
Super impressive accomplishment and savings rate!

arebelspy

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #9 on: December 16, 2014, 09:04:44 PM »
Badass.

Well done Pete!

In honor of your accomplishment, I'll post a gif of my favorite Pete, doing the same stroll I imagine you did after paying off the mortgage.  :)

I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
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SingleMomDebt

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #10 on: December 16, 2014, 09:30:47 PM »
Very Impressive!

SMCx3

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #11 on: December 16, 2014, 09:37:00 PM »
85% Savings Rate = Wow!

Dicey

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #12 on: December 16, 2014, 11:10:47 PM »
24 weeks to fill up the bucket to live off for the next two years and then it is FIRE.
Sorry, I'm not sure I'm positive I don't know what you mean by this, despite reading it several times. Do you have a source of income that begins in two years and you need to save for six months to tide yourself over? Would you care to elaborate, please?
Congrats on the loan payoff. That much my tiny brain understood.

PeteD01

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #13 on: December 17, 2014, 04:35:56 AM »
24 weeks to fill up the bucket to live off for the next two years and then it is FIRE.
Sorry, I'm not sure I'm positive I don't know what you mean by this, despite reading it several times. Do you have a source of income that begins in two years and you need to save for six months to tide yourself over? Would you care to elaborate, please?
Congrats on the loan payoff. That much my tiny brain understood.

You got it. We are at less than 1k cash at the moment and I am going to work for another 5 1/2 months to save enough to get us through the next two years. We have have a considerable investment in TIAA Traditional and either interest rates will go up during the next two years or it will have appreciated enough anyway after two years to reach the income goal I want to reach with these annuities. It is just part of my strategy of managing sequence of returns risk of our stock market investments.

Rural

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #14 on: December 17, 2014, 06:53:15 AM »
Congrats to you, Pete! Cutting out that (often order-of-magnitude) biggest expense really changes everything.

going2ER

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #15 on: December 17, 2014, 07:32:48 AM »
congrats on paying off your mortgage.

What a great savings rate, I want to be you when I grow up!

PeteD01

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #16 on: December 17, 2014, 08:43:35 AM »
Thanks everyone!

But I got to admit that the savings rate of 85% is not that impressive when considering our household income.
The savings rate came about by trying to keep our living expenses below projected FIRE income. The good news is that we managed to stay somewhat below the projected income.

Dicey

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #17 on: December 17, 2014, 12:44:35 PM »
24 weeks to fill up the bucket to live off for the next two years and then it is FIRE.
Sorry, I'm not sure I'm positive I don't know what you mean by this, despite reading it several times. Do you have a source of income that begins in two years and you need to save for six months to tide yourself over? Would you care to elaborate, please?
Congrats on the loan payoff. That much my tiny brain understood.

You got it. We are at less than 1k cash at the moment and I am going to work for another 5 1/2 months to save enough to get us through the next two years. We have have a considerable investment in TIAA Traditional and either interest rates will go up during the next two years or it will have appreciated enough anyway after two years to reach the income goal I want to reach with these annuities. It is just part of my strategy of managing sequence of returns risk of our stock market investments.
If I'm reading this correctly, you paid off your mortgage after you funded your investment accounts. If that's correct, my cheering just increased by at least one order of magnitude. So many "kill the mortgage" screamers do so at the expense of long-term savings. It's much smarter to save for FIRE or even ordinary retirement first and then kill the mortgage. I'd love to hear more about your strategy for managing sequence of returns risk.

PeteD01

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #18 on: December 17, 2014, 01:42:26 PM »
We are still in the process of investing with the maximum contribution going into our 403b's in 2015.
With a two year horizon, there was no better investment than the 4.5% mortgage interest we are guaranteed not to have to pay.
We are going to sell our house and will put most of the proceeds into the market when it happens but now there is no pressure to sell.
We have a roommate and that keeps the cost of ownership very low.
Paying off the mortgage instead of investing was already a way to manage sequence of return risk during the last two years.
Going forward, we will hopefully have enough cash to be able to wait before turning on the fixed (well, almost fixed - it is TIAA Trad) annuities.
The fixed annuities will pay enough to meet basic necessities thereby taking care of risk of returns.
We are also going to fully annuitize our qualified market investments.
This will fulfill the SEP requirements and, due to the quirks of the insanely progressive tax system in our retirement destination, will lead to much reduced taxes.
Annuity payments are taxed at a much lower rate and are not counted as income whereas withdrawals of qualified funds and pension/SS proceeds are.
This means that when my small pension and our SS payments eventually start it won't push our income into the higher brackets.
If everything works out as planned we will pay approximately US tax rates while living in Europe and will be able to build another little stash.
My small pension is in Euros and won't trigger windfall rules as it was funded prior to coming to the US and later on a voluntary basis.
This pension is our currency hedge.

