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  • Living situation

    My mortgage is my 4th biggest expense. After savings, taxes, and daycare.
    daycare will go away the soonest but I am sure it will be partially replaced by other expenses.
    Savings will go away when I retire.
    Taxes never go away but will be markedly reduced in retirement.
    My mortgage will disappear in 145 months. But who's counting.

    I was thinking about how much of an advantage ditching the mortgage before retirement is. Not only would it be my biggest expense at the time but eliminating it would have the secondary benefit of reducing my spending and my taxes. Dramatically decreasing my FI number.

    poll for current situation.
    But also
    What are your thoughts about keeping a mortgage into retirement?
    35
    Renting
    5.71%
    2
    I own my home
    45.71%
    16
    The bank owns my home
    48.57%
    17

  • #2
    Retirement... better have that house paid off! We own our original home but our current home the bank owns... hopefully will be paid off in next 4-8 years.

    Comment


    • #3
      Originally posted by Lordosis View Post
      My mortgage is my 4th biggest expense. After savings, taxes, and daycare.
      daycare will go away the soonest but I am sure it will be partially replaced by other expenses.
      Savings will go away when I retire.
      Taxes never go away but will be markedly reduced in retirement.
      My mortgage will disappear in 145 months. But who's counting.

      I was thinking about how much of an advantage ditching the mortgage before retirement is. Not only would it be my biggest expense at the time but eliminating it would have the secondary benefit of reducing my spending and my taxes. Dramatically decreasing my FI number.

      poll for current situation.
      But also
      What are your thoughts about keeping a mortgage into retirement?
      Zaphod has been relatively quiet recently, but this is the kind of thing that could make his head explode. how does it reduce your spending or your taxes? guess I never counted mortgage as part of my spending, so it didn't have anything to do with my FI number (outside of calculating disability insurance need). you identify 4 buckets of money. you can move money out of one and put it in the other if you want.

      btw, debt free here. recommended.

      and I'm still waiting for your 529 funding by age and aggressiveness 3D poll

      Comment


      • #4
        Technically the county owns everyone's home.....

        Comment


        • #5
          Originally posted by Peds View Post
          Technically the county owns everyone's home.....
          ...and having met my county commissioners, that is an extremely disheartening observation.

          Comment


          • #6
            Personally, I don't think it's a good idea to retire with a mortgage.

            Comment


            • #7
              getting rid of the mortgage reduces your spending but how does it reduce your taxes?

              We just made a decision to pay off our home by the time our oldest gets to college, rather than massively funding 529 accounts. We'll still max out the 529 accounts to get the max state tax deduction, but at least for now the goal is to pay off the mortgage 12 years earlier than planned, starting in 2021. I'd rather just have easier cash flow issues by college and no mortgage will help there. Also helps on FAFSA although certainly not pinning any hopes on that, unless both of us are working dream jobs that happen to only make us ~75-125k/yr

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              • #8
                I can tell you that having no mortgage in retirement is a must!!! This will keep you out of your retirement accounts letting them continue to compound even after you retire. The results are amazing. I really think being debt free is a big part of a stressless retirement so plan accordingly.

                Comment


                • #9
                  I have been planning no mortgage in retirement, but mortgage rates at 2.5% are starting to look tempting. I agree with the logic of being debt free, but I am reasonably confident I can out earn 2.5% on my portfolio.

                  Comment


                  • #10
                    Originally posted by JBME View Post
                    getting rid of the mortgage reduces your spending but how does it reduce your taxes?

                    We just made a decision to pay off our home by the time our oldest gets to college, rather than massively funding 529 accounts. We'll still max out the 529 accounts to get the max state tax deduction, but at least for now the goal is to pay off the mortgage 12 years earlier than planned, starting in 2021. I'd rather just have easier cash flow issues by college and no mortgage will help there. Also helps on FAFSA although certainly not pinning any hopes on that, unless both of us are working dream jobs that happen to only make us ~75-125k/yr
                    My thought process is that during working years income tax is based off your income but during retirement it is based off your spending because in order to spend you will need to draw off your retirement or taxable accounts forcing you to either claim income or realize gains. Unless you have massive Roth accounts or high basis taxable. Of course the rules could change but the way it is now I would pay very little tax spending what we spend.

