Author Topic: Mr. Math and paying off your mortgage  (Read 47818 times)

boarder42

  • Walrus Stache
  • *******
  • Posts: 7845
Re: Mr. Math and paying off your mortgage
« Reply #200 on: April 26, 2017, 08:39:15 AM »
"The Great Depression: A Diary" by Benjamin Roth is a good read to show how a prolonged financial crisis affects investors. Roth was an educated professional man and he was barely making it... year after year. Every day he would read the news or look at stock prices, see notices of foreclosures or liquidations, hear about bankruptcies, and every day he would write the same thing: "If only I had a little money!"

But he didn't. Nobody he knew had any money. Landlords lost their properties because their tenants couldn't pay rent. Investors had to sell stock just to pay daily expenses, stock which would have made them rich if only they could've held on for a little while longer - and they knew if they could only hold out, the price would recover. Agonizing, to have to sell under those conditions.

It was enlightening to see how all aspects of people's lives were affected by the depression: brilliant kids who were in college had to leave, women advertised themselves in the newspaper for marriage. Really. Talk about risk.

The next crisis won't look like 1929, and it won't look like 2008, because it's true the financial world is on guard against what has already happened. So it will look different. It will still come though, don't you think? Human nature and all.


the great depression was a perfect storm of things which many rules and regulations have been put into place to prevent from every happening again.  2008 is another example of a somewhat perfect storm... though it really wasnt that bad b/c of the speed of the recovery.  <--- some of that is likely contributed to previous rule/regulation changes .... then more rules and regulations were put in place to prevent 2008.  as we continue as a capitalist society we put in new rules and regulations to make sure money keeps growing b/c thats what runs the economy.  something will change and some crisis MAY happen again.  it MAY not.  the overwhelming likelihood though is we'll all be just fine if we stay invested. 

dont bet the short odds out of fear ... understand the whole picture and then if you want to protect against worst case you'd better be doing something like pizza steve and working til you get a 2% SWR b/c you know we dont know the future. 

and the catastrophies talked about here arent protected by owning a home and holding 30% bonds.

Wise Virgin

  • 5 O'Clock Shadow
  • *
  • Posts: 68
Re: Mr. Math and paying off your mortgage
« Reply #201 on: April 26, 2017, 08:48:20 AM »
"The Great Depression: A Diary" by Benjamin Roth is a good read to show how a prolonged financial crisis affects investors. Roth was an educated professional man and he was barely making it... year after year. Every day he would read the news or look at stock prices, see notices of foreclosures or liquidations, hear about bankruptcies, and every day he would write the same thing: "If only I had a little money!"

But he didn't. Nobody he knew had any money. Landlords lost their properties because their tenants couldn't pay rent. Investors had to sell stock just to pay daily expenses, stock which would have made them rich if only they could've held on for a little while longer - and they knew if they could only hold out, the price would recover. Agonizing, to have to sell under those conditions.

It was enlightening to see how all aspects of people's lives were affected by the depression: brilliant kids who were in college had to leave, women advertised themselves in the newspaper for marriage. Really. Talk about risk.

The next crisis won't look like 1929, and it won't look like 2008, because it's true the financial world is on guard against what has already happened. So it will look different. It will still come though, don't you think? Human nature and all.


the great depression was a perfect storm of things which many rules and regulations have been put into place to prevent from every happening again.  2008 is another example of a somewhat perfect storm... though it really wasnt that bad b/c of the speed of the recovery.  <--- some of that is likely contributed to previous rule/regulation changes .... then more rules and regulations were put in place to prevent 2008.  as we continue as a capitalist society we put in new rules and regulations to make sure money keeps growing b/c thats what runs the economy.  something will change and some crisis MAY happen again.  it MAY not.  the overwhelming likelihood though is we'll all be just fine if we stay invested. 

dont bet the short odds out of fear ... understand the whole picture and then if you want to protect against worst case you'd better be doing something like pizza steve and working til you get a 2% SWR b/c you know we dont know the future. 

and the catastrophies talked about here arent protected by owning a home and holding 30% bonds.
Actually there were winners in the Great Depression. Not people who worked for a living though. Not ordinary investors with ordinary capitalization. Winners were: government employees; holders of government bonds; owners of blue-chip stocks who could hold off selling until they recovered; people who held onto their cash money until the Depression had gone on for years... and then bought distressed properties. People who scooped up bargains too early lost their shirts.

I suppose it's natural to picture risk as how it would affect oneself, so I won't apologize for being haunted by the reality that women advertised themselves in the newspaper for marriage. Imagine an upper middle class woman, used to living comfortably, all her friends are like herself, all her expectations are little pleasures, having babies and running a household someday, maybe she is in college - and within the year she is advertising herself and even a drunken swamper in a speakeasy has to be considered as a potential mate, just because he has a job and she is out of choices. Advertising in her local newspaper. For everyone she knows to read.

For a woman over 50 it would be so much worse. I'm 52. Yeah... risk.

boarder42

  • Walrus Stache
  • *******
  • Posts: 7845
Re: Mr. Math and paying off your mortgage
« Reply #202 on: April 26, 2017, 09:00:15 AM »
"The Great Depression: A Diary" by Benjamin Roth is a good read to show how a prolonged financial crisis affects investors. Roth was an educated professional man and he was barely making it... year after year. Every day he would read the news or look at stock prices, see notices of foreclosures or liquidations, hear about bankruptcies, and every day he would write the same thing: "If only I had a little money!"

But he didn't. Nobody he knew had any money. Landlords lost their properties because their tenants couldn't pay rent. Investors had to sell stock just to pay daily expenses, stock which would have made them rich if only they could've held on for a little while longer - and they knew if they could only hold out, the price would recover. Agonizing, to have to sell under those conditions.

It was enlightening to see how all aspects of people's lives were affected by the depression: brilliant kids who were in college had to leave, women advertised themselves in the newspaper for marriage. Really. Talk about risk.

The next crisis won't look like 1929, and it won't look like 2008, because it's true the financial world is on guard against what has already happened. So it will look different. It will still come though, don't you think? Human nature and all.


the great depression was a perfect storm of things which many rules and regulations have been put into place to prevent from every happening again.  2008 is another example of a somewhat perfect storm... though it really wasnt that bad b/c of the speed of the recovery.  <--- some of that is likely contributed to previous rule/regulation changes .... then more rules and regulations were put in place to prevent 2008.  as we continue as a capitalist society we put in new rules and regulations to make sure money keeps growing b/c thats what runs the economy.  something will change and some crisis MAY happen again.  it MAY not.  the overwhelming likelihood though is we'll all be just fine if we stay invested. 

dont bet the short odds out of fear ... understand the whole picture and then if you want to protect against worst case you'd better be doing something like pizza steve and working til you get a 2% SWR b/c you know we dont know the future. 

and the catastrophies talked about here arent protected by owning a home and holding 30% bonds.
Actually there were winners in the Great Depression. Not people who worked for a living though. Not ordinary investors with ordinary capitalization. Winners were: government employees; holders of government bonds; owners of blue-chip stocks who could hold off selling until they recovered; people who held onto their cash money until the Depression had gone on for years... and then bought distressed properties. People who scooped up bargains too early lost their shirts.

I suppose it's natural to picture risk as how it would affect oneself, so I won't apologize for being haunted by the reality that women advertised themselves in the newspaper for marriage. Imagine an upper middle class woman, used to living comfortably, all her friends are like herself, all her expectations are little pleasures, having babies and running a household someday, maybe she is in college - and within the year she is advertising herself and even a drunken swamper in a speakeasy has to be considered as a potential mate, just because he has a job and she is out of choices. Advertising in her local newspaper. For everyone she knows to read.

For a woman over 50 it would be so much worse. I'm 52. Yeah... risk.

what risk... you throw around the word like it has meaning but you have defined what risk is.  there are many ways to mitigate the "risk" that comes with market volitiliy and many of them greatly curtail your FIRE date but many help your FIRE date and allow for greatly incrased spending as you age.  if your concern is risk from volitily it would be wise to throw out the old ideas around holding more bonds etc. b/c those increase the chances you'll work longer and/or run out of money if you live longer than your expectation. 

mitigating volatility risk with flexibiliy in spend/earning and a mortgage decreases risk of working longer and decreases risk of running out of money late in life the flexible spending/earning actually decreases risk of running out of money early in FIRE.  A paid off home all but guarantees working longer than necessary, and increases risk of money running out late in life.  it does decrease risk of running out of money earlier in FIRE.

the way i see it you have 3 major risks to FIRE that should be mitigated in some way

1. Staying employed longer than necessary
2. running out of money early in FIRE
3. Running out of money late in FIRE

whats your plan to mitigate each of these risks?

Wise Virgin

  • 5 O'Clock Shadow
  • *
  • Posts: 68
Re: Mr. Math and paying off your mortgage
« Reply #203 on: April 26, 2017, 09:16:38 AM »
Boarder42, I have no plan to FIRE because it is unlikely I will, realistically.