That's it in a nutshell. (By the way, I am 52 years old)

Dan_at_Home

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #19 on: December 17, 2014, 11:11:50 PM »
shhh don't tell anyone you paid off your mortgage,

there is a group of mustachians on this forum who get angry when people say they paid off their mortgage because they want to keep the mortgage for 30 years and invest the money instead, they are very aggressive and repeatedly bring up the math over and over again.

that aside, congratulations on paying it off, I paid mine off in Feb and don't regret it at all.

arebelspy

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #20 on: December 17, 2014, 11:33:54 PM »

shhh don't tell anyone you paid off your mortgage,

there is a group of mustachians on this forum who get angry when people say they paid off their mortgage because they want to keep the mortgage for 30 years and invest the money instead, they are very aggressive and repeatedly bring up the math over and over again.

that aside, congratulations on paying it off, I paid mine off in Feb and don't regret it at all.

[Citation needed.]

Who are these people?

Certainly there are plenty of us that argue the math of keeping a mortgage when asked about what is "best," but I don't see anyone getting angry at someone paying off a mortgage or getting aggressive and bringing up the math "over and over again."

This thread is a good example - do you see any of that?  If not, it seems to me your claims are pretty baseless, and rather rude to take Pete's thread with the many congratulations off track with your random accusations.

/shrug

Sorry Pete, couldn't let that one go. :)
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
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Dicey

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #21 on: December 17, 2014, 11:46:33 PM »
shhh don't tell anyone you paid off your mortgage,

there is a group of mustachians on this forum who get angry when people say they paid off their mortgage because they want to keep the mortgage for 30 years and invest the money instead, they are very aggressive and repeatedly bring up the math over and over again.

that aside, congratulations on paying it off, I paid mine off in Feb and don't regret it at all.
There is also a group of mustachians who want to help others understand that paying off the mortgage at the expense of other savings can have profound negative consequences on net worth. You can always pay off your mortgage but you can't go back and make up for missed employer matches or Roth/401k contributions. You could also be potentially reducing the benefits of compound interest by favoring early (dare I say premature?) mortgage payoff.

This mustachian family used mortgages as leverage to help build wealth. Once we  achieved FI/RE, we purchased our current home for cash. We still debate whether or not that was the best move financially. It's true we have no mortgage now, but we still swear by them as a wealth building tool. Are we "angry"? Absolutely not. Life is too good these days to be angry about much of anything.

Dan_at_Home

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #22 on: December 18, 2014, 02:47:05 PM »
@ARS and @Diane_C

Ok, maybe "angry" is not the best word.  However, what really irks me is when someone on this forum declares they have paid off their mortgage, very often, someone chims in with an unsolicited lecture on how they should invest the money instead.
 
I understand that if the thread is directed to a debate as to which is better then such advice is appropriate.  Or if someone in the "Ask a mustachian" section asks for advice on which future route to take then again such advice is appropriate.

However, often it is the case, that there will be a thread where someone in the "Share your badassity section" or "Throw down the gauntlet" proudly stating their accomplishment of paying down their mortgage or plans they already made to paying it off in the next year, that a member of the "invest over mortgage crowd" will give a lecture even when the original poster never asked for one in the first place.  This is what I mean by "aggressive". These people who give the "invest over mortgage" advice may think they doing a noble service in these instances but, offering advice when it is not asked for is not helpful, it is just really annoying, in my opinion.  It is already pretty well known by this point that taking on the extra risk to keep a lower interest mortgage and invest the money instead comes out better in most cases, this is old news and does not need to repeated over and over again.

Here is an example: for this thread:
http://forum.mrmoneymustache.com/throw-down-the-gauntlet/mortgage-payoff-club!!/

The OPs initial optismism ("started a quest to pay off my mortgage! I even created a blog to document my journey.") The argument starts up after about just 5-6 posts.  Soon statements appear such as "Sorry ... I think this is a poor investment decision. Borrow at 3.5% fixed for 30years. Put the overpayments into the sp500" or "I believe you are hurting your financial balance sheet""My point is don't get hung up on the Dave Ramsey and other mantras that debt is bad".
A few posts later someone pleads for peace "Paying off a mortgage, if that's what someone wants to do, is an awesome accomplishment and deserves praise rather than criticism.  Save the face punches for people who really need them! "
But the criticism continues, but a lesser rate over time with phrases like: "IMHO,  paying off a mortgage is the equivalent or paying your rent 30 years in advance.  Why in the world would I ever do that.   If it is some psychological need simply put your money into a REIT account and label it 'paid off home.' ... Paying off a mortgage = wussassity,"

This even pops on the blog articles discussion, for example, the one below is from the last case study:

Dicey

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #23 on: December 19, 2014, 11:29:38 AM »
I think I understand your point, Dan, but there is a reason for the examples you cite. Getting out of debt and creating wealth are two very different things. Leveraged debt can help create wealth, therefore, *gasp* not all debt is bad debt. Yes, Virginia, there is such a thing as good debt, but it's hard to hear this message over the shouting.

