Author Topic: DONT Payoff your Mortgage Club  (Read 156304 times)

Boofinator

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Re: DONT Payoff your Mortgage Club
« Reply #950 on: December 06, 2018, 07:28:51 PM »
The Walmart greeter was a bit of an exaggeration, but the tail risk is nonetheless real. And of course a lot depends on the job market; in the current market, you can probably get a decent job if you have a pulse, but there have been some rough job markets that coincided with a shitty stock market.

But that is one of the benefits of FIRE, no? If the stock market dropped 40% on year 2 of your retirement with 4% SWR and you're in that one Oh, Shit! monte carlo simulation, you wouldn't be need to go out immediately to get a job to make ends meet. You could cut back some of the discretionary spending for a couple years and casually search for a PT job that interests you. If the market stinks and it takes awhile that find that job, big deal.

Agreed, if you had discretionary money to cut. But, my point remains, if the point is to get enough and FIRE, many (especially given the rising mortgage rates) can get to 4% SWR sooner by paying off the mortgage shortly before retirement.

Telecaster

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Re: DONT Payoff your Mortgage Club
« Reply #951 on: December 07, 2018, 02:06:03 PM »
I agree with you that if we are looking at average expected returns, the best bet is to not pay the mortgage for a variety of reasons (including inflation). My comment was referring to minimizing tail risk in early retirement (which is the same objective of the 4% rule and cFIREsim), and looking at the tails one can see that deflationary events and poor stock returns (and shitty job markets) are correlated. (Do you think the unleveraged brokers were jumping out windows in 1929?)


Not quite.  BigErn's analysis that you linked to showing advantage of not having a mortgage in retirement assumed a inflation rate of just 2% for the next 60 years.  A couple problems with that assumption: 

-There has never been a 60 year period of 2% inflation in the United States

-There has never even been been a 30 year period of 2% inflation in the United States.

-Inflation is higher than 2% right now.

Is that an assumption you really want to use for retirement planning?   

It is easy to come up with scenarios where the 4% rule fails.  If something that has never happened before (like say 2% inflation for 30 years) happens in the future, then 4% won't work.    But that exercise is enormously unproductive, you can't protect against everything.   You should know within 7-10 years if the 4% rule is failing.  At that point there are a number of things you can do to mitigate, as tralfamadorian points out.   

On the flip side, instead of guarding against fantastically unlikely events (like 2% inflation for 30 years), keeping liquid assets outside the house provides protection against far more likely invents.   Divorce, for example.    Simple prudence dictates protecting yourself against more likely events before moving onto the unlikely. 

Boofinator

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Re: DONT Payoff your Mortgage Club
« Reply #952 on: December 08, 2018, 09:58:06 AM »
Inflation is a bit of a red herring in this conversation. The important things to consider are the returns on the mortgage relative to other investment assets, and the sequence of returns risk that comes with stock performance.

When you leverage assets into equities, the sequence of returns can blow up the portfolio (in both directions, positive and negative). This risk, when you consider the 4% rule (or cFIREsim), shows that in many cases (even with relatively low mortgage interest rates) you delay financial independence by holding on to the mortgage.

AlexMar

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Re: DONT Payoff your Mortgage Club
« Reply #953 on: December 08, 2018, 10:08:17 AM »
I didn't read the entire thread, but skimming the posts I don't see any discussion at all about asset protection.  When making a decision about paying off a mortgage, there is more to consider than just interest/ROI.

You should be aware of your States homestead laws and how that relates to protecting your assets.  Where I live (Florida) - we have no limit on homestead value/protection.  So every penny in your homestead is protected against creditors.  This could be bankruptcy, it could be an auto accident, it could be a lot of things.  And considering Mustachians often don't want to over insure, probably not carrying umbrella insurance, honestly, paying off a mortgage and protecting your funds may not always be a bad idea.

For example.  Maybe you have $200k remaining on your mortgage and $1M in stocks.  Pulling 20% of your stock portfolio to pay off the mortgage and protect these funds could very well be a good idea.

RWD

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Re: DONT Payoff your Mortgage Club
« Reply #954 on: December 08, 2018, 10:53:06 AM »
I didn't read the entire thread, but skimming the posts I don't see any discussion at all about asset protection.  When making a decision about paying off a mortgage, there is more to consider than just interest/ROI.

You should be aware of your States homestead laws and how that relates to protecting your assets.  Where I live (Florida) - we have no limit on homestead value/protection.  So every penny in your homestead is protected against creditors.  This could be bankruptcy, it could be an auto accident, it could be a lot of things.  And considering Mustachians often don't want to over insure, probably not carrying umbrella insurance, honestly, paying off a mortgage and protecting your funds may not always be a bad idea.

For example.  Maybe you have $200k remaining on your mortgage and $1M in stocks.  Pulling 20% of your stock portfolio to pay off the mortgage and protect these funds could very well be a good idea.

Most 401k plans are also protected from bankruptcy and lawsuits.

FIreDrill

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Re: DONT Payoff your Mortgage Club
« Reply #955 on: December 08, 2018, 10:58:56 AM »
I didn't read the entire thread, but skimming the posts I don't see any discussion at all about asset protection.  When making a decision about paying off a mortgage, there is more to consider than just interest/ROI.

You should be aware of your States homestead laws and how that relates to protecting your assets.  Where I live (Florida) - we have no limit on homestead value/protection.  So every penny in your homestead is protected against creditors.  This could be bankruptcy, it could be an auto accident, it could be a lot of things.  And considering Mustachians often don't want to over insure, probably not carrying umbrella insurance, honestly, paying off a mortgage and protecting your funds may not always be a bad idea.

For example.  Maybe you have $200k remaining on your mortgage and $1M in stocks.  Pulling 20% of your stock portfolio to pay off the mortgage and protect these funds could very well be a good idea.

Most 401k plans are also protected from bankruptcy and lawsuits.
Most states also have laws that give IRA's the same treatment as 401ks when it comes to lawsuits as well.

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FIreDrill

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Re: DONT Payoff your Mortgage Club
« Reply #956 on: December 08, 2018, 11:04:18 AM »


This risk, when you consider the 4% rule (or cFIREsim), shows that in many cases (even with relatively low mortgage interest rates) you delay financial independence by holding on to the mortgage.

I'd like to see how you ran this through cFIREsim.  I've also ran different scenarios through to compare mortgage vs invest and I found the opposite.  Accelerating mortgage payoff almost always resulted in a longer time to FI if you assumed sub 4% mortgage rates.