Specifically mitigating risk: I am delaying retirement until age 70 when Social Security reaches its maximum benefit. I am saving 30% of my income and investing it, in a balanced 60/40 allocation fund of stocks/bonds (Vanguard Wellington) as the main holding, and also growth holdings in REITs and global stocks.

I need the aggressive investments for growth because I may live a long time, I know I need to take risk. A savings account or CD is not going to do me any good.

Apropos of this thread's title, I've chosen not to pay off a mortgage or even get one. I'd rather have the money, and the value of that money compounded.

It's not safe to presume too much that everything will go well. The presumption could make a person less resilient to the shock of misfortune, like the upper middle class lady in my nightmare, who one day thought prudence was alarmist and unnecessary because "I'll marry a good husband and he'll take care of me."

Interestingly, holders of insurance policies also did remarkably well during the Great Depression. There was no cash, so insurance policies were valued and traded. Burial policies too.

BlueHouse

  • Magnum Stache
  • ******
  • Posts: 3585
  • Location: WDC
Re: Mr. Math and paying off your mortgage
« Reply #204 on: April 26, 2017, 03:28:15 PM »
"The Great Depression: A Diary" by Benjamin Roth is a good read to show how a prolonged financial crisis affects investors. Roth was an educated professional man and he was barely making it... year after year. Every day he would read the news or look at stock prices, see notices of foreclosures or liquidations, hear about bankruptcies, and every day he would write the same thing: "If only I had a little money!"

But he didn't. Nobody he knew had any money. Landlords lost their properties because their tenants couldn't pay rent. Investors had to sell stock just to pay daily expenses, stock which would have made them rich if only they could've held on for a little while longer - and they knew if they could only hold out, the price would recover. Agonizing, to have to sell under those conditions.

It was enlightening to see how all aspects of people's lives were affected by the depression: brilliant kids who were in college had to leave, women advertised themselves in the newspaper for marriage. Really. Talk about risk.

The next crisis won't look like 1929, and it won't look like 2008, because it's true the financial world is on guard against what has already happened. So it will look different. It will still come though, don't you think? Human nature and all.


the great depression was a perfect storm of things which many rules and regulations have been put into place to prevent from every happening again.  2008 is another example of a somewhat perfect storm... though it really wasnt that bad b/c of the speed of the recovery.  <--- some of that is likely contributed to previous rule/regulation changes .... then more rules and regulations were put in place to prevent 2008.  as we continue as a capitalist society we put in new rules and regulations to make sure money keeps growing b/c thats what runs the economy.  something will change and some crisis MAY happen again.  it MAY not.  the overwhelming likelihood though is we'll all be just fine if we stay invested. 

dont bet the short odds out of fear ... understand the whole picture and then if you want to protect against worst case you'd better be doing something like pizza steve and working til you get a 2% SWR b/c you know we dont know the future. 

and the catastrophies talked about here arent protected by owning a home and holding 30% bonds.
Actually there were winners in the Great Depression. Not people who worked for a living though. Not ordinary investors with ordinary capitalization. Winners were: government employees; holders of government bonds; owners of blue-chip stocks who could hold off selling until they recovered; people who held onto their cash money until the Depression had gone on for years... and then bought distressed properties. People who scooped up bargains too early lost their shirts.

I suppose it's natural to picture risk as how it would affect oneself, so I won't apologize for being haunted by the reality that women advertised themselves in the newspaper for marriage. Imagine an upper middle class woman, used to living comfortably, all her friends are like herself, all her expectations are little pleasures, having babies and running a household someday, maybe she is in college - and within the year she is advertising herself and even a drunken swamper in a speakeasy has to be considered as a potential mate, just because he has a job and she is out of choices. Advertising in her local newspaper. For everyone she knows to read.

For a woman over 50 it would be so much worse. I'm 52. Yeah... risk.

what risk... you throw around the word like it has meaning but you have defined what risk is. ?
B42, you have stopped the debate and you are pure argument now. Conversation stops When participants are unwilling to hear other perspectives. 

Wise Virgin

  • 5 O'Clock Shadow
  • *
  • Posts: 68
Re: Mr. Math and paying off your mortgage
« Reply #205 on: April 26, 2017, 05:18:34 PM »
I hope we don't stop talking about this. The subject is risk, and what does risk look like, and how can risks be mitigated. It's especially worthwhile to have a conversation like this now because the risk I personally see needing to be prepared against is about 5 years off. It's the perfect time to trim the course to meet it.

I see about 5 years of expanding growth and economic good times. Risky because people will forget (they are already forgetting) how necessary it is to be prudent. Now is the time to "skate where the puck is going to be," as they say in hockey.

Mitigating that risk means managing one's own expectations and reading, reading, reading to be educated in human nature and how it interacts with money. The past is relevant. Thematically, all financial crises are alike. We can learn to recognize them. Mr. Math probably can't help us much with that though.

boarder42

  • Walrus Stache
  • *******
  • Posts: 7845
Re: Mr. Math and paying off your mortgage
« Reply #206 on: April 26, 2017, 07:10:05 PM »
Way to just snip what I said. After I further defined what risks were out there blue house.

EscapeVelocity2020

  • Magnum Stache
  • ******
  • Posts: 3417
  • Age: 47
  • Location: Houston
    • EscapeVelocity2020
Re: Mr. Math and paying off your mortgage
« Reply #207 on: April 26, 2017, 08:13:07 PM »

mitigating volatility risk with flexibiliy in spend/earning and a mortgage decreases risk of working longer and decreases risk of running out of money late in life the flexible spending/earning actually decreases risk of running out of money early in FIRE.  A paid off home all but guarantees working longer than necessary, and increases risk of money running out late in life.  it does decrease risk of running out of money earlier in FIRE.

the way i see it you have 3 major risks to FIRE that should be mitigated in some way

1. Staying employed longer than necessary
2. running out of money early in FIRE
3. Running out of money late in FIRE

whats your plan to mitigate each of these risks?

These 'grey' discussions are what keeps the discussion alive.  I think we agree that the ways to mitigate risk all involve flexibility.  But to most, 'retirement' is an inflexible idea because they already have good, stable income and benefits, and don't want to replace even half of that if it involves work or depending on 100% equities for too much longer.  Also, from what I'm gathering anecdotally, online income is nosediving, so following in most blogger / YouTuber's footsteps is already a thing of the past.  So it really is, in the long term planning terms, a matter of accepting Wal-mart and McDonald entry level pay and work if you plan to supplement your income in 5-10 years.

So yeah, if it turns out that you feel like you are running under-plan early or late in ER, it may start with tightening the belt, but I'd predict that you're going back to a crap low-paying job sooner or later.  But at least you didn't work too long in that earlier, good pay and benefits job too long, right?

EnjoyIt

  • Handlebar Stache
  • *****
  • Posts: 1399
Re: Mr. Math and paying off your mortgage
« Reply #208 on: April 26, 2017, 08:55:30 PM »
This is getting interesting, this discussion regarding risk is very tough because everyone defines risk differently.

If you are an emotionless robot, then maybe boarder's 3 risks are accurate.  I would also add #4 into that list of risks losing your job and being forced to live off of depressed assets for a prolonged period of time.

Me personally I would rather work 1 extra year now for example at my inflated wages then have to work at McDonalds after retiring.  I am very comfortable mitigating that risk with an extra year of work.  Especially since my work is not unbearable.

Then there are other risks which are much more difficult to quantify.  For example the risk of stress and being able to not sleep well causing you health issues because the market becomes too volatile.  This is a real risk us non robots have to deal with. In all honesty health is one of my biggest priorities.  If I can use money to purchase better health with very little effort, then I think this is a well placed purchase. So how much could health cost me?  Is it that same 1 extra year of work I described above?  If so, then again, that is money very well placed and I am thrilled to lose a few percent off my returns to be able to fund my health.

You can't really understand your own emotions until you have experienced a significant downturn when all the news and the people you meet are spreading doom and gloom.  Especially when your own portfolio drops by several hundreds of thousands.  You may be aware that at some point in the future the markets will rise, at the same time the lose is staring you in your face.  Every month you are selling stocks that have lost a large chunk of their value and your wealth continues to decline.  That is some scary shit, and I am confident that my health will be affected if I am not properly prepared.  BTW, working at McDonalds will not decrease my stress.  It may diminish it a little, but after a month or two flipping burgers I think real doubt would start setting in.  Instead what I choose to do is make sure I have the right asset allocation.  I mitigate my risk by making sure I have enough bonds or CDs in my portfolio to survive several years without touching my equities.  Maybe even selling some bonds to balance back into those equities to make some significant profit.

When that next recession comes, and it will come, I don't want to struggle, I don't want to worry, I just want to keep on trucking and enjoying my life.  I sure as hell don't want to be stuck in a $7.50 and hour job when instead I can have a pleasant vacation in Tuscany.  I am very happy to spend an extra year working to secure that retirement with an appropriate asset allocation that meets my willingness, ability, and need to take risk.

boarder42

  • Walrus Stache
  • *******
  • Posts: 7845
Re: Mr. Math and paying off your mortgage
« Reply #209 on: April 27, 2017, 06:03:44 AM »
This is getting interesting, this discussion regarding risk is very tough because everyone defines risk differently.