The "kill all the debt first" people will not be able to retire as early (or ever) IF they kill their debt at the expense of saving and investing. This is an important distinction. It's an advanced, but not really all that difficult concept, just like compound interest. If you don't embrace and understand how these things work, your odds of reaching the goal are not in your favor. Those of us who have learned this really want to help others get it, too. Ours is the less popular and less obvious position, yet we tenaciously hang around, trying to help others get there, too.

This is not a how-to-dig-yourself-out-from-under-a-mountain-of-debt site (a la Dave Ramsey). It's about how to create enough wealth to allow you to be the master of your own carefully designed life. Big difference. The loudest cheers are for those who have figured it out and are now at least FI, if not FIRE. Killing the mortgage isn't even necessary to FIRE, but so many people just don't believe that. You paid off your mortgage? Okay, good for you. You retired today? Halle-fucking-lujah!

PeteD01

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #24 on: December 19, 2014, 01:59:34 PM »
The math dealing with paying off a mortgage early or not is ridiculously simple but doesn't give an answer about what to do.

I used to be leveraged to the hilt and that's why I became rather precipitously FI not too long ago and what helped with that is that I am an extremely unemotional investor.

Staying leveraged into retirement and carrying a mortgage on a property one lives in may make a lot of sense when the tax environment is favorable.

I'm looking at at a 40%+ tax bracket kicking in at around 40k taxable income and a rather low standard deductible and I will be living in Euroland. Carrying any $ denominated debt in the current environment would be insane.

Dan_at_Home

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #25 on: December 19, 2014, 02:50:22 PM »
The "kill all the debt first" people will not be able to retire as early (or ever) IF they kill their debt at the expense of saving and investing. This is an important distinction. It's an advanced, but not really all that difficult concept, just like compound interest. If you don't embrace and understand how these things work, your odds of reaching the goal are not in your favor. Those of us who have learned this really want to help others get it, too. Ours is the less popular and less obvious position, yet we tenaciously hang around, trying to help others get there, too.

Diane C it is true that often your method yields better results.  The issue I bring up deals with "tolerance" and respecting for different ideas and opinions from other forum members.

In the mustachian community there are universal bad traits that are always frowned upon such as borrowing money to buy a card or keeping high interest CC debt. 

Once one gets to the point where their only debt remaining is the mortgage debt, the mustachians are basically split off into different directions.  For example about 70% pay off the mortgage debt early and 30% keep it for as long as possible and invest to maximize their wealth (http://forum.mrmoneymustache.com/ask-a-mustachian/let%27s-settle-this-with-a-vote-invest-or-payoff-debts/). 

This has nothing to do with Dave Ramsey.  The issue is that this criticism from some with regards to keeping mortgage indicates a lack of tolerance for this other 70% that does things different than what you believe is the best way.  When you give your recommendations to people who don't ask for it or want it, you are implying "I am better than you".  This does nothing positive for the MMM community but just divides it further.  You say it is help people, but it is helpful under your beliefs not necessary others.  This approach does not convince the person to change, it only re-enforces their beliefs they already had.  They will simply dig their heels in further and stop listening to you (if you don't believe me about this read Dale Carnegie's "How to win friends and influence people").

You have to please understand that people will go about getting to FI in different ways.  In fact as the MMM group grows larger and larger, the diversity will only increase.  If you go around telling people that they will never reach FI unless they do it your way, this sounds like absolutism, where you saying "it is my way or no way".  Clearly this is incorrect because the founder of MMM himself prefers to not carry mortgage debt (i.e. see http://www.mrmoneymustache.com/2012/02/24/pay-down-the-mortgage-or-invest-more-a-winwin-question/ where he states "But now I operate on an all-cash basis. I have no mortgage on my primary house, or the rental house, and I avoiding the temptation to borrow to expand my investments further ... My analytical side knows that I could make much more income through leverage, but sometimes you can afford the analytical side be damned. " )