                    I see this as a way to front load my spending. 529s are similar. I have a similar plan like you to have it paid off by college to increase cash flow and I am funding the 529 to cover most but not all. I realize that I would not be able to completely cash flow 4 kids in school at once which is why the 529 savings to take the edge off helps.

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                    • #11
                      Currently renting, and have been for 2.5 years as we wrap up our live like a resident phase. Student loans gone, retirement accounts maxed since residency, and no other debt, but we're currently building a home so that will change soon.

                      Comment


                      • #12
                        Originally posted by Hatton View Post
                        I can tell you that having no mortgage in retirement is a must!!! This will keep you out of your retirement accounts letting them continue to compound even after you retire. The results are amazing. I really think being debt free is a big part of a stressless retirement so plan accordingly.
                        Differ a little on some of the assumptions.
                        •Rent vs Own - total cost and preference.
                        •Cashflow rent vs own
                        Run the numbers- the tax free sale, existing tax free funds and opportunity cost of investing or tax liability in freeing up funds is a factor.
                        •Future plans , are you staying there or potentially changing for whatever personal reasons.
                        Certainly cash flow is improved with zero rent or mortgage. For some, the IRA tax hit to payoff the mortgage isn’t worth it. Taxes can change the math and personal situations as well..

                        Comment


                        • #13
                          What is the difference between writing a check for $400k (or $200k) to pay your mortgage off on 8/10/2020 and retiring afterwards versus paying your monthly mortgage payments for the next 10 or 15 years at 3% interest? If you had a 30 year mortgage then your payments for the last 10 years would be at 20+ year old prices. Sure you have a mortgage payment, but if you don't pay it off then you have $400k (or $200K) of extra cash (cash which may be in the market).
                          Last edited by JWeb; 08-05-2020, 10:36 AM.

                          Comment


                          • #14
                            Originally posted by JWeb View Post
                            What difference between writing a check for $400k (or $200k) to pay your mortgage off on 8/10/2020 and retiring afterwards versus paying your monthly mortgage payments for the next 10 or 15 years at 3% interest? If you had a 30 year mortgage then your payments for the last 10 years would be at 20+ year old prices. Sure you have a mortgage payment, but if you don't pay it off then you have $400k (or $200K) of extra cash (cash which may be in the market).
                            I know your question was rhetorical, but for those not convinced, that is the point. Instead of paying your mortgage early, you put extra into that savings bucket. Money is fungible. In fact, if you invest, you will likely come out ahead given current mortgage rates.

                            Personally, I prefer to have a paid off home; essentially I have pre-paid for the bulk of my housing expenses going forward. I've also pre-paid (hopefully) college with a sizeable 529 and pre-paid a portion of my health expenses with an HSA that is nearly 6 digits (will today be the day!?). Basically, I eschewed mental accounting and created actual buckets. It works for my personality type.

                            But none of that is any different than just putting it all into a taxable account.

                            Comment


                            • #15
                              Originally posted by Hatton View Post
                              I can tell you that having no mortgage in retirement is a must!!! This will keep you out of your retirement accounts letting them continue to compound even after you retire. The results are amazing. I really think being debt free is a big part of a stressless retirement so plan accordingly.
                              Agree on this.

                              There are decisions made that make financial sense and those that bring about emotional well being. Yes, one can have a 2.5% mortgage and think that you can easily beat it by investing the money you would have used to pay off the mortgage, and made much more on the market. But what if the market goes down and stays down for a couple of years and you see negative returns and an erosion of the principal.

                              I think that by eliminating the big items like house mortgage, college tuition, other loans taken and have vehicles that will last well into retirement, you will not worried about finance in retirement. The dividends from your investments, social security and the stash of emergency fund will easily fund your expenses. Even a physician can live on 60-75K if all you need are living expenses, health care expenses and travel. That is my plan for retirement.

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