If you are an emotionless robot, then maybe boarder's 3 risks are accurate.  I would also add #4 into that list of risks losing your job and being forced to live off of depressed assets for a prolonged period of time.

Me personally I would rather work 1 extra year now for example at my inflated wages then have to work at McDonalds after retiring.  I am very comfortable mitigating that risk with an extra year of work.  Especially since my work is not unbearable.

Then there are other risks which are much more difficult to quantify.  For example the risk of stress and being able to not sleep well causing you health issues because the market becomes too volatile.  This is a real risk us non robots have to deal with. In all honesty health is one of my biggest priorities.  If I can use money to purchase better health with very little effort, then I think this is a well placed purchase. So how much could health cost me?  Is it that same 1 extra year of work I described above?  If so, then again, that is money very well placed and I am thrilled to lose a few percent off my returns to be able to fund my health.

You can't really understand your own emotions until you have experienced a significant downturn when all the news and the people you meet are spreading doom and gloom.  Especially when your own portfolio drops by several hundreds of thousands.  You may be aware that at some point in the future the markets will rise, at the same time the lose is staring you in your face.  Every month you are selling stocks that have lost a large chunk of their value and your wealth continues to decline.  That is some scary shit, and I am confident that my health will be affected if I am not properly prepared.  BTW, working at McDonalds will not decrease my stress.  It may diminish it a little, but after a month or two flipping burgers I think real doubt would start setting in.  Instead what I choose to do is make sure I have the right asset allocation.  I mitigate my risk by making sure I have enough bonds or CDs in my portfolio to survive several years without touching my equities.  Maybe even selling some bonds to balance back into those equities to make some significant profit.

When that next recession comes, and it will come, I don't want to struggle, I don't want to worry, I just want to keep on trucking and enjoying my life.  I sure as hell don't want to be stuck in a $7.50 and hour job when instead I can have a pleasant vacation in Tuscany.  I am very happy to spend an extra year working to secure that retirement with an appropriate asset allocation that meets my willingness, ability, and need to take risk.

i'd say that risk 4 would be risk of earning another dollar in FIRE.  which is inline with you rather working another year to get a buffer than have to work at mcdonalds. I think there are about a billion other ways to make a dollar before going minimum wage at mcdonalds but if you're dead set on that it counteracts number 1 on the list ... but is a risk i'm ok with taking on b/c probability says i wont have to make another dollar or cut spending.

BlueHouse

  • Magnum Stache
  • ******
  • Posts: 3585
  • Location: WDC
Re: Mr. Math and paying off your mortgage
« Reply #210 on: April 27, 2017, 10:21:44 AM »
Way to just snip what I said. After I further defined what risks were out there blue house.
B42, this is a bit off topic, but I feel like we're just sniping now.   I don't generally have a problem with what you say, but I often am at odds with how you say it.  You tend to use absolutes and make comments that one way is the only way, or "do the math", implying that there is only one answer. 

Here's a recent quote from Maizeman.  See how nothing is ever "always" or "the only way" or "the right way"?  It acknowledges that people are different and have different needs.  If you could couch some of your statements with an understanding that your way is not the only way, without condescending by saying "if you want to be [emotional, stupid, wrong] then you can do xyz", I think many of our disagreements may go away. 

With MMMers the default assumption is often that we'll be living off significantly less annual income in FIRE than our annual income during the accumulation phase. This means we'd likely pay lower taxes in FIRE than our marginal rate today. That's the textbook definition of when traditional IRA/401k contributions are a better choice than Roth contributions.

The above is not a hard and fast rule that will work in every person's individual situation, but I think it does explain the general trend you are seeing.



FIreDrill

  • Handlebar Stache
  • *****
  • Posts: 1087
Re: Mr. Math and paying off your mortgage
« Reply #211 on: April 27, 2017, 11:47:15 AM »
Yes, risk is a very tricky topic because many people define or look at risk differently.  One of the main reasons I decided on 100% equities is because the risk of FIRE failure increases for my timeline if I were to add bonds to my portfolio.  This is simply because the lower returns that bonds given out over historical time periods.  This is one of the reasons I see bonds as a "drag" to my portfolio more than anything.

Many times we argue asset allocation when only looking at a 30 year time frame because shit, that's what the trinity study was based on.  Fortunately, many of us early retires are looking at being retired for 50-65 years.  Go us!  Because my retirement will most likely be for 50-65 years, I can not afford the long term "drag" that bonds will put on my portfolio.  Below is a couple cFIREsim simulations based on different asset allocations with .05% fees over a 50 year retirement timeline with a 4% withdrawal rate.

Equity/Bonds

100/0       91.84% success rate
85/15       88.78% success rate
75/25       85.71% success rate


This is the point when I realized that by holding bonds I was trading the risk of a FIRE failure for less portfolio volatility.  With my timeline, I do not see how bonds would help me at all with reaching FIRE sooner or staying FIRE'd longer.  Risk is a fun subject to discuss though, and if done correctly, the discussion gives others additional scenarios to consider.

boarder42

  • Walrus Stache
  • *******
  • Posts: 7845
Re: Mr. Math and paying off your mortgage
« Reply #212 on: April 27, 2017, 12:31:13 PM »
Yes, risk is a very tricky topic because many people define or look at risk differently.  One of the main reasons I decided on 100% equities is because the risk of FIRE failure increases for my timeline if I were to add bonds to my portfolio.  This is simply because the lower returns that bonds given out over historical time periods.  This is one of the reasons I see bonds as a "drag" to my portfolio more than anything.

Many times we argue asset allocation when only looking at a 30 year time frame because shit, that's what the trinity study was based on.  Fortunately, many of us early retires are looking at being retired for 50-65 years.  Go us!  Because my retirement will most likely be for 50-65 years, I can not afford the long term "drag" that bonds will put on my portfolio.  Below is a couple cFIREsim simulations based on different asset allocations with .05% fees over a 50 year retirement timeline with a 4% withdrawal rate.

Equity/Bonds

100/0       91.84% success rate
85/15       88.78% success rate
75/25       85.71% success rate


This is the point when I realized that by holding bonds I was trading the risk of a FIRE failure for less portfolio volatility.  With my timeline, I do not see how bonds would help me at all with reaching FIRE sooner or staying FIRE'd longer.  Risk is a fun subject to discuss though, and if done correctly, the discussion gives others additional scenarios to consider.

so then you add a mortgage to it and it further increases those numbers ... add in the variable spending of say 10% and those numbers get really good.... here is a look at someone who retires with 1.2MM and a 200k mortgage at 4% with 10% variable spending on the downside and no upward limit.  meaining they would have to decrease their non mortgage spending by 4k or find a way to earn 4k in down to bad market years. if they can go down 15% and earn just an extra 6k a few years or spend that little less it becomes 100% AA 100/0.  this is run over 40 years to not miss the down years. if you dont want the variable spending you would just save 25x whatever that rate is at 10% its 100k extra at 15% its 150k extra savings in this scenario.  <- thats not one for one the extra savings will likely end up turning out slightly better than variable spending.  but variable spending also gives upside potential <-  i wish you could fix the upside and say i wont spend over my initial for 10 years or 5 years etc. on cfiresim and see what happens but that feature isnt there.

10% - 98.13%
15% - 100%

FIreDrill

  • Handlebar Stache
  • *****
  • Posts: 1087
Re: Mr. Math and paying off your mortgage
« Reply #213 on: April 27, 2017, 01:18:16 PM »
Yes, risk is a very tricky topic because many people define or look at risk differently.  One of the main reasons I decided on 100% equities is because the risk of FIRE failure increases for my timeline if I were to add bonds to my portfolio.  This is simply because the lower returns that bonds given out over historical time periods.  This is one of the reasons I see bonds as a "drag" to my portfolio more than anything.

Many times we argue asset allocation when only looking at a 30 year time frame because shit, that's what the trinity study was based on.  Fortunately, many of us early retires are looking at being retired for 50-65 years.  Go us!  Because my retirement will most likely be for 50-65 years, I can not afford the long term "drag" that bonds will put on my portfolio.  Below is a couple cFIREsim simulations based on different asset allocations with .05% fees over a 50 year retirement timeline with a 4% withdrawal rate.

Equity/Bonds

100/0       91.84% success rate
85/15       88.78% success rate
75/25       85.71% success rate


This is the point when I realized that by holding bonds I was trading the risk of a FIRE failure for less portfolio volatility.  With my timeline, I do not see how bonds would help me at all with reaching FIRE sooner or staying FIRE'd longer.  Risk is a fun subject to discuss though, and if done correctly, the discussion gives others additional scenarios to consider.
but variable spending also gives upside potential <-  i wish you could fix the upside and say i wont spend over my initial for 10 years or 5 years etc. on cfiresim and see what happens but that feature isnt there.

10% - 98.13%
15% - 100%

Yep, one of the main reasons I plan on having a variable withdrawal strategy in FIRE is to diminish the risk of a failure, but most importantly, increase my potential spending if my portfolio grows out of control.