With regards to which strategy is best:
He states "deciding whether you should pay off your mortgage as quickly as possible, or pump your surplus cash into stocks and other investments ... But there is still some good news: itís a win/win question since either of these strategies involve YOU putting away money in a productive place, which will tend to make you wealthier over time. The Mustachian Way is flexible enough that it will make us all rich relatively quickly, so there is no need to lock on to one particular strategy as The Only Way To Do It"

I am with MMM on this one, and I like this as the best approach for mustachism in general.  Forcing one way as the best way puts off future readers of MMM.  If MMM himself is flexible enough or tolerant enough to accept this, why can you not accept it?  I feel that as mustachians we should recognize universally bad decision and criticize them according i.e. borrowing money to buy a car or carrying balances on high interest CC debt.  However, once you get to final road towards FI of building wealth (i.e. where the only remaining debt is the mortage), we need to back off a bit and let person choose the route they are most comfortable with and encourage them as they are instead of trying to change them. 

The things you say about compound interest are absolutely true and right mathematically but real life is bit more complex that math alone.  Thus, according to you where it does the criticism stop?  Are you also going to criticize people who hold a different allocation of stocks to bonds as you do, or criticize them for having rentals over index funds or vice versa?  For example, someone who holds 75% stocks and 25% bonds, history tells us that they are not going to benefit as much as someone with 100% stocks mathematically speaking.  Are you going to demand that no one can be a so called "advanced" mustachian unless they hold 100% stocks from now on.

If future mustachians want to do it your way, they will either ask for the information directly or look it up since it is already pretty well documented at this point.  In summary, that is the point I am trying to make here.
« Last Edit: December 19, 2014, 02:57:28 PM by Dan_at_Home »

arebelspy

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #26 on: December 19, 2014, 03:02:15 PM »
We're all trying to help people here Dan.  No one is intolerant or disrespectful to those who weigh their options and decide to pay off their mortgage.  We just want to make sure they're making an educated decision first.
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #27 on: December 19, 2014, 05:14:16 PM »
Pete, so glad you reached your goals!  I think it is great to look at all the options & then decide what is best in your personal situation.   We love being debt free & will stay in our home hopefully forever.   

KBecks2

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #28 on: December 19, 2014, 05:39:44 PM »
Congrats Pete!

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #29 on: December 19, 2014, 05:42:32 PM »
shhh don't tell anyone you paid off your mortgage,

there is a group of mustachians on this forum who get angry when people say they paid off their mortgage because they want to keep the mortgage for 30 years and invest the money instead, they are very aggressive and repeatedly bring up the math over and over again.

that aside, congratulations on paying it off, I paid mine off in Feb and don't regret it at all.

ME TOO! I'm one of those screaming-meanie mortgage killers. Got my balance down to $58K and plan to pay it off within one year.

Mortgage Free Mike

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #30 on: December 19, 2014, 06:37:20 PM »
Awesome story, Pete! Paying off my mortgage was such a relief! Can't wait to hear more from you in 6 months... or 5 1/2 months! lol!

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #31 on: December 19, 2014, 06:47:36 PM »
Congrats on paying off your mortgage. I wasn't happy when you said 24 weeks until FIRE. I really struggled to do the math on how many months that was. Now that I've figured it out I feel better.

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #32 on: December 19, 2014, 07:16:02 PM »
Congrats on the payoff!

I'm curious if there's a blog post or a page on the forum somewhere that goes into the math a little more on mortgage payoff vs investing? Of course individual preferences matter, but I'm curious to learn more about this in general.

I'm pretty risk-averse, so I think I'd be happier paying off a mortgage but you never know!

sol

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #33 on: December 19, 2014, 07:35:23 PM »
I'm curious if there's a blog post or a page on the forum somewhere that goes into the math a little more on mortgage payoff vs investing

I'm right in the middle of a thread like that right now:  http://forum.mrmoneymustache.com/ask-a-mustachian/should-i-pay-off-my-mortgage-early/

Dee18

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #34 on: December 20, 2014, 06:46:15 AM »
Congrats Pete!  And thanks for the info re payout from an annuity being taxed at a different rate.  I wasn't aware of that.  I also have money in TIAA traditional so that's great news.

PeteD01

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Re: mortgage paid off - green light for FIRE just went ON
« Reply #35 on: December 20, 2014, 07:36:26 AM »
Congrats Pete!  And thanks for the info re payout from an annuity being taxed at a different rate.  I wasn't aware of that.  I also have money in TIAA traditional so that's great news.

That is not the case for qualified annuities in the US. It only applies in one country that I know of where annuitization does that. I will still have to pay the difference to US income tax to the IRS in the US on the payouts. This is not a way to get out of paying US income tax but management of a foreign tax liability. So unless you emigrate to Spain, it doesn't apply.