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Telecaster

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Re: DONT Payoff your Mortgage Club
« Reply #957 on: December 08, 2018, 05:19:23 PM »


This risk, when you consider the 4% rule (or cFIREsim), shows that in many cases (even with relatively low mortgage interest rates) you delay financial independence by holding on to the mortgage.

I'd like to see how you ran this through cFIREsim.  I've also ran different scenarios through to compare mortgage vs invest and I found the opposite.  Accelerating mortgage payoff almost always resulted in a longer time to FI if you assumed sub 4% mortgage rates.

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I _think_  the logic goes like this (correct me if I'm wrong please):  Let's say you have a $1MM portfolio.   Your monthly expenses except housing are $26K a year.   You can:

1) Take out a nice $250K mortgage at sub 4% interest, your payments would be about $14K per year, add in the $26K in other expenses and boom!  The math works.  You can retire on 4% of your portfolio. cFIREsim gives this a 96% chance of success.   

2)  Plunk down $250K cash for a house, leaving you with $750K.   Since you only need the $26K, you can retire on a WR of only 3.4%.    Since 3.4% is safer than 4% there is less chance you go bust.  And indeed, cFIREsim gives this a 100% chance of success.   

There is some logic there.  A 4% chance of going bust is not nothing, and the standard of living is the same (at least early on).   However, cFIREsim allows you to model holding a mortgage by fixing some spending, instead of letting it rise with inflation.    If you fix the $14K mortgage spending then the success rate of holding a mortgage goes to 100%.

I suppose in theory the 3.4% WR is still microscopically safer, but c'mon!   Putting a large portion of your money in a single, non-liquid asset is plenty risky, and it is flat foolish to ignore those risks in order to protect yourself from scenarios that have never happened in recorded US financial history.     


RWD

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Re: DONT Payoff your Mortgage Club
« Reply #958 on: December 08, 2018, 05:48:15 PM »
This risk, when you consider the 4% rule (or cFIREsim), shows that in many cases (even with relatively low mortgage interest rates) you delay financial independence by holding on to the mortgage.

I'd like to see how you ran this through cFIREsim.  I've also ran different scenarios through to compare mortgage vs invest and I found the opposite.  Accelerating mortgage payoff almost always resulted in a longer time to FI if you assumed sub 4% mortgage rates.

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I _think_  the logic goes like this (correct me if I'm wrong please):  Let's say you have a $1MM portfolio.   Your monthly expenses except housing are $26K a year.   You can:

1) Take out a nice $250K mortgage at sub 4% interest, your payments would be about $14K per year, add in the $26K in other expenses and boom!  The math works.  You can retire on 4% of your portfolio. cFIREsim gives this a 96% chance of success.   

2)  Plunk down $250K cash for a house, leaving you with $750K.   Since you only need the $26K, you can retire on a WR of only 3.4%.    Since 3.4% is safer than 4% there is less chance you go bust.  And indeed, cFIREsim gives this a 100% chance of success.   

There is some logic there.  A 4% chance of going bust is not nothing, and the standard of living is the same (at least early on).   However, cFIREsim allows you to model holding a mortgage by fixing some spending, instead of letting it rise with inflation.    If you fix the $14K mortgage spending then the success rate of holding a mortgage goes to 100%.

I suppose in theory the 3.4% WR is still microscopically safer, but c'mon!   Putting a large portion of your money in a single, non-liquid asset is plenty risky, and it is flat foolish to ignore those risks in order to protect yourself from scenarios that have never happened in recorded US financial history.     

House payments should not be considered the same as normal expenses with regards to the 4% rule because they don't increase with inflation (which you mentioned) and they are not indefinite. I don't think option 2) actually gives better results in cFIREsim. But at this point in either case 1) or 2) you are already well below the 4% rule.

muckety_muck

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Re: DONT Payoff your Mortgage Club
« Reply #959 on: December 08, 2018, 07:35:48 PM »
We have just over 11 years left on a 15 yr mortgage at 3%. We're not in any hurry to pay it off.

But - The mortgage payment will be a BEAST if we FIRE... so we may pay it off by then. Not sure. Have to look at what else we will have as income (rentals, etc).


AlexMar

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Re: DONT Payoff your Mortgage Club
« Reply #960 on: December 08, 2018, 08:12:32 PM »
I didn't read the entire thread, but skimming the posts I don't see any discussion at all about asset protection.  When making a decision about paying off a mortgage, there is more to consider than just interest/ROI.

You should be aware of your States homestead laws and how that relates to protecting your assets.  Where I live (Florida) - we have no limit on homestead value/protection.  So every penny in your homestead is protected against creditors.  This could be bankruptcy, it could be an auto accident, it could be a lot of things.  And considering Mustachians often don't want to over insure, probably not carrying umbrella insurance, honestly, paying off a mortgage and protecting your funds may not always be a bad idea.

For example.  Maybe you have $200k remaining on your mortgage and $1M in stocks.  Pulling 20% of your stock portfolio to pay off the mortgage and protect these funds could very well be a good idea.

Most 401k plans are also protected from bankruptcy and lawsuits.

Correct. But who said it has to be one or the other? Protecting $1M in a homestead is not comparable to $60k in an IRA.  Both are good options for asset protection.  But anyways, my point was simple and that is anyone having this debate about paying off a mortgage should also factor in asset protection. I know doctors who take asset protection very seriously with malpractice lawsuit concerns.  It's not the solution for everyone, but again, it is something to consider. I personally paid off my mortgage on a $1.4M home.  I like knowing I could FIRE by selling my house and that the money is protected, the security of that is a big deal for me. It also freed up a lot of cashflow that I aggressiveky invest.

RWD

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Re: DONT Payoff your Mortgage Club
« Reply #961 on: December 08, 2018, 09:38:11 PM »
I didn't read the entire thread, but skimming the posts I don't see any discussion at all about asset protection.  When making a decision about paying off a mortgage, there is more to consider than just interest/ROI.

You should be aware of your States homestead laws and how that relates to protecting your assets.  Where I live (Florida) - we have no limit on homestead value/protection.  So every penny in your homestead is protected against creditors.  This could be bankruptcy, it could be an auto accident, it could be a lot of things.  And considering Mustachians often don't want to over insure, probably not carrying umbrella insurance, honestly, paying off a mortgage and protecting your funds may not always be a bad idea.