Currently I'm leaning towards a 4% yearly portfolio withdrawal with no ceiling limit and a floor limit of 3.5% of the initial portfolio amount.  Seems to be the best of both worlds from the research I have done.  A little flexibility goes a long way in FIRE.  I also have some business ideas that I may pursue which could really help my withdrawal strategy.

boarder42

  • Walrus Stache
  • *******
  • Posts: 7845
Re: Mr. Math and paying off your mortgage
« Reply #214 on: April 27, 2017, 02:20:35 PM »
There seems to be some individuals that are very worried about working to long. I got thinking about his and concluded people tend to talk past each other because situations are so different. I think most people view this question and related risk like Bob or Bill's scenario.

Example Bob:
$150,000 Income
$24,000 annual expense

Once Bob has reached a SWR of 4% it will only take 1 additional year to reach 3.1% and 3 additional year to reach 2.0%.

Example Bill:
$45,000 Income
$24,000 annual expense

Once Bill has reached a SWR of 4% it will take 2 additional years to reach 3.1% and 6 additional years to reach 2.0%.

If Bob likes his job why not work a little longer for a better safety margin, increased spending, increased giving, and leaving a larger legacy when he dies. $150,000 per year would be very difficult to replicate. He can't do is big corporate job part time.

If Bill hates his job why would he work longer when he could retire now? Besides he works in the trades and may start up a tile laying business in his spare time if he needs a little extra income.

so IF you're going to work that extra year to reach a 3.1% SWR why not keep with optimization and keep the mortgage too b/c you're already safe and now you can give MORE away and LEAVE a LARGER LEGACY. 

During no time has 3.1% failed with a mortgage or without but with the mortgage you'll be able to leave magnitudes more money if thats your goal. 

my wife and i fit something similar to case 1 ... and maybe we'll just work longer to live ultra luxurious lives .... its only one more year and one more year.... but thats kinda why this site is here to help you pull the plug. each extra year we work cuts or SWR for our basic needs already ultra luxurious life by .5% ...  or just let lifestyle creep.  have a FatFIRE... thats a new thing over at reddit now i hear.

i currently feel pulling the plug may be extremely hard for me with my golden handcuffs.  but we'll see if i can do it when the time comes.  .

man based on my math i could buy a new kitchen every single year if i worked an extra 3 years(20k).  but what would i do with all those kitchens? /sarcasm
« Last Edit: April 27, 2017, 02:26:21 PM by boarder42 »

EnjoyIt

  • Handlebar Stache
  • *****
  • Posts: 1399
Re: Mr. Math and paying off your mortgage
« Reply #215 on: April 27, 2017, 02:54:05 PM »
There seems to be some individuals that are very worried about working to long. I got thinking about his and concluded people tend to talk past each other because situations are so different. I think most people view this question and related risk like Bob or Bill's scenario.

Example Bob:
$150,000 Income
$24,000 annual expense

Once Bob has reached a SWR of 4% it will only take 1 additional year to reach 3.1% and 3 additional year to reach 2.0%.

Example Bill:
$45,000 Income
$24,000 annual expense

Once Bill has reached a SWR of 4% it will take 2 additional years to reach 3.1% and 6 additional years to reach 2.0%.

If Bob likes his job why not work a little longer for a better safety margin, increased spending, increased giving, and leaving a larger legacy when he dies. $150,000 per year would be very difficult to replicate. He can't do is big corporate job part time.

If Bill hates his job why would he work longer when he could retire now? Besides he works in the trades and may start up a tile laying business in his spare time if he needs a little extra income.

so IF you're going to work that extra year to reach a 3.1% SWR why not keep with optimization and keep the mortgage too b/c you're already safe and now you can give MORE away and LEAVE a LARGER LEGACY. 

During no time has 3.1% failed with a mortgage or without but with the mortgage you'll be able to leave magnitudes more money if thats your goal. 

my wife and i fit something similar to case 1 ... and maybe we'll just work longer to live ultra luxurious lives .... its only one more year and one more year.... but thats kinda why this site is here to help you pull the plug. each extra year we work cuts or SWR for our basic needs already ultra luxurious life by .5% ...  or just let lifestyle creep.  have a FatFIRE... thats a new thing over at reddit now i hear.

i currently feel pulling the plug may be extremely hard for me with my golden handcuffs.  but we'll see if i can do it when the time comes.  .

man based on my math i could buy a new kitchen every single year if i worked an extra 3 years(20k).  but what would i do with all those kitchens? /sarcasm

We are similar to option #1 with a higher income and also higher spending. When I let my license laps that type of income is gone forever which indeed makes it very very hard to give up.  Although we can technically retire now, it is not the lifestyle I want to retire to and I am completely okay with adding in another 1.75 years to make it happen.  I am also completely comfortable having a paid of house when we actually do retire.  I can afford to make those choices because of the higher income and the low cost of my home compared to my income. I don't have the need or willingness to take on the extra risk of having a mortgage in retirement.

EnjoyIt

  • Handlebar Stache
  • *****
  • Posts: 1399
Re: Mr. Math and paying off your mortgage
« Reply #216 on: April 27, 2017, 04:35:32 PM »

What do you do?

I started my career near scenario 1 with a loathsome job but within a few years was near scenario 2. The short time in-between I think gives me a difference perspective on this issue.

I started my career working 60-100 hours a week getting paid $45k for the year with no additional pay for overtime. That was residency.
I am a physician. I started my post residency career very late with a mortgage sized school loan.

boarder42

  • Walrus Stache
  • *******
  • Posts: 7845
Re: Mr. Math and paying off your mortgage
« Reply #217 on: April 28, 2017, 05:37:10 AM »
i'm an engineer.  always been paid well ... but for the first 6 years of my career i spent 30-60% of the year on the road doing something i really enjoyed but got burnt out on travel.  Now i've transitioned to a job i like but with less travel.  So had to trade what i loved for something i like ... to increase my home time and family life.  Currently if it was 7 years from now and this last month with this client had happened i'd be asking to be put on another project and a new PM brought in to take over or i'd be walking out the door. But i've really only got 4-5 more months of this and then its back to the client i enjoy doing work for.

I really think FIRE is a game for me more than anything else.  I enjoy thinking outside the box and outside societal norms, but i've basically been on railroad tracks and will be til i pull the FIRE trigger,  I do plan to use the birth of a child to hopefully cut my work days down to 4 day weeks - thats quite abnormal for a male in my field to do.  Probably going to have to evaluate when i get there and i will end up prolonging my career and locking in one of the biggest risks (IMO) to fire.  working longer than necessary.  i just enjoy figuring out how to beat the system thats in place and leverage it to my full advantage.
« Last Edit: April 28, 2017, 05:42:20 AM by boarder42 »

Wise Virgin

  • 5 O'Clock Shadow
  • *
  • Posts: 68
Re: Mr. Math and paying off your mortgage
« Reply #218 on: April 28, 2017, 08:31:43 AM »
i just enjoy figuring out how to beat the system thats in place and leverage it to my full advantage.
It's not a system though, is it? It's a life.

There is another thread somewhere currently about "Mustachianism's fatal flaw," and if I were going to pick a flaw the MMM method has (though it's not fatal), it seems to me it would be playing life as though it were a game. In a game the factors are all understood and the fun is in playing within the factors so as to beat other players who are also playing within them. That's not what life is. Life is mysterious and mystical, and so are you.

You won't understand this "system" without the humanities: history, art, literature, drama. So what you do without understanding will always have a flaw in it.

I say "you" but I'm not meaning just specifically you, boarder42; it's only your words made me think some things.

boarder42

  • Walrus Stache
  • *******
  • Posts: 7845
Re: Mr. Math and paying off your mortgage
« Reply #219 on: April 28, 2017, 08:59:35 AM »
i just enjoy figuring out how to beat the system thats in place and leverage it to my full advantage.
It's not a system though, is it? It's a life.

There is another thread somewhere currently about "Mustachianism's fatal flaw," and if I were going to pick a flaw the MMM method has (though it's not fatal), it seems to me it would be playing life as though it were a game. In a game the factors are all understood and the fun is in playing within the factors so as to beat other players who are also playing within them. That's not what life is. Life is mysterious and mystical, and so are you.

You won't understand this "system" without the humanities: history, art, literature, drama. So what you do without understanding will always have a flaw in it.

I say "you" but I'm not meaning just specifically you, boarder42; it's only your words made me think some things.

it is a system. organized govt. taxes ... savings ... spending ... our lives are inside of a large system ... even with out organized govt its still a system.  calling it Life is just naming the system.  and there are ways to game all systems.

EnjoyIt

  • Handlebar Stache
  • *****
  • Posts: 1399
Re: Mr. Math and paying off your mortgage
« Reply #220 on: April 28, 2017, 09:05:28 AM »
i'm an engineer.  always been paid well ... but for the first 6 years of my career i spent 30-60% of the year on the road doing something i really enjoyed but got burnt out on travel.  Now i've transitioned to a job i like but with less travel.  So had to trade what i loved for something i like ... to increase my home time and family life.  Currently if it was 7 years from now and this last month with this client had happened i'd be asking to be put on another project and a new PM brought in to take over or i'd be walking out the door. But i've really only got 4-5 more months of this and then its back to the client i enjoy doing work for.

