I retired two years ago, my mortgage payment is $1187 month . Eleven years 8 months left to pay. I just started triple payment to shorten it to two years
@lovethomassowell
3 ай бұрын
Trading invested cash for home equity in retirement may provide psychological relief and a lower break-even, but if the mortgage balance is substantial relative to liquid assets, it concurrently reduces financial flexibility by substantially reducing liquidity. It's like air safety for pilots. If you make a mistake at 10,000 feet, you have a lot of recovery time versus making a mistake at 3,000 ft. I would rather have $500K in liquid, invested assets and a $250K mortgage (assuming a 3% or less fixed rate mortgage that ends before your longevity) than $250K in liquid, invested assets and a fully-paid mortgage.
@IwasRetired
3 ай бұрын
If someone is sitting on a sub 3% mortgage, I would say continue to pay it off, but in case retirement comes sooner than you expect, have a plan to cover the mortgage in retirement with fixed income sources. But as you get closer to potential retirement, the home mortgage should be getting smaller, and trading invested fixed income investments can be a better long-term deal. Never say it is better to pay a low-interest mortgage and invest the difference in equity! Treat your home equity as part of the fixed income investments. If you cannot earn more than the mortage rate (and for people with a 4-6% mortgage may soon be in that position, then paying down debt will be better than what you will get in fixed income investments.
@theretirementmanifesto3379
3 жыл бұрын
Thanks for doing the deep dive research on the question of how many retirees carry a mortgage, triggered by my "statistics post". Great video with solid advice (fyi, I paid off our mortgage in my early 50's, before retirement).
@IwasRetired
3 жыл бұрын
Thank you for all the advice you offer in all your posts. I know it was only one of many in that compilation, but it concerned me that too many people would think the majority do not pay off the mortgage. That just makes the annual expense nut tougher to crack!
@winniethepoohandeeyore2
4 ай бұрын
Bought my house during retirement using an SSDI income. We got it for a great price and a great interest rate. Been overpaying the principal every month since the first payment was due, Knocked years off the life of the mortgage in 3 years.
@sarashann
4 ай бұрын
Not having a mortgage allowed us to safely retire years earlier than we otherwise could have. We agree buying a smaller home 20 years ago and making extra payments on a 15-year mortgage was one of the smarter decisions we ever made!
@IwasRetired
4 ай бұрын
Yes! In our working years, we doubled payments to reduce PMI, then refinanced into 15 years then paid it off in 2008 to free up cash flow. That allowed me to max out retirement savings.
@tomg7972
Жыл бұрын
Thanks! Very informative! I am going to pay more to the principal now before I retire in 10 years😊
@IwasRetired
Жыл бұрын
Freeing up retirement budget makes planning easier. If you have a lower mortgage rate, you might take your time. But having it paid off before you find yourself retired, the better you will be.
@randolphbehm877
3 жыл бұрын
Interesting video. Coincidentally I just paid my house off this week... I am 44 and plan to have the option to retire at 55. Last year I was furloughed from work for a few months due to the pandemic. I had a decent emergency fund so I made it through unscathed. Once the e-fund was topped off I decided to assault the mortgage. I had to sell a small hunting property, a quad and a boat to get it done. Now I am maxing out my Roth IRA, Roth 401k, and HSA..... Thanks for your insight!!!
@IwasRetired
3 жыл бұрын
Randolph, that's great! I hadn't thought of that asset class going to pay down the mortgage, but other real property and things could definitely do it! I recently read a blog post about people in retirement simplifying lifestyle: sellling the boat and joining a boat sharing club, for instance. Good luck as you move toward retirement on your own terms.
@jamesphillips4888
4 ай бұрын
Of course you did well during the pandemic people were psif more from unemployment than essential workers. I had to work 30 hours overtime to match tge unemployment that people received. People got paid more not to work than wirk. Its pretty messed up. Health care workers risked our lives while everyone stayed home and got paid for doing absolutely . Im glad your paid your house off but im 51 years old and just bought my first home. Don’t judge others just because you were lucky though! Im 51 with 20 years to pay for my mortgage. Im paying it off when I turn 60
@glockman9c
10 ай бұрын
It completely depends. No children is quite a bit different than 4 kids and 8 grandkids. Some people pay off to fast then find themselves in a serious cash flow crunch. If it is cheap money, keep the mortgage, you can always double or triple your payments if you have too much money.