For example.  Maybe you have $200k remaining on your mortgage and $1M in stocks.  Pulling 20% of your stock portfolio to pay off the mortgage and protect these funds could very well be a good idea.

Most 401k plans are also protected from bankruptcy and lawsuits.

Correct. But who said it has to be one or the other? Protecting $1M in a homestead is not comparable to $60k in an IRA.  Both are good options for asset protection.  But anyways, my point was simple and that is anyone having this debate about paying off a mortgage should also factor in asset protection. I know doctors who take asset protection very seriously with malpractice lawsuit concerns.  It's not the solution for everyone, but again, it is something to consider. I personally paid off my mortgage on a $1.4M home.  I like knowing I could FIRE by selling my house and that the money is protected, the security of that is a big deal for me. It also freed up a lot of cashflow that I aggressiveky invest.

It is not uncommon to end up with $1 million in a 401k either. I would much rather pay for umbrella insurance, malpractice insurance, or whatever is necessary for sufficient protection than tie up so much capital in my residence. A paid off house isn't perfectly safe either if you don't have the necessary insurance against some sort of "act of god" that destroys it (e.g. earthquake, flood).

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Re: DONT Payoff your Mortgage Club
« Reply #962 on: December 08, 2018, 09:57:07 PM »
Umbrella insurance is cheap.   If you have $1M in assets, you can afford it.


As for my mortgage, $180,001 on a 15 year 2.75% fixed rate basis.

13 years to go, balance now $157,002.52.

I'll knock off over $10,000 in principal paying the minimum next year.

FIreDrill

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Re: DONT Payoff your Mortgage Club
« Reply #963 on: December 08, 2018, 10:15:16 PM »
I didn't read the entire thread, but skimming the posts I don't see any discussion at all about asset protection.  When making a decision about paying off a mortgage, there is more to consider than just interest/ROI.

You should be aware of your States homestead laws and how that relates to protecting your assets.  Where I live (Florida) - we have no limit on homestead value/protection.  So every penny in your homestead is protected against creditors.  This could be bankruptcy, it could be an auto accident, it could be a lot of things.  And considering Mustachians often don't want to over insure, probably not carrying umbrella insurance, honestly, paying off a mortgage and protecting your funds may not always be a bad idea.

For example.  Maybe you have $200k remaining on your mortgage and $1M in stocks.  Pulling 20% of your stock portfolio to pay off the mortgage and protect these funds could very well be a good idea.

Most 401k plans are also protected from bankruptcy and lawsuits.

Correct. But who said it has to be one or the other? Protecting $1M in a homestead is not comparable to $60k in an IRA.  Both are good options for asset protection.  But anyways, my point was simple and that is anyone having this debate about paying off a mortgage should also factor in asset protection. I know doctors who take asset protection very seriously with malpractice lawsuit concerns.  It's not the solution for everyone, but again, it is something to consider. I personally paid off my mortgage on a $1.4M home.  I like knowing I could FIRE by selling my house and that the money is protected, the security of that is a big deal for me. It also freed up a lot of cashflow that I aggressiveky invest.
If your income is high enough to pay off a 1.4m home then we are probably picking at small issues but here are my thoughts.

1. It is very easy to shelter a TON of money into 401k/IRA accounts.  If we stopped investing now we would still have about 4.3M between our tax advantaged accounts by "traditional" retirement assuming historical inflation adjusted returns.

2.  If you did happen to sell the house and FIRE then that 1.4m is no longer protected as it is now not secured by your home.

3. Potentially a better solution would be to do a mega backdoor roth if possible.  That way the money is protected until you withdraw minimal amounts to fund FIRE. It sounds like you may already be doing this though.



Either way you are kicking ass. Even though it may not be the most optimal route for asset growth and protection.

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Boofinator

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Re: DONT Payoff your Mortgage Club
« Reply #964 on: December 10, 2018, 09:29:56 AM »


This risk, when you consider the 4% rule (or cFIREsim), shows that in many cases (even with relatively low mortgage interest rates) you delay financial independence by holding on to the mortgage.

I'd like to see how you ran this through cFIREsim.  I've also ran different scenarios through to compare mortgage vs invest and I found the opposite.  Accelerating mortgage payoff almost always resulted in a longer time to FI if you assumed sub 4% mortgage rates.

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I went through the cFIREsim results for paying off the mortgage early during FIRE in this thread: https://forum.mrmoneymustache.com/investor-alley/stop-saying-it-is-not-mathematically-correct-to-pay-off-your-mortgage-early!/msg2181733/#msg2181733. This applies to someone about to enter FIRE or in FIRE, not someone in the accumulation stage, when the quickest way to FI is to use the mortgage to leverage into equities.

Note that there are a lot of factors that affect this decision, only a few of which I touched on here (mortgage interest rate, loan-to-portfolio ratio, and years remaining on loan). Note also that the math may change the decision point during FIRE (it might state to keep the mortgage a the beginning, but depending on how things go it might be advantageous later on to pay off the mortgage).

AlexMar

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Re: DONT Payoff your Mortgage Club
« Reply #965 on: December 11, 2018, 09:45:08 AM »
I didn't read the entire thread, but skimming the posts I don't see any discussion at all about asset protection.  When making a decision about paying off a mortgage, there is more to consider than just interest/ROI.

You should be aware of your States homestead laws and how that relates to protecting your assets.  Where I live (Florida) - we have no limit on homestead value/protection.  So every penny in your homestead is protected against creditors.  This could be bankruptcy, it could be an auto accident, it could be a lot of things.  And considering Mustachians often don't want to over insure, probably not carrying umbrella insurance, honestly, paying off a mortgage and protecting your funds may not always be a bad idea.

For example.  Maybe you have $200k remaining on your mortgage and $1M in stocks.  Pulling 20% of your stock portfolio to pay off the mortgage and protect these funds could very well be a good idea.

Most 401k plans are also protected from bankruptcy and lawsuits.

Correct. But who said it has to be one or the other? Protecting $1M in a homestead is not comparable to $60k in an IRA.  Both are good options for asset protection.  But anyways, my point was simple and that is anyone having this debate about paying off a mortgage should also factor in asset protection. I know doctors who take asset protection very seriously with malpractice lawsuit concerns.  It's not the solution for everyone, but again, it is something to consider. I personally paid off my mortgage on a $1.4M home.  I like knowing I could FIRE by selling my house and that the money is protected, the security of that is a big deal for me. It also freed up a lot of cashflow that I aggressiveky invest.
If your income is high enough to pay off a 1.4m home then we are probably picking at small issues but here are my thoughts.