I really think FIRE is a game for me more than anything else.  I enjoy thinking outside the box and outside societal norms, but i've basically been on railroad tracks and will be til i pull the FIRE trigger,  I do plan to use the birth of a child to hopefully cut my work days down to 4 day weeks - thats quite abnormal for a male in my field to do.  Probably going to have to evaluate when i get there and i will end up prolonging my career and locking in one of the biggest risks (IMO) to fire.  working longer than necessary.  i just enjoy figuring out how to beat the system thats in place and leverage it to my full advantage.

:) I had a feeling you may be an engineer with your very analytical approach to risk. We share one critical difference, I don't mind working 1 extra years part time before FIRE. In reality my plan is not to FIRE but to work part time and hopefully for many many years to come.  Which may also explain why I simply do not need to take on more risk. I am looking to still work 6-8 shifts a month giving me a ridiculous amount of free time. The reason why I choose to work is that practicing medicine is fun. Talking to patients, explaining them their disease process is enjoyable. Saving someone's life is a ridiculous rush. Unfortunately there is a ton of waste and bureaucracy in medicine today which also makes the job frustrating and makes me want to throw in the towel and never come back. But, I find when I have a few days off the BS doesn't seam to bother me as much. Considering the continued creep in waste as well as regulations that add no value to the patient I am highly concerned that I may get fed up much sooner than later which does bother me some. All I know is that if markets don't go crazy on me I shall be able to semi-FIRE in 1.75 years. Then I can FIRE 2-3 year after that. Since all I need is 1.75 years to get me where I want, I simply don't want to take the short term risk of a large drop in my equities and be forced into full time work for an additional year.

Another reason why I plan on semi-FIRE is because we don't have kids yet.  Although I estimate what they may cost us, I am not positive and want to make sure we are prepared for that as well.  I know kids can cost as little as a few thousand a year to an infinite amount of money.  I have a doctor friend with 2 kids and they seam to be spending over $60k a year on child care, private school, extracurricular activities and so forth. 

boarder42

  • Walrus Stache
  • *******
  • Posts: 7845
Re: Mr. Math and paying off your mortgage
« Reply #221 on: April 28, 2017, 09:12:07 AM »
yeah my field doesnt really allow me to work a few days a week.

I plan to leverage where i'm at by likely taking a 6 month sabatical as a trial FIRE the year we hit our number.  and maybe it leads to me being part time but i doubt it b/c its not normal in my industry.

but the simple fact that you are going to work part time after FI ... i would say would make me do the exact opposite of your plan and take on the added volitily b/c you have your risk mitigation stratgey in place. 

we're kids less currently but leveraging kid 1 into partial part time 4 day weeks.  may try to leverage kid 2 into 3 day weeks but we'll see how the first one goes.

Wise Virgin

  • 5 O'Clock Shadow
  • *
  • Posts: 68
Re: Mr. Math and paying off your mortgage
« Reply #222 on: April 28, 2017, 09:24:56 AM »
i just enjoy figuring out how to beat the system thats in place and leverage it to my full advantage.
It's not a system though, is it? It's a life.

There is another thread somewhere currently about "Mustachianism's fatal flaw," and if I were going to pick a flaw the MMM method has (though it's not fatal), it seems to me it would be playing life as though it were a game. In a game the factors are all understood and the fun is in playing within the factors so as to beat other players who are also playing within them. That's not what life is. Life is mysterious and mystical, and so are you.

You won't understand this "system" without the humanities: history, art, literature, drama. So what you do without understanding will always have a flaw in it.

I say "you" but I'm not meaning just specifically you, boarder42; it's only your words made me think some things.

it is a system. organized govt. taxes ... savings ... spending ... our lives are inside of a large system ... even with out organized govt its still a system.  calling it Life is just naming the system.  and there are ways to game all systems.
When you figure out a way to game being born and getting old, please let me know. ;)

"Greatness does not approach him who is forever looking down, while he who is looking up is growing poor." Is this a true statement in your conception of the system called life, or a false one?

You realize you are forever looking down in order to get richer. Will greatness approach you?

There is a real cost to the grinding process of getting rich. Do you recognize and accept this cost? I just think your system needs to be bigger, as a human being you are so much bigger than it is. Shakespeare says the Law is an idiot, but sometimes I think Mr. Math is.

boarder42

  • Walrus Stache
  • *******
  • Posts: 7845
Re: Mr. Math and paying off your mortgage
« Reply #223 on: April 28, 2017, 10:00:59 AM »
System - a set of connected things or parts forming a complex whole, in particular.

your body is a system

our bodies belong to the system of this planet both natural and man made. 

Science has been gaming the life cycle system you speak of thru advanced medicine for years look at the avg age expectancy now vs 1900. 

but the life cycle is a system with a beginning and an end of which the beginning we have little control over but the end to some extent is within a humans control. 

on this site we are gaming the monetary system in order to stop trading our time for money and get our time back to do with as we please. 


Scortius

  • Bristles
  • ***
  • Posts: 475
Re: Mr. Math and paying off your mortgage
« Reply #224 on: April 28, 2017, 10:01:05 AM »
i just enjoy figuring out how to beat the system thats in place and leverage it to my full advantage.
It's not a system though, is it? It's a life.

There is another thread somewhere currently about "Mustachianism's fatal flaw," and if I were going to pick a flaw the MMM method has (though it's not fatal), it seems to me it would be playing life as though it were a game. In a game the factors are all understood and the fun is in playing within the factors so as to beat other players who are also playing within them. That's not what life is. Life is mysterious and mystical, and so are you.

You won't understand this "system" without the humanities: history, art, literature, drama. So what you do without understanding will always have a flaw in it.

I say "you" but I'm not meaning just specifically you, boarder42; it's only your words made me think some things.

it is a system. organized govt. taxes ... savings ... spending ... our lives are inside of a large system ... even with out organized govt its still a system.  calling it Life is just naming the system.  and there are ways to game all systems.
When you figure out a way to game being born and getting old, please let me know. ;)

"Greatness does not approach him who is forever looking down, while he who is looking up is growing poor." Is this a true statement in your conception of the system called life, or a false one?

You realize you are forever looking down in order to get richer. Will greatness approach you?

There is a real cost to the grinding process of getting rich. Do you recognize and accept this cost? I just think your system needs to be bigger, as a human being you are so much bigger than it is. Shakespeare says the Law is an idiot, but sometimes I think Mr. Math is.

I don't think you understand.  For engineering types, the constant optimization is fun.  I love it!  Maxing out the right accounts, figuring out how to structure assets for the best tax advantages, finding ways to optimize our house for efficiency, they're all games that also benefit us and our families.  There's no extra 'human cost' involved.  We live our lives just like you, we just have different types of hobbies and interests.

BFGirl

  • Pencil Stache
  • ****
  • Posts: 730
Re: Mr. Math and paying off your mortgage
« Reply #225 on: April 28, 2017, 10:07:59 AM »
i just enjoy figuring out how to beat the system thats in place and leverage it to my full advantage.
It's not a system though, is it? It's a life.

There is another thread somewhere currently about "Mustachianism's fatal flaw," and if I were going to pick a flaw the MMM method has (though it's not fatal), it seems to me it would be playing life as though it were a game. In a game the factors are all understood and the fun is in playing within the factors so as to beat other players who are also playing within them. That's not what life is. Life is mysterious and mystical, and so are you.

You won't understand this "system" without the humanities: history, art, literature, drama. So what you do without understanding will always have a flaw in it.

I say "you" but I'm not meaning just specifically you, boarder42; it's only your words made me think some things.

it is a system. organized govt. taxes ... savings ... spending ... our lives are inside of a large system ... even with out organized govt its still a system.  calling it Life is just naming the system.  and there are ways to game all systems.
When you figure out a way to game being born and getting old, please let me know. ;)

"Greatness does not approach him who is forever looking down, while he who is looking up is growing poor." Is this a true statement in your conception of the system called life, or a false one?

You realize you are forever looking down in order to get richer. Will greatness approach you?

There is a real cost to the grinding process of getting rich. Do you recognize and accept this cost? I just think your system needs to be bigger, as a human being you are so much bigger than it is. Shakespeare says the Law is an idiot, but sometimes I think Mr. Math is.

I don't think you understand.  For engineering types, the constant optimization is fun.  I love it!  Maxing out the right accounts, figuring out how to structure assets for the best tax advantages, finding ways to optimize our house for efficiency, they're all games that also benefit us and our families.  There's no extra 'human cost' involved.  We live our lives just like you, we just have different types of hobbies and interests.

Gaming the system and optimizing is fine as long as it doesn't become more important than everything else.

boarder42

  • Walrus Stache
  • *******
  • Posts: 7845
Re: Mr. Math and paying off your mortgage
« Reply #226 on: April 28, 2017, 10:17:29 AM »
i just enjoy figuring out how to beat the system thats in place and leverage it to my full advantage.
It's not a system though, is it? It's a life.