@ron311
Жыл бұрын
But you do have good sense. 👍 lol. subscribing now.
@IwasRetired
Жыл бұрын
Welcome aboard!
@stevemueller9832
3 жыл бұрын
Great video, I’m in the minority but I have two mortgages. I refinanced the two properties several years ago when rates were in the low threes. I see them as me issuing debt. They permit me to invest the funds I’d be using to pay them off. It does indeed make the “number” bigger. I figured I’d always have a payment- the TI portion of the PITI never goes away, I just need a bit more to cover the PI.
@IwasRetired
3 жыл бұрын
Thanks, Steve. Do you expect to carry mortgages into retirement? Will you have a dedicated income stream to manage them? What do you think of my rebalancing analogy of using large equity gains in the good years to knock down your fixed investment?
@stevemueller9832
3 жыл бұрын
@@IwasRetired I retired March 2020, so I am carrying both into retirement. I do not intend to pay them off early. My observation was that historically low rates were an opportunity to lock in fixed debt. My expectations are that inflation will return. So I’ll be paying them off with inflated dollars. Your proposal to allocate a portion of investments to the payment makes sense. In my situation, the mortgage payments are part of my overall budget. So I have not dedicated a specific portion of investments toward the payment.
@wesm3848
3 жыл бұрын
In my case I have a home loan at 2.5% and rather than pay off the loan (which I can easily do $150,000 approx) I have the money invested in my taxable account. The combination of dividend income and appreciation in the stocks I own far exceed my cost of capital (2.5%). Without going into tax issues given the SALT deductions, if your marginal cost is 2.5% and the marginal revenue is say 10% to 15%, paying off the loan makes little sense. I know the perils of investing and for some just paying off the loan makes them feel good.
@IwasRetired
3 жыл бұрын
Wes, in my case, using windfall bonuses mid-career allowed me to pay off the mortgage and then use that cashflow to max out retirement savings. If you can max out retirement savings and carry the mortgage into retirement with that added expense nut, then that might be the right course for you.
@wesm3848
3 жыл бұрын
@@IwasRetired I have always maxed out retirement 401(k) so not an issue. In a few years I may pay off balance of loan when retired, I do like some leverage in my balance sheet. I am a cpa and into financial worksheets for a living and did download the example you reviewed in a different video. Like you, I made additions to the downloaded copy similar to what you did.
@Psuedo-Nim
3 күн бұрын
2.5% interest rate? I'd be dumb to pay that off early when I get guaranteed returns double that, or average market returns 400% greater.
@IwasRetired
3 күн бұрын
As later comments on the channel have said, if you have a low rate on your mortgage, go ahead and keep it into retirement, but make sure you have the budget to continue paying it off, ideally with fixed-income investments, not equity. A forced-early retirement puts a crimp on your cash flow and it is easier to budget if you don't have a mortgage. I ditched my mortgage in the GFC of 2008 when it was around 4% and then went on to invest the cash flow in increasing my retirement savings during my 50s. That allowed me to comfortably move into retirement, when I was retired one month before I turned 59, with solid retirement savings, and a cash cushion for the first 3 years of retirement, all without worrying about the mortgage.
@70qq
Жыл бұрын
ty
@mrpangy4174
3 жыл бұрын
Wow. Sorry to be the critic... a mortgage has some tax advantages (interest rate tax deductible-lowering the cost of funds). Take the extra you would use to pay off the mortgage and place it in a Roth or 401k or other tax advantaged investment... earlier the better. Get cash in flow that is much grater than outflow that is the key.