1. It is very easy to shelter a TON of money into 401k/IRA accounts.  If we stopped investing now we would still have about 4.3M between our tax advantaged accounts by "traditional" retirement assuming historical inflation adjusted returns.

2.  If you did happen to sell the house and FIRE then that 1.4m is no longer protected as it is now not secured by your home.

3. Potentially a better solution would be to do a mega backdoor roth if possible.  That way the money is protected until you withdraw minimal amounts to fund FIRE. It sounds like you may already be doing this though.



Either way you are kicking ass. Even though it may not be the most optimal route for asset growth and protection.

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As much as I like retirement accounts and the protection they afford, aren't we talking about retiring early?  Having so much funds in an account I can't touch until I'm 60 doesn't make a lot of sense to me.  I have them funded at "typical" levels which is $12,500/yr for my SIMPLE and $5500 for my traditional IRA.  Even at current funding and projected returns, based on my age, they are already funded enough for when I'm 60.  I project about $2.5M which is probably too much as it is.  Though I'll continue to fund them for a few more years.  I do use them for asset protection as well.  And again, my point was that asset protection should only be considered when contemplating paying off a mortgage, but not necessarily a rule.

If I had a 2.75% mortgage with only $150k on it like some folks here, I probably wouldn't be in a hurry to pay it off either.  Though and I am very much a proponent of being debt free, sub 3% is really, really cheap money.
« Last Edit: December 11, 2018, 09:47:20 AM by AlexMar »

sherr

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Re: DONT Payoff your Mortgage Club
« Reply #966 on: December 11, 2018, 10:44:20 AM »
As much as I like retirement accounts and the protection they afford, aren't we talking about retiring early?  Having so much funds in an account I can't touch until I'm 60 doesn't make a lot of sense to me.

But you can touch them (without penalty) before 60.

If you go the "Roth Pipeline" route you pretty much only need 5 years' expenses in taxable accounts and/or Roth contributions.

AlexMar

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Re: DONT Payoff your Mortgage Club
« Reply #967 on: December 12, 2018, 08:42:48 AM »
As much as I like retirement accounts and the protection they afford, aren't we talking about retiring early?  Having so much funds in an account I can't touch until I'm 60 doesn't make a lot of sense to me.

But you can touch them (without penalty) before 60.

If you go the "Roth Pipeline" route you pretty much only need 5 years' expenses in taxable accounts and/or Roth contributions.

That's interesting.  Not something I was familiar with.  Now, can you tell me how I can put $200k/year in earnings in to an IRA so I can do this?  At the moment, at least to the best of my knowledge (always happy to learn more) - I can only put $18,000 or so in to my IRA's annually.

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Re: DONT Payoff your Mortgage Club
« Reply #968 on: December 12, 2018, 09:53:51 AM »
As much as I like retirement accounts and the protection they afford, aren't we talking about retiring early?  Having so much funds in an account I can't touch until I'm 60 doesn't make a lot of sense to me.

But you can touch them (without penalty) before 60.

If you go the "Roth Pipeline" route you pretty much only need 5 years' expenses in taxable accounts and/or Roth contributions.

That's interesting.  Not something I was familiar with.  Now, can you tell me how I can put $200k/year in earnings in to an IRA so I can do this?  At the moment, at least to the best of my knowledge (always happy to learn more) - I can only put $18,000 or so in to my IRA's annually.
It isn't that complicated - you max your tax advantaged accounts to the extent possible, then invest in taxable. At an income that allows you to put $200K/year into investments, you almost certainly want to favor Traditional over Roth whenever you can. Depending on your situation, you might have:

401K/403B/TSP - 19K / year max (2019)
457B (available to a lot of teachers / government workers) - another 19K
IRA - 6K (depending on income may have to be Roth - under current law, if you're careful you can always make Roth IRA contributions, either straight-forwardly or via the backdoor)

Then your employer might have a 401a in addition to all of the above - often a non-optional fixed percentage goes into there. Then your 401K might support the Mega-backdoor Roth technique to get you up to the $56K limit.

Does any of your income come in the form of a side-business? Then up to another $56K into a solo 401K or SEP-IRA. If you have employees in your side business, do your homework on options. If you've got a large side business, you might even start a defined-benefit plan.

All of these numbers are per person if you're married. OK, 401K and the like are per working person. A lot of them also depend on the particulars of your employer's retirement plans, so there is no getting out of doing your homework.

dandarc

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Re: DONT Payoff your Mortgage Club
« Reply #969 on: December 12, 2018, 09:56:12 AM »
At that income, you might want to check out whitecoatinvestor.com - targeted at doctors, but has a lot of ideas that apply to pretty much anyone with a high income.

AlexMar

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Re: DONT Payoff your Mortgage Club
« Reply #970 on: December 13, 2018, 06:48:21 AM »
As much as I like retirement accounts and the protection they afford, aren't we talking about retiring early?  Having so much funds in an account I can't touch until I'm 60 doesn't make a lot of sense to me.

But you can touch them (without penalty) before 60.

If you go the "Roth Pipeline" route you pretty much only need 5 years' expenses in taxable accounts and/or Roth contributions.

That's interesting.  Not something I was familiar with.  Now, can you tell me how I can put $200k/year in earnings in to an IRA so I can do this?  At the moment, at least to the best of my knowledge (always happy to learn more) - I can only put $18,000 or so in to my IRA's annually.
It isn't that complicated - you max your tax advantaged accounts to the extent possible, then invest in taxable. At an income that allows you to put $200K/year into investments, you almost certainly want to favor Traditional over Roth whenever you can. Depending on your situation, you might have:

401K/403B/TSP - 19K / year max (2019)
457B (available to a lot of teachers / government workers) - another 19K
IRA - 6K (depending on income may have to be Roth - under current law, if you're careful you can always make Roth IRA contributions, either straight-forwardly or via the backdoor)

Then your employer might have a 401a in addition to all of the above - often a non-optional fixed percentage goes into there. Then your 401K might support the Mega-backdoor Roth technique to get you up to the $56K limit.

Does any of your income come in the form of a side-business? Then up to another $56K into a solo 401K or SEP-IRA. If you have employees in your side business, do your homework on options. If you've got a large side business, you might even start a defined-benefit plan.