There is another thread somewhere currently about "Mustachianism's fatal flaw," and if I were going to pick a flaw the MMM method has (though it's not fatal), it seems to me it would be playing life as though it were a game. In a game the factors are all understood and the fun is in playing within the factors so as to beat other players who are also playing within them. That's not what life is. Life is mysterious and mystical, and so are you.

You won't understand this "system" without the humanities: history, art, literature, drama. So what you do without understanding will always have a flaw in it.

I say "you" but I'm not meaning just specifically you, boarder42; it's only your words made me think some things.

it is a system. organized govt. taxes ... savings ... spending ... our lives are inside of a large system ... even with out organized govt its still a system.  calling it Life is just naming the system.  and there are ways to game all systems.
When you figure out a way to game being born and getting old, please let me know. ;)

"Greatness does not approach him who is forever looking down, while he who is looking up is growing poor." Is this a true statement in your conception of the system called life, or a false one?

You realize you are forever looking down in order to get richer. Will greatness approach you?

There is a real cost to the grinding process of getting rich. Do you recognize and accept this cost? I just think your system needs to be bigger, as a human being you are so much bigger than it is. Shakespeare says the Law is an idiot, but sometimes I think Mr. Math is.

I don't think you understand.  For engineering types, the constant optimization is fun.  I love it!  Maxing out the right accounts, figuring out how to structure assets for the best tax advantages, finding ways to optimize our house for efficiency, they're all games that also benefit us and our families.  There's no extra 'human cost' involved.  We live our lives just like you, we just have different types of hobbies and interests.

Gaming the system and optimizing is fine as long as it doesn't become more important than everything else.

wouldnt this be a matter of personal satisfaction.  yes there is balance between other parts of life... and in reality with indexing and everything else once you learn it and have a plan there isnt much to do but watch it grow.  the i just stick around here and maybe learn some nuances i didnt know and maybe things change but optimization is what we are programmed to do and as Scortius said we enjoy doing.  Not saying everyone here should enjoy, but the point of my beating the invest horse to death around here is to get thru to some people, i dont really care how many.  but if 1 or 2 people a month learn see and understand how its more optimal in most back tests.  makes me happy that more people are optimizing.   

BFGirl

  • Pencil Stache
  • ****
  • Posts: 730
Re: Mr. Math and paying off your mortgage
« Reply #227 on: April 28, 2017, 10:40:04 AM »
i just enjoy figuring out how to beat the system thats in place and leverage it to my full advantage.
It's not a system though, is it? It's a life.

There is another thread somewhere currently about "Mustachianism's fatal flaw," and if I were going to pick a flaw the MMM method has (though it's not fatal), it seems to me it would be playing life as though it were a game. In a game the factors are all understood and the fun is in playing within the factors so as to beat other players who are also playing within them. That's not what life is. Life is mysterious and mystical, and so are you.

You won't understand this "system" without the humanities: history, art, literature, drama. So what you do without understanding will always have a flaw in it.

I say "you" but I'm not meaning just specifically you, boarder42; it's only your words made me think some things.

it is a system. organized govt. taxes ... savings ... spending ... our lives are inside of a large system ... even with out organized govt its still a system.  calling it Life is just naming the system.  and there are ways to game all systems.
When you figure out a way to game being born and getting old, please let me know. ;)

"Greatness does not approach him who is forever looking down, while he who is looking up is growing poor." Is this a true statement in your conception of the system called life, or a false one?

You realize you are forever looking down in order to get richer. Will greatness approach you?

There is a real cost to the grinding process of getting rich. Do you recognize and accept this cost? I just think your system needs to be bigger, as a human being you are so much bigger than it is. Shakespeare says the Law is an idiot, but sometimes I think Mr. Math is.

I don't think you understand.  For engineering types, the constant optimization is fun.  I love it!  Maxing out the right accounts, figuring out how to structure assets for the best tax advantages, finding ways to optimize our house for efficiency, they're all games that also benefit us and our families.  There's no extra 'human cost' involved.  We live our lives just like you, we just have different types of hobbies and interests.

Gaming the system and optimizing is fine as long as it doesn't become more important than everything else.

wouldnt this be a matter of personal satisfaction.  yes there is balance between other parts of life... and in reality with indexing and everything else once you learn it and have a plan there isnt much to do but watch it grow.  the i just stick around here and maybe learn some nuances i didnt know and maybe things change but optimization is what we are programmed to do and as Scortius said we enjoy doing.  Not saying everyone here should enjoy, but the point of my beating the invest horse to death around here is to get thru to some people, i dont really care how many.  but if 1 or 2 people a month learn see and understand how its more optimal in most back tests.  makes me happy that more people are optimizing.

I'm not talking about your quest to convince people that you are right.  I am talking about when a sole focus on optimization and refusal to consider other points of view becomes a detriment to personal relationships.  A refusal to bend and consider other options can have the affect of alienating those who care about you.

Wise Virgin

  • 5 O'Clock Shadow
  • *
  • Posts: 68
Re: Mr. Math and paying off your mortgage
« Reply #228 on: April 28, 2017, 10:42:33 AM »
I just mean that the essence of a game requires tunnel vision. You can't play a game without excluding all other things.

The game of accumulating wealth can be played too long and too intensively. The focus of your inward eye can permanently change. That change means a loss of something really important.

Scortius

  • Bristles
  • ***
  • Posts: 475
Re: Mr. Math and paying off your mortgage
« Reply #229 on: April 28, 2017, 10:54:14 AM »
I just mean that the essence of a game requires tunnel vision. You can't play a game without excluding all other things.

The game of accumulating wealth can be played too long and too intensively. The focus of your inward eye can permanently change. That change means a loss of something really important.

Ok, to me it seems like you're saying that by running some models, doing the math, and determining that holding a mortgage for the full 30 years is a better monetary investment than paying it off early, we are risking losing out on life's greater pleasures?

boarder42

  • Walrus Stache
  • *******
  • Posts: 7845
Re: Mr. Math and paying off your mortgage
« Reply #230 on: April 28, 2017, 10:55:12 AM »
i just enjoy figuring out how to beat the system thats in place and leverage it to my full advantage.
It's not a system though, is it? It's a life.

There is another thread somewhere currently about "Mustachianism's fatal flaw," and if I were going to pick a flaw the MMM method has (though it's not fatal), it seems to me it would be playing life as though it were a game. In a game the factors are all understood and the fun is in playing within the factors so as to beat other players who are also playing within them. That's not what life is. Life is mysterious and mystical, and so are you.

You won't understand this "system" without the humanities: history, art, literature, drama. So what you do without understanding will always have a flaw in it.

I say "you" but I'm not meaning just specifically you, boarder42; it's only your words made me think some things.

it is a system. organized govt. taxes ... savings ... spending ... our lives are inside of a large system ... even with out organized govt its still a system.  calling it Life is just naming the system.  and there are ways to game all systems.
When you figure out a way to game being born and getting old, please let me know. ;)

"Greatness does not approach him who is forever looking down, while he who is looking up is growing poor." Is this a true statement in your conception of the system called life, or a false one?

You realize you are forever looking down in order to get richer. Will greatness approach you?

There is a real cost to the grinding process of getting rich. Do you recognize and accept this cost? I just think your system needs to be bigger, as a human being you are so much bigger than it is. Shakespeare says the Law is an idiot, but sometimes I think Mr. Math is.

I don't think you understand.  For engineering types, the constant optimization is fun.  I love it!  Maxing out the right accounts, figuring out how to structure assets for the best tax advantages, finding ways to optimize our house for efficiency, they're all games that also benefit us and our families.  There's no extra 'human cost' involved.  We live our lives just like you, we just have different types of hobbies and interests.

Gaming the system and optimizing is fine as long as it doesn't become more important than everything else.

wouldnt this be a matter of personal satisfaction.  yes there is balance between other parts of life... and in reality with indexing and everything else once you learn it and have a plan there isnt much to do but watch it grow.  the i just stick around here and maybe learn some nuances i didnt know and maybe things change but optimization is what we are programmed to do and as Scortius said we enjoy doing.  Not saying everyone here should enjoy, but the point of my beating the invest horse to death around here is to get thru to some people, i dont really care how many.  but if 1 or 2 people a month learn see and understand how its more optimal in most back tests.  makes me happy that more people are optimizing.

I'm not talking about your quest to convince people that you are right.  I am talking about when a sole focus on optimization and refusal to consider other points of view becomes a detriment to personal relationships.  A refusal to bend and consider other options can have the affect of alienating those who care about you.

i dont have a refusal to bend.  i used to be on the other side of this mortgage debate i didnt bend i broke and saw the light.

boarder42

  • Walrus Stache
  • *******
  • Posts: 7845
Re: Mr. Math and paying off your mortgage
« Reply #231 on: April 28, 2017, 10:57:20 AM »
I just mean that the essence of a game requires tunnel vision. You can't play a game without excluding all other things.