@IwasRetired
3 жыл бұрын
Mr. Pangy, see an earlier video I did as well "Which Rate Rates?" IMHO, paying down debt earlier in your career allows you to max out those retirement savings options after age 50, so you enter retirement with solid savings and no debt. As I note in this and my earlier video, tax deduction is a diminishing factor. Many with the Standard Deduction so large won't itemize and those who do will see a smaller deduction each year. Earlier in a career, I do suggest having a cash cushion for emergencies, contributing at least as much as needed to get employer match, and then after all debt is clear, max out a range of Roth, TDA, and taxable savings as circumstances allow. Having three tax buckets at retirement helps manage retirement income, especially if you need income to stay in certain brackets.
@adrianskipper-i8o
6 ай бұрын
Underpaid and overtaxed = debts . Would love to have kept the money I earned .
@glockman9c
10 ай бұрын
$1200 per month. lol.
@coelhocointech9841
Жыл бұрын
Never pay off your mortgage, it’s an asset at less than 3 percent. Focus on growing your monthly cash floor instead. It’s the property taxes, utilities, insurance, upkeep that will be the bigger problem as they continue to go up year after year. My property taxes went from 650 a month to 2200 a month, utilities from 300 a month to 900 a month, insurance from 300 a month to 800 a month during my mortgage. Meanwhile my mortgage has stayed the same, and now most of my mortgage payment goes to principal. Meanwhile the money that would have paid off my mortgage 15 years ago as more than triple. That cashflow now pays off everything related to house expenses and I like the convenience that I can make one payment for taxes and insurance. It’s all about have enough Cashflow cashflow cashflow to pay monthly for everything. I live in a high tax blue state, unlike many of my retired friends who have moved to Florida to save on taxes, I have the cashflow to handle all the taxes my blue state throws at me.
@IwasRetired
Жыл бұрын
I paid off a mortgage in 2008 when I had enough free cash and judged that it was best fixed income option. It allowed me to use cash flow to invest in retirement plans.
@busterbrown1686
Жыл бұрын
That's insane. Less earnings (retirement) means smaller budget you can fund. Eliminating mortgage and consumer debt is less pressure on retirement income, savings and create cushion for inflation and savings for new furnace, roof, travel etc and investing. If you were mortgage free would you get a equity loan so you can invest ? No that's insane. Pay off the mortgage lower the cash floor and invest YOUR REVENUE . Listen to Dave Ramsey podcast
@FooFan-b3k
10 ай бұрын
@@busterbrown1686 Would you get a HELOC at 2.8% if you could invest the money at 5% with zero risk? That's the position a lot of people are in right now. I'm not sure there's a right or wrong answer except I know listening to Dave Ramsey isn't the correct choice.
@busterbrown1686
9 ай бұрын
@@FooFan-b3k What sense do it make to borrow money to invest ? That's ridiculous. Pay off your mortgage first and invest the mortgage payment and interest you were paying . You letting the bank make mortgage interest plus HELOC interest when all that money could be invested for your benefit and PROFIT MARGIN. You become the bank. Your goal is $1 million or more NET WORTH and get out of the credit game. Trying to short cut like that is not wise at all. Imagine paying cash for things instead of giving away interest alongside the true cost of those things. A car cost $30,000 but with interest you really paid $37,000 that drops in value as soon as you leave the parking lot. .Dave Ramsey is right.
@FooFan-b3k
9 ай бұрын
@@busterbrown1686 Well if I can make 2% with no risk I'll play that game everyday. And personally I think net worth is a meaningless number. It's all about how that wealth is allocated. For example, I;m 62 and retired. My net worth is roughly 5 million give or take, but I do have about 1.5 million in debt. Do I care? no! Why? Because my income is about 300K/yr and someone else, my tenants, pays the debt. One of my best friends owes about 3 million on his house at age 60. He just bought a 2nd home with a $4 million mortgage and has about $5,000/mo in car payments. He also has a $10,000,000.yr income and a net worth of probably close to $50 million. Another friend of mine is 62 and retired with a paid off house. But he only has about 300K saved + social security to live on. His net worth though is close to $1 million. Which of my friends would you rather be? Stop listening to Dave Ramsey and start thinking and playing a bigger game would be my advice.
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