All of these numbers are per person if you're married. OK, 401K and the like are per working person. A lot of them also depend on the particulars of your employer's retirement plans, so there is no getting out of doing your homework.

I am the employer.  If I do a 401k, then I have to deal with all the fees associated (that's why I didn't create one and went with a SIMPLE) and I'd be pretty much the only one using it.  Plus I already have a SIMPLE IRA, can I even do both?  Right now I max out the SIMPLE through the company and also a personal traditional IRA.  I make too much for a Roth and the tax advantages are favorable for a traditional anyways, as you know.

I am married and I max out my wife's traditional IRA, too.

The info here about penalty free withdrawals and the backdoor Roth is new to me, so I am going to do some more reading on that and discuss it with my accountant.


AlexMar

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Re: DONT Payoff your Mortgage Club
« Reply #971 on: December 13, 2018, 06:51:24 AM »
At that income, you might want to check out whitecoatinvestor.com - targeted at doctors, but has a lot of ideas that apply to pretty much anyone with a high income.

I much prefer the strategies and approach of MMM regardless of my income.  It's timeless and useful.  I do read other sites, too.  But I like the "grounding" from a site like this that focuses a lot on frugality and I tend to relate better to the types of people here.

tralfamadorian

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Re: DONT Payoff your Mortgage Club
« Reply #972 on: December 13, 2018, 07:04:38 AM »
Are you eligible for a solo 401k? If so, there are no fees associated with them.

AlexMar

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Re: DONT Payoff your Mortgage Club
« Reply #973 on: December 13, 2018, 11:36:57 AM »
Are you eligible for a solo 401k? If so, there are no fees associated with them.

No, I have a lot of employees.  None of which took the SIMPLE IRA offer with matching.. Lol.  Oh well...  darn.  You want proof that people just don't understand the basics?  My office is it.

mtnman125

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Re: DONT Payoff your Mortgage Club
« Reply #974 on: December 14, 2018, 10:16:54 AM »
Are there any rules of thumb for choosing 10/15yr over a 30y?  Right now, the spread looks to be ~.6% (4.4% for 30, 3.8% for 10/15)

We'll be selling our current home this spring and relocating.  Netting ~$150k from sale.

New home will be $300-$350k, and trying to decide between 20% downpayment with 30y or 15y.  If we did 30y, we'd invest the difference between 15/30, and likely another $1k/mo with either mortgage.

We could put down larger downpayment and even look at a 10yr, but I think 15y might be the sweet spot.

Maxing all 401k/Roth/HSA, but very little left for taxable investing (driver of the move is to increase savings)

Thoughts?

RWD

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Re: DONT Payoff your Mortgage Club
« Reply #975 on: December 14, 2018, 10:44:02 AM »
There's a break even point that depends on how long you will keep the house. Longer means 30 year mortgage is better. You should do the calculations yourself (or use something like the NY Times calculator) but it usually works out to something like less than 10 years the shorter mortgage with lower interest rate is better.

Pizzabrewer

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Re: DONT Payoff your Mortgage Club
« Reply #976 on: December 14, 2018, 12:53:36 PM »
No, I have a lot of employees.  None of which took the SIMPLE IRA offer with matching.. Lol.  Oh well...  darn.  You want proof that people just don't understand the basics?  My office is it.

LOL.  Yup, the company I work for operates several hundred restaurants.  The vast majority of the employees are kitchen and waitstaff.  I'm not considered a HCE so I can max out my account.  But the several times I've had to contact HR about a 401k issue it was obvious my questions were completely foreign to them.  401k participation is low and I'm clearly the outlier.  Like you said, the vast majority don't understand the basics.

Based on what I've seen I'd bet my entire stache that there are several times more people with pay garnishments than those who contribute to their 401k. 

Telecaster

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Re: DONT Payoff your Mortgage Club
« Reply #977 on: December 14, 2018, 02:20:11 PM »
There's a break even point that depends on how long you will keep the house. Longer means 30 year mortgage is better. You should do the calculations yourself (or use something like the NY Times calculator) but it usually works out to something like less than 10 years the shorter mortgage with lower interest rate is better.

One thing to consider if the poster really does intend to move is something like a 7/1 ARM.   The interest rate is between a 15 and a 30-year.  But the loan is amortized over 30 years, so the monthly payments will be lower than either.   You have to be pretty sure you will move before the fixed period is over though. 

FIRE@50

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Re: DONT Payoff your Mortgage Club
« Reply #978 on: December 14, 2018, 02:26:57 PM »
There's a break even point that depends on how long you will keep the house. Longer means 30 year mortgage is better. You should do the calculations yourself (or use something like the NY Times calculator) but it usually works out to something like less than 10 years the shorter mortgage with lower interest rate is better.

One thing to consider if the poster really does intend to move is something like a 7/1 ARM.   The interest rate is between a 15 and a 30-year.  But the loan is amortized over 30 years, so the monthly payments will be lower than either.   You have to be pretty sure you will move before the fixed period is over though.
Really? You know what rates will be 7 years from now? Care to share?

Telecaster

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Re: DONT Payoff your Mortgage Club
« Reply #979 on: December 14, 2018, 02:37:08 PM »
I have no idea what rates will be in seven years.   That's exactly why a 7/1 ARM only makes sense if you are sure you are going to move.   The beauty of the 30-fixed is the extremely long period fixed at today's low rates.   But if you can't take advantage of that long time period, why pay extra?   

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #980 on: December 14, 2018, 05:59:40 PM »
There's a break even point that depends on how long you will keep the house. Longer means 30 year mortgage is better. You should do the calculations yourself (or use something like the NY Times calculator) but it usually works out to something like less than 10 years the shorter mortgage with lower interest rate is better.

One thing to consider if the poster really does intend to move is something like a 7/1 ARM.   The interest rate is between a 15 and a 30-year.  But the loan is amortized over 30 years, so the monthly payments will be lower than either.   You have to be pretty sure you will move before the fixed period is over though.
Really? You know what rates will be 7 years from now? Care to share?
I have no idea what rates will be in seven years.   That's exactly why a 7/1 ARM only makes sense if you are sure you are going to move.   The beauty of the 30-fixed is the extremely long period fixed at today's low rates.   But if you can't take advantage of that long time period, why pay extra?   
Why the snark, @FIRE@50? What do you mean by "Care to share?"