The game of accumulating wealth can be played too long and too intensively. The focus of your inward eye can permanently change. That change means a loss of something really important.

Ok, to me it seems like you're saying that by running some models, doing the math, and determining that holding a mortgage for the full 30 years is a better monetary investment than paying it off early, we are risking losing out on life's greater pleasures?

this is all philosophical statements with no meaning behind them.  i mean you've said it you're working til youre normal retirement age already.  cool.  is this philosophical stuff how you're wrapping your head around that being the best thing?  i'm really confused

Wise Virgin

  • 5 O'Clock Shadow
  • *
  • Posts: 68
Re: Mr. Math and paying off your mortgage
« Reply #232 on: April 28, 2017, 11:03:45 AM »
I just mean that the essence of a game requires tunnel vision. You can't play a game without excluding all other things.

The game of accumulating wealth can be played too long and too intensively. The focus of your inward eye can permanently change. That change means a loss of something really important.

Ok, to me it seems like you're saying that by running some models, doing the math, and determining that holding a mortgage for the full 30 years is a better monetary investment than paying it off early, we are risking losing out on life's greater pleasures?
"Pleasure" is not what I am interested in. And I think the discussion, while still tethered to Mortgage vs. Math, has moved on and become more universal.

Are you familiar with the play "Peer Gynt"? The main character is kind of a jerk, he likes to game the system. There's this scene where he comes to the cave of this mountain witch who is incredibly ugly and evil. The evil part doesn't bother our guy, he's kinda amoral himself, but the ugly really takes some effort for him to deal with. This witch wants to marry him to her even uglier more evil daughter. First Peer says no way; then the witch tells him how rich she is and how her daughter will inherit everything, so Peer thinks maybe he could do that. He likes money.

The witch tells him there is one condition: she must scratch his eyeball just a little. After she does that, the daughter will look beautiful, because he will no longer be able to tell beautiful from ugly. He'll be happy ever after and rich. Just one little scratch...

Peer forgets the game and runs for his life.

What meant so much to him?

boarder42

  • Walrus Stache
  • *******
  • Posts: 7845
Re: Mr. Math and paying off your mortgage
« Reply #233 on: April 28, 2017, 11:10:43 AM »
are you familiar with the movie Harry potter and the order of the phoenix.

witches and wizards play games and try to defeat a dark over lord from taking over. 

people die..

Why did they die.

well they didnt b/c it was a movie.

except albus that guy died in real life.


Wise Virgin

  • 5 O'Clock Shadow
  • *
  • Posts: 68
Re: Mr. Math and paying off your mortgage
« Reply #234 on: April 28, 2017, 11:23:50 AM »
boarder42, you remember how stories work. Pay attention.

Why was Peer Gynt terrified of being permanently changed, even though he could achieve everything he said he wanted, just by accepting this one little loss?

Scortius

  • Bristles
  • ***
  • Posts: 475
Re: Mr. Math and paying off your mortgage
« Reply #235 on: April 28, 2017, 11:32:43 AM »
boarder42, you remember how stories work. Pay attention.

Why was Peer Gynt terrified of being permanently changed, even though he could achieve everything he said he wanted, just by accepting this one little loss?

I'm sorry, to me it feels like you're coming across as extremely preachy and condescending at this point.  You don't need to resort to cute fables to get your point across.  We've tried to point out to you that for many people, optimization does not come at the cost of 'life' or 'at the exclusion of all else'.  Rather, by making sure we're on a beneficial financial path early in our careers we hope to increase the amount time we can devote to experiencing life at its fullest.  Not paying your mortgage off is very simple and involves a very low number of scratched eyeballs.
« Last Edit: April 28, 2017, 11:35:03 AM by Scortius »

boarder42

  • Walrus Stache
  • *******
  • Posts: 7845
Re: Mr. Math and paying off your mortgage
« Reply #236 on: April 28, 2017, 11:52:34 AM »
boarder42, you remember how stories work. Pay attention.

Why was Peer Gynt terrified of being permanently changed, even though he could achieve everything he said he wanted, just by accepting this one little loss?

I'm sorry, to me it feels like you're coming across as extremely preachy and condescending at this point.  You don't need to resort to cute fables to get your point across.  We've tried to point out to you that for many people, optimization does not come at the cost of 'life' or 'at the exclusion of all else'.  Rather, by making sure we're on a beneficial financial path early in our careers we hope to increase the amount time we can devote to experiencing life at its fullest.  Not paying your mortgage off is very simple and involves a very low number of scratched eyeballs.

favorite*

Wise Virgin

  • 5 O'Clock Shadow
  • *
  • Posts: 68
Re: Mr. Math and paying off your mortgage
« Reply #237 on: April 28, 2017, 11:55:52 AM »
Scortius, I find Mr. Math to be the most preachy and condescending S.O.B. on the planet.

Mr. Math has no use for stories either.

BlueHouse

  • Magnum Stache
  • ******
  • Posts: 3585
  • Location: WDC
Re: Mr. Math and paying off your mortgage
« Reply #238 on: April 28, 2017, 12:00:05 PM »
are you familiar with the movie Harry potter and the order of the phoenix.

witches and wizards play games and try to defeat a dark over lord from taking over. 

people die..

Why did they die.

well they didnt b/c it was a movie.

except albus that guy died in real life.
I have to admit this response made me laugh.  Sorry Wise Virgin, no offense intended to you, but it does come off as preachy.

Wise Virgin

  • 5 O'Clock Shadow
  • *
  • Posts: 68
Re: Mr. Math and paying off your mortgage
« Reply #239 on: April 28, 2017, 12:06:11 PM »
It's okay to laugh, I'm not sensitive.

boarder42

  • Walrus Stache
  • *******
  • Posts: 7845
Re: Mr. Math and paying off your mortgage
« Reply #240 on: April 28, 2017, 12:15:55 PM »
Scortius, I find Mr. Math to be the most preachy and condescending S.O.B. on the planet.

Mr. Math has no use for stories either.

Mr. Math is what the basis of this theory of FIRE is based on.

Wise Virgin

  • 5 O'Clock Shadow
  • *
  • Posts: 68
Re: Mr. Math and paying off your mortgage
« Reply #241 on: April 28, 2017, 12:24:23 PM »
Scortius, I find Mr. Math to be the most preachy and condescending S.O.B. on the planet.

Mr. Math has no use for stories either.

Mr. Math is what the basis of this theory of FIRE is based on.
Yes it is.

boarder42

  • Walrus Stache
  • *******
  • Posts: 7845
Re: Mr. Math and paying off your mortgage
« Reply #242 on: April 28, 2017, 12:25:18 PM »
and i've said this many times but i think it gets overlooked i'm fine with those like blue house who choose to pay down their mortgage understanding everything.  The problem i have is that in a general sense mortgage paydown should be in the same bucket as hiring a lawn mower.  Sure once you understand what your lawn mower costs you go ahead hire one ... but the default answer for 90% of cases here should be dont pay it down.

hell even Dicey one of the large supporters of invest vs paydown owns her house.  but it was a choice they made understanding everything.  I own a boat and i dont tell others hey you should go get one too its the best way to enjoy your life on the way to and in FIRE - nothing feels better spending a sunny day on the lake boarding a surfing. I tell most new comers the exact opposite.  sell the boat. 

boarder42

  • Walrus Stache
  • *******
  • Posts: 7845
Re: Mr. Math and paying off your mortgage
« Reply #243 on: April 28, 2017, 12:27:55 PM »
boarder42, you remember how stories work. Pay attention.

Why was Peer Gynt terrified of being permanently changed, even though he could achieve everything he said he wanted, just by accepting this one little loss?

I'm sorry, to me it feels like you're coming across as extremely preachy and condescending at this point.  You don't need to resort to cute fables to get your point across.  We've tried to point out to you that for many people, optimization does not come at the cost of 'life' or 'at the exclusion of all else'.  Rather, by making sure we're on a beneficial financial path early in our careers we hope to increase the amount time we can devote to experiencing life at its fullest.  Not paying your mortgage off is very simple and involves a very low number of scratched eyeballs.

+2. Different people will find joy in different pursuits. What brings the community together on this forum isn't our agreement on what we want to spend our lives doing, just our agreement that having no choice but to work a job through most of our adult life is a significant constraint on doing the things that do bring us joy.

maizeman i like your charts any chance you can graph a ratio of scratched eye balls to mortgage paydown ratio.

BFGirl

  • Pencil Stache
  • ****
  • Posts: 730
Re: Mr. Math and paying off your mortgage
« Reply #244 on: April 28, 2017, 12:53:59 PM »
and i've said this many times but i think it gets overlooked i'm fine with those like blue house who choose to pay down their mortgage understanding everything.  The problem i have is that in a general sense mortgage paydown should be in the same bucket as hiring a lawn mower.  Sure once you understand what your lawn mower costs you go ahead hire one ... but the default answer for 90% of cases here should be dont pay it down.

hell even Dicey one of the large supporters of invest vs paydown owns her house.  but it was a choice they made understanding everything.  I own a boat and i dont tell others hey you should go get one too its the best way to enjoy your life on the way to and in FIRE - nothing feels better spending a sunny day on the lake boarding a surfing. I tell most new comers the exact opposite.  sell the boat.