Icecreamarsenal

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Re: DONT Payoff your Mortgage Club
« Reply #981 on: December 14, 2018, 06:34:12 PM »
Dag I messed up and paid off the mortgage today.  I blame MMM's accountant.  Granted, he's already FIRE'd.

https://wealthyaccountant.com/2018/09/24/paying-off-the-mortgage-vs-investing-the-difference/

Should I take out a HELOC and invest in the market?

mrmoonymartian

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Re: DONT Payoff your Mortgage Club
« Reply #982 on: December 14, 2018, 07:15:25 PM »
Dang I messed up and paid off the mortgage today.  I blame MMM's accountant.  Granted, he's already FIRE'd.

https://wealthyaccountant.com/2018/09/24/paying-off-the-mortgage-vs-investing-the-difference/

Should I take out a HELOC and invest in the market?
The guy has a point. And that point is... after successfully timing the market, it's a good idea to pocket some winnings if there is some piddling 6-figure debt that is mildly annoying to your 8-figure magnificence.

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #983 on: December 14, 2018, 07:27:06 PM »
Dag I messed up and paid off the mortgage today.  I blame MMM's accountant.  Granted, he's already FIRE'd.

https://wealthyaccountant.com/2018/09/24/paying-off-the-mortgage-vs-investing-the-difference/

Should I take out a HELOC and invest in the market?
You could take out a HELOC, but a more straightforward way would to simply refinance.

mtnman125

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Re: DONT Payoff your Mortgage Club
« Reply #984 on: December 14, 2018, 08:27:51 PM »
There's a break even point that depends on how long you will keep the house. Longer means 30 year mortgage is better. You should do the calculations yourself (or use something like the NY Times calculator) but it usually works out to something like less than 10 years the shorter mortgage with lower interest rate is better.

Iíll take a look for that calculator. New home is in a great town walking/biking distance to schools, groceries, and close family. So I anticipate being there long term. 

The 15yr would have house paid off when daughter is in high school, but lower payment of 30y gives flexibility for one or both of us to go part time work at some point.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #985 on: December 15, 2018, 02:06:34 AM »
Dag I messed up and paid off the mortgage today.  I blame MMM's accountant.  Granted, he's already FIRE'd.

https://wealthyaccountant.com/2018/09/24/paying-off-the-mortgage-vs-investing-the-difference/

Should I take out a HELOC and invest in the market?
Sorry, if we can't comment on that other thread, comments like yours are not welcome here. Take it to the proper thead. Unless you're joking. In which case, welcome to the world of the enlightened.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #986 on: December 15, 2018, 10:01:09 AM »
Our mortgage just got paid off.  Although, it happened, cause I already paid too much in.  Otherwise, it had just ran it's course,

It was paid off in 10 years. 

We just sold our other home.  Planning to invest it.  Just have not hit those buttons. Posted an update for boarder, as it was suggested that we sell out.  Well, it happened.  Couldn't come at a better time, in our opinion.
Again, there's a thread for celebrating premature mortgage payoff and this is not it.

As to the "other home" update: if you're really posting for boarder42's benefit, why compose your post the way you did?

It seems unnecessarily antagonistic.

ACyclist

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Re: DONT Payoff your Mortgage Club
« Reply #987 on: December 15, 2018, 10:13:41 AM »
Our mortgage just got paid off.  Although, it happened, cause I already paid too much in.  Otherwise, it had just ran it's course,

It was paid off in 10 years. 

We just sold our other home.  Planning to invest it.  Just have not hit those buttons. Posted an update for boarder, as it was suggested that we sell out.  Well, it happened.  Couldn't come at a better time, in our opinion.
Again, there's a thread for celebrating premature mortgage payoff and this is not it.

As to the "other home" update: if you're really posting for boarder42's benefit, why compose your post the way you did?

It seems unnecessarily antagonistic.

Antagonistic.  I am so sorry, if it came off that way.  Not intended.  I followed his advice and am honestly looking for what the next step should be. 

I thought he was the author of the thread.  Just making conversation. 

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #988 on: December 15, 2018, 10:24:43 AM »
Our mortgage just got paid off.  Although, it happened, cause I already paid too much in.  Otherwise, it had just ran it's course,

It was paid off in 10 years. 

We just sold our other home.  Planning to invest it.  Just have not hit those buttons. Posted an update for boarder, as it was suggested that we sell out.  Well, it happened.  Couldn't come at a better time, in our opinion.
Again, there's a thread for celebrating premature mortgage payoff and this is not it.

As to the "other home" update: if you're really posting for boarder42's benefit, why compose your post the way you did?

It seems unnecessarily antagonistic.

Antagonistic.  I am so sorry, if it came off that way.  Not intended.  I followed his advice and am honestly looking for what the next step should be. 

I thought he was the author of the thread.  Just making conversation.
He was, but has since been banned for multiple forum decorum violations.  For those of us who considered him an integral part of this forum it is sad to not have him around, regardless of whether we agreed with 100% of his postings.

I think Dicey's point is that this thread was created for those of us who choose not to pay off our mortgage.  There are lots (LOTS) of additional threads dedicated to discussing the pro's & con's of this approach.  Unfortunately it attracts some posters who want to congratulate themselves for doing the opposite of the thread's stated purpose.

ACyclist

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Re: DONT Payoff your Mortgage Club
« Reply #989 on: December 15, 2018, 10:26:55 AM »
We rode ours to the end, after chatting with boarder

<exiting>

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #990 on: December 15, 2018, 10:36:03 AM »
Our mortgage just got paid off.  Although, it happened, cause I already paid too much in.  Otherwise, it had just ran it's course,

It was paid off in 10 years. 

We just sold our other home.  Planning to invest it.  Just have not hit those buttons. Posted an update for boarder, as it was suggested that we sell out.  Well, it happened.  Couldn't come at a better time, in our opinion.
Again, there's a thread for celebrating premature mortgage payoff and this is not it.

As to the "other home" update: if you're really posting for boarder42's benefit, why compose your post the way you did?

It seems unnecessarily antagonistic.

Antagonistic.  I am so sorry, if it came off that way.  Not intended.  I followed his advice and am honestly looking for what the next step should be. 

I thought he was the author of the thread.  Just making conversation.
Just making conversation with someone who is banned? If you really want him to know, you can compose a message, pm it to me and I will forward it to him. Otherwise, please take this topic to the other thread(s).

And yes, boarder42 did start this thread, at my suggestion. Seems people who were blithely celebrating paying off their mortgages, often at the expense of better options like saving enough to get their full employer match, had no tolerance for the possibility that their decisions were potentially sub-optimal. The mods asked us to lay off so this thread was born.

Boarder42 also started another great motivational thread. As 2018 wraps up, I fervently hope he reaches his goal.
https://forum.mrmoneymustache.com/throw-down-the-gauntlet/1mm-networth-by-the-end-of-2018/

And @ACyclist, your comment is about to cross with mine. I'm not asking you to leave, just please stay on topic.

ACyclist

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Re: DONT Payoff your Mortgage Club
« Reply #991 on: December 15, 2018, 10:51:40 AM »
I didn't know Boarder was banned.  That makes me sad.  I was in celebratory mode about selling off the rental.

Was waiting for him to reply to me thread in another place on the site.  LOL  We better get that removed. 

Sad.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #992 on: December 15, 2018, 10:57:06 AM »
I didn't know Boarder was banned.  That makes me sad.  I was in celebratory mode about selling off the rental.

Was waiting for him to reply to me thread in another place on the site.  LOL  We better get that removed. 

Sad.
Or you could let the mods know you'd like him back :-))

There's this thread, which he hopefully reads on occasion. https://forum.mrmoneymustache.com/off-topic/r-i-p-boarder42/150/

tralfamadorian

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Re: DONT Payoff your Mortgage Club
« Reply #993 on: December 15, 2018, 10:57:33 AM »
I'm also presuming that the first mortgage payoff person is trolling us. But for anyone else reading in the future to which it might be helpful: IMO fixed 30 year refinances are vastly superior to callable HELOCs for long term for stock market vs debt arbitrage.

And an on-topic question- unless something very expected happens in the next two weeks, 2018 has been a bust for me for buying property. I continue to doggedly check the numbers on all likely candidates I come across but nothing worked out this year. Simultaneously, while rates have dipped slightly the last month or so, overall they are still up ~1% over EOY 2017.

I just ran a quote at my favorite online lender, which gave me 5.255% APR in my target market. Against the total average stock market return of 10%, this still looks like a pretty good spread. But looking towards the future and presuming we will continue to see a regression to the mean, the choice becomes less clear. You know, I started with the previous then decided I was looking at this the wrong way. We say here all the time, 10% 10% 10% but really, what I'm interested in here as someone comparing 30yr fixed mortgage debt to the stock market, is rolling 30 year returns. Why should I look at average returns instead of rolling returns when I want an apples to apples comparison?

Taking a look at a chart of the rolling 30 year annual S&P returns here:


This chart makes me feel like chicken little for being uncomfortable with my potential 5.25% mortgage rate. There has never been a time in modern American history where the rolling 30 year average annual returns is less than a smidge under 8%.

And here is the chart of mortgage rates from the St Louis fed:


The data only goes back to the 70s but is still helpful. Note that the average rate is 8.08%.

What do you all think? What is the rate range where you would switch from long term minimum payments to lump sum payoff and why?

FIreDrill

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Re: DONT Payoff your Mortgage Club
« Reply #994 on: December 15, 2018, 12:13:10 PM »
Well, life happened and I disappeared for a while.  But now I'm back and with a mortgage bigger than ever! (Unfortunately)

We took an opportunity to move from our LCOL area to an area that we absolutely love... However, housing here is absolutely mind-blowingly stupid and I don't see it getting any better anytime soon.

Long story short... We moved and sold our house for 250k.  Relocated and bought a modest home that will fit us well for a long time, but at a price of around 650k.  We commuted a round trip time of 7-8 hours between the two of us for a while before we bought our house.  Now are combined round trip commute is about 2.5 hours.  Not the best commute but a hell of a lot better than before.  Other than the high costs, we absolutely love the home, location, and all the activities to do around here.  Our base incomes increased by about 20% so that should help to offset the housing costs a little.

Now for the fun stuff.... We now have a huge mortgage at a much higher interest rate of 4.75%.  I had to take a long hard look at our plan of attack when it comes to paying down versus investing but I came to the same conclusion as last time.  Max out retirement accounts and then hit the taxable brokerage accounts hard.  The pre-tax savings of retirement accounts is too good to pass up and I still feel the higher returns and flexibility of taxable investments works better for us than a guaranteed 4.75% return.

Savings will probably suffer as we get settled in, buy furniture, and get back to "normal", but we are on our way.

The good news is our income potential here is MUCH higher.  The transition took us from a 60% savings rate to an estimated 30% savings rate so we will see if that pays off in the next 5 years.

Glad to be back.  Time to stache.

A fun little update.... Moving to a better job market is definitely starting to pay off.

I just received an offer from another company for 20% higher base pay.  On top of that, the offer had RSU and Cash bonuses written into it for a total compensation increase of 40-50% depending on the cash bonus.

This means our total comp has had an estimated conservative increase of 45% between the two of us since moving from our LCOL area just over a year ago.  The best part is we have a pretty clear path to gain another 20-25% of base pay over the next 3 years which could put us back on a very quick path to FI regardless of our high mortgage.

It's been a rough ride but we are starting to see the light.

« Last Edit: December 15, 2018, 12:28:32 PM by FIreDrill »

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #995 on: December 15, 2018, 12:19:47 PM »
Wow!

DreamFIRE

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Re: DONT Payoff your Mortgage Club
« Reply #996 on: December 15, 2018, 01:21:33 PM »

But I live in a high COLA where $125k won't even buy you a garage.

You can get a decent house with an attached two car garage in a nice neighborhood in my area for $125,000.  Jump that up to about $160,000, and you have a lot of nice options.  A dreamhouse log house that I like on 9 acres of land nicely secluded by trees is $200,000.  It's too far of a drive for work and is not a practical choice for me, so the dream is cheap. lol  We get stuck with higher property taxes, though.

When I got my home loans around 16 and 25 years ago, not a cent of it was deductible because my standard deduction alone exceeded what I could have deducted otherwise at that time, despite the high mortgage rates at the time.

Boofinator

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Re: DONT Payoff your Mortgage Club
« Reply #997 on: December 17, 2018, 10:47:04 AM »
What do you all think? What is the rate range where you would switch from long term minimum payments to lump sum payoff and why?

First off, as most likely understand, there is no correct optimal answer to this question except in hindsight. The best we can do is study the past, and make the optimal choice based on those assumptions. And of course not everyone uses the same historical lens, which leads toward unique "right" answers for everyone. Now that that's out of the way....

The answer for me depends on investment timeframe.