The problem that I have is that this advice is offered to "90% of the cases here" without a detailed explanation of the actual risks that are involved.  It is not fair to give the advice to people to invest with leveraged money without also pointing out that there is some risk in the event of a downturn.   When you summarily dismiss the points that others repeatedly try to make, you lose credibility.

It's not that people care whether or not "you are fine with people like blue house who choose to pay down their house", it is that you refuse to acknowledge that risks or other considerations exist.  You state that you are okay with people making the decision to pay down their house if they "understand everything."  However, you do not seem to want people to "understand everything" in making the decision to invest rather than pay off a mortgage.

I think your advice is sound in principle, however, other people's concerns or situations are not "extreme" or "unlikely" or "anecdotal".  If your goal is to educate people, then they need to be able to consider all aspects of their decision.


boarder42

  • Walrus Stache
  • *******
  • Posts: 7845
Re: Mr. Math and paying off your mortgage
« Reply #245 on: April 28, 2017, 01:08:00 PM »
and i've said this many times but i think it gets overlooked i'm fine with those like blue house who choose to pay down their mortgage understanding everything.  The problem i have is that in a general sense mortgage paydown should be in the same bucket as hiring a lawn mower.  Sure once you understand what your lawn mower costs you go ahead hire one ... but the default answer for 90% of cases here should be dont pay it down.

hell even Dicey one of the large supporters of invest vs paydown owns her house.  but it was a choice they made understanding everything.  I own a boat and i dont tell others hey you should go get one too its the best way to enjoy your life on the way to and in FIRE - nothing feels better spending a sunny day on the lake boarding a surfing. I tell most new comers the exact opposite.  sell the boat.

The problem that I have is that this advice is offered to "90% of the cases here" without a detailed explanation of the actual risks that are involved.  It is not fair to give the advice to people to invest with leveraged money without also pointing out that there is some risk in the event of a downturn.   When you summarily dismiss the points that others repeatedly try to make, you lose credibility.

It's not that people care whether or not "you are fine with people like blue house who choose to pay down their house", it is that you refuse to acknowledge that risks or other considerations exist.  You state that you are okay with people making the decision to pay down their house if they "understand everything."  However, you do not seem to want people to "understand everything" in making the decision to invest rather than pay off a mortgage.

I think your advice is sound in principle, however, other people's concerns or situations are not "extreme" or "unlikely" or "anecdotal".  If your goal is to educate people, then they need to be able to consider all aspects of their decision.

most of them are extreme and unlikely based on history if you want to what if you can what if yourself into never quitting.

show me a case that includes variables all of which have a higher probability of happening than not that point to what would not make them unlikely or extreme.
« Last Edit: April 28, 2017, 01:20:23 PM by boarder42 »

BFGirl

  • Pencil Stache
  • ****
  • Posts: 730
Re: Mr. Math and paying off your mortgage
« Reply #246 on: April 28, 2017, 01:15:09 PM »
and i've said this many times but i think it gets overlooked i'm fine with those like blue house who choose to pay down their mortgage understanding everything.  The problem i have is that in a general sense mortgage paydown should be in the same bucket as hiring a lawn mower.  Sure once you understand what your lawn mower costs you go ahead hire one ... but the default answer for 90% of cases here should be dont pay it down.

hell even Dicey one of the large supporters of invest vs paydown owns her house.  but it was a choice they made understanding everything.  I own a boat and i dont tell others hey you should go get one too its the best way to enjoy your life on the way to and in FIRE - nothing feels better spending a sunny day on the lake boarding a surfing. I tell most new comers the exact opposite.  sell the boat.

The problem that I have is that this advice is offered to "90% of the cases here" without a detailed explanation of the actual risks that are involved.  It is not fair to give the advice to people to invest with leveraged money without also pointing out that there is some risk in the event of a downturn.   When you summarily dismiss the points that others repeatedly try to make, you lose credibility.

It's not that people care whether or not "you are fine with people like blue house who choose to pay down their house", it is that you refuse to acknowledge that risks or other considerations exist.  You state that you are okay with people making the decision to pay down their house if they "understand everything."  However, you do not seem to want people to "understand everything" in making the decision to invest rather than pay off a mortgage.

I think your advice is sound in principle, however, other people's concerns or situations are not "extreme" or "unlikely" or "anecdotal".  If your goal is to educate people, then they need to be able to consider all aspects of their decision.

most of them are extreme and unlikely based on history if you want to what if you can what if yourself into never quitting.

Why do you not want the people to whom you are giving advice to not consider other variables?  Not everyone has the same goals as you do, the same safety nets as you or are the same age as you.

Personally, my house is paid for and I do not plan to work forever and will likely retire within the next 4 years.  But I guess I am just an outlier.

Edited to fix my double negative
« Last Edit: April 28, 2017, 01:25:06 PM by BFGirl »

boarder42

  • Walrus Stache
  • *******
  • Posts: 7845
Re: Mr. Math and paying off your mortgage
« Reply #247 on: April 28, 2017, 01:45:06 PM »
and i've said this many times but i think it gets overlooked i'm fine with those like blue house who choose to pay down their mortgage understanding everything.  The problem i have is that in a general sense mortgage paydown should be in the same bucket as hiring a lawn mower.  Sure once you understand what your lawn mower costs you go ahead hire one ... but the default answer for 90% of cases here should be dont pay it down.

hell even Dicey one of the large supporters of invest vs paydown owns her house.  but it was a choice they made understanding everything.  I own a boat and i dont tell others hey you should go get one too its the best way to enjoy your life on the way to and in FIRE - nothing feels better spending a sunny day on the lake boarding a surfing. I tell most new comers the exact opposite.  sell the boat.

The problem that I have is that this advice is offered to "90% of the cases here" without a detailed explanation of the actual risks that are involved.  It is not fair to give the advice to people to invest with leveraged money without also pointing out that there is some risk in the event of a downturn.   When you summarily dismiss the points that others repeatedly try to make, you lose credibility.

It's not that people care whether or not "you are fine with people like blue house who choose to pay down their house", it is that you refuse to acknowledge that risks or other considerations exist.  You state that you are okay with people making the decision to pay down their house if they "understand everything."  However, you do not seem to want people to "understand everything" in making the decision to invest rather than pay off a mortgage.

I think your advice is sound in principle, however, other people's concerns or situations are not "extreme" or "unlikely" or "anecdotal".  If your goal is to educate people, then they need to be able to consider all aspects of their decision.

most of them are extreme and unlikely based on history if you want to what if you can what if yourself into never quitting.

Why do you not want the people to whom you are giving advice to not consider other variables?  Not everyone has the same goals as you do, the same safety nets as you or are the same age as you.

Personally, my house is paid for and I do not plan to work forever and will likely retire within the next 4 years.  But I guess I am just an outlier.

Edited to fix my double negative

should we discuss higher risk of getting hit by a car and dieing before telling someone they should bike to work.  should we discuss lack of knowledge in a kitchen and gettins some bad form of food poisoning and dieing every time we tell someone to cook from home. 

probability of these is around the same probability of risk historically when compared to paying down vs investing.

i dont have an issue with the correct opposing down side risks being brought up but they are extremely overplayed as to their likelihood and couple that with the people who simply make incorrect math statements and you may have just convinced someone of something they likely wont benefit as much from

Common held belief in the general population is that paying down a mortgage is better.  but in most circumstances its not when compared with investing. so when people come out and already have a preconceived notion that its better and outlier cases of hard luck times for a few people with friends from 2008.  or when the probability based on history is presented such that the risk is equivalent to the benefit of not paying it down ... and then the people who just respond with factually incorrect information its hard to weed thru everything ...

If you look at any of these "debates" you have equal people on both sides of something when it should be a majority of the people on one side.

PizzaSteve

  • Pencil Stache
  • ****
  • Posts: 501
Re: Mr. Math and paying off your mortgage
« Reply #248 on: April 28, 2017, 01:50:37 PM »
For gosh sakes, stop trying to argue.  There is no side to debate.

Paying off debt has lower expected returns, but greater certainty and reduced volatility.

Investing has higher volatility of possible outcomes and also higher expected returns.

Insisting that someone knows the ideal asset allocation for the future for everyone is preposterous.
« Last Edit: April 28, 2017, 01:55:14 PM by PizzaSteve »

boarder42

  • Walrus Stache
  • *******
  • Posts: 7845
Re: Mr. Math and paying off your mortgage
« Reply #249 on: April 28, 2017, 01:57:43 PM »
For gosh sakes, stop trying to argue.  There is no side to debate.

Paying off debt has lower expected returns, but greater certainty and reduced volatility.

Investing has higher volatility of possible outcomes and also higher expected returns.

Insisting that someone knows the ideal asset allocation for the future for everyone is preposterous.

you have every right to not read what i post if it aggravates you so much.  i will continue to post my opinions on here on this subject it has helped quite a few people see the light.