If I am young, earning the big bucks, and early in my investment life (far from FI), I want to maximize expected returns. I'd probably tell my younger self to keep debt at up to around 10% to max out tax-deferred investments in equities, and maybe up to 5% for taxable accounts. The 10% would be my risk-taking attempt to maximize expected returns with the tax-deferred boost, while the 5% is lower than expected returns but understands the risk that if the economy tanks and the market tanks, I would still have to pay down that debt and might not have strong job prospects. For mortgage payments I might go slightly higher than 5% (maybe 7%), since it is a long-term debt instrument.

As I get closer to FI, the goal becomes less of maximizing returns to maximizing financial independence, and hence my risk tolerance decreases. I think it still makes sense to feed the fire with tax-deferred investments up to probably 8% or so (though by this time you really shouldn't have any debt anywhere near this high with the large taxable cash cushion), and for taxable I'd probably drop to 4% (my safe withdrawal rate). As for the mortgage, it would depend on the time remaining; the longer the remaining duration, the better chance of me holding onto a higher percentage rather than paying it off.

(The numbers might go up or down somewhat based on my feelings for current market and economy conditions.)

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #998 on: December 23, 2018, 01:50:49 PM »
In a perfect world, I would be posting this elsewhere on this forum, but the mods have spoken, so here I am, sharing these golden eggs with the enlightened. At least it's good confirmation. Feel free to share it far and wide, if you find a place that seems appropriate and not inflammatory. After all, the people celebrating their payoffs don't want to hear from the Debbie Downers like us, lol.

I think this Motley Fool article is so useful, I'm copying the entire text here and the link.

https://www.yahoo.com/finance/news/why-shouldn-apos-t-pay-124500544.html


Why You Shouldn't Pay Off Your Mortgage Early, Even If You Can
 
Sending in a monthly mortgage payment can be a hassle and a headache. It's probably your largest monthly payment, and it likely takes a good chunk out of your budget.
 
If you're tired of the bank being a co-owner on your home and want to stop sending in those payments every month, you may be tempted to try to pay off your mortgage early by sending in extra payments. Unfortunately, while it seems like a smart financial move, doing so can actually be a bad idea. Here's why.

1. There's a big opportunity cost to paying off your mortgage early.

Every dollar you put toward paying off your mortgage early is a dollar you can't use for anything else, such as saving up an emergency fund.

If you have no emergency fund because you put your extra money toward an early mortgage payoff, a single financial disaster could force you to take out costly loans. Or, if your mortgage hasn't been paid off in full yet,  an emergency could lead to foreclosure on your house if it means can't pay the mortgage later. While you could tap into the equity in your home using a home equity loan or line of credit to cover emergencies, getting these loans can be costly, time-consuming and you aren't guaranteed to get it.

Another opportunity cost is losing the chance to invest in the stock market. If you put all your extra cash toward a mortgage payoff, you're losing the chance to earn higher returns and benefit from compound growth by investing in the stock market. It's reasonable to expect around a 7% to 8% return if you invest in the broader market. Meanwhile, your mortgage rate is probably below 4.5% and may be much lower, so at most, you're likely getting a 4.5% return on any money you prepay to your mortgage.

You're better off doing something with your money that will most likely earn you close to double the return you'd get from paying off your home loan ahead of schedule. There's no pressure saying you have to beat your mortgage payment schedule.

2. You'll miss out on tax breaks.

If you itemize your taxes by taking specific deductions instead of claiming the standard deduction, you can deduct interest paid on your mortgage.  When you deduct mortgage interest, this reduces your taxable income for the year, meaning you may pay a less percent of your income in taxes if you fall into a lower tax bracket.

 If you took out your mortgage before December 15, 2017, you're eligible to deduct the cost of mortgage interest you pay on up to $1 million in mortgage debt. If you took out your loan after, you can deduct mortgage interest on up to $750,000 of indebtedness.

You give up that tax break each year  after your mortgage is paid off. Plus, if you're using money to pay your mortgage that you otherwise could've invested in a 401(k) or IRA, you're also giving up a tax break each year you could've gotten for retirement savings. And you don't have to itemize to claim these tax breaks for retirement investments, which means you can claim them even if you take the standard deduction.

If you spend $5,500 prepaying your mortgage instead of putting it into an IRA, you could miss out on a $1,210 tax break just from this alone if you're in the 22% tax bracket since you wouldn't have to pay the 22% tax on the $5,500 in income you deducted.

3. Inflation offsets savings in interest

Despite the fact you can earn better returns by investing than by paying off your mortgage early, some people still prefer to prepay their mortgage. This may be because of an aversion to debt, or a belief it's better to get the guaranteed return that comes from mortgage prepayment, since there's no guarantee invested money will grow.

The problem is, you need to factor in inflation when deciding if this strategy makes sense. Due to inflation, your mortgage effectively becomes cheaper to pay over time since the value of your money erodes but your mortgage payment stays the same (assuming you have a fixed-rate loan). If you have a monthly payment of $1,500 today, in 25 years, the $1,500 you'll pay toward your mortgage would be the equivalent of around $942 of today's dollars -- assuming inflation of 2% annually.

Since your mortgage payment is continually getting cheaper over time, it seldom makes sense to prepay it. Don't forget that all the interest savings you net from paying off the mortgage early are also reduced by inflation, making this even less of a good deal over time. If you save around $80,000 in interest by paying off a $300,000 4.5% mortgage in 21.5 years instead of 30 years, you've actually saved less than $50,000 when accounting for the fact you don't benefit from the interest savings for more than two decades.

Consider investing instead of paying off your mortgage early

If you want to make the smartest choice for your money, putting it into the market and building a diversified portfolio is the way to go. Over time, you'll likely earn better returns on your money, you will benefit from years of tax breaks, and the costs of your monthly mortgage payment will fall thanks to inflation.


AlexMar

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Re: DONT Payoff your Mortgage Club
« Reply #999 on: December 23, 2018, 07:33:02 PM »
With the standard deduction being so high, the tax breaks on mortgage interest is probably irrelevant to most people here.

"putting it into the market and building a diversified portfolio is the way to go."

So the author thinks "diversified" means having all of your money in the stock market?  To this day I don't really know anyone who says "Gosh, I sure wish my house wasn't paid off" nor do I know anyone taking out huge equity lines on their homes to throw it all in to the stock market.


I think the Motley Fool author has Captain Hindsight syndrome.  Though they do admit the stock market will "likely" have better returns....  Compared to your guaranteed return on your mortgage.