Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Old 09-04-2014, 10:15 AM   #21
Thinks s/he gets paid by the post
Cobra9777's Avatar
Join Date: Jul 2012
Location: Texas
Posts: 1,555
Originally Posted by pb4uski View Post
If/when interest rates rise then it will mean that the Fed believes that the economy has strengthened sufficiently to raise rates and while increase rates are a negative factor for bonds and stocks, the stronger economy is good for stocks.
Your portfolio is 40% bonds and we both agree that will be negative. Stocks... yes, the first few years should be positive due to a strong economy. After that, it's negative as high rates take a toll on corporate earnings and growth. You can see this pattern following the low post-war rates. Going forward, how that plays out in any given situation depends on the timing of the stock turn vs the remaining mortgage period and how bad bonds are hit.

Originally Posted by pb4uski View Post
Besides, mortgage holders who also own stocks and bonds are so far ahead of the game after the last few years that there is probably no way short of some sort of economic Armageddon that we could end up behind. As an example, I refied in early 2012 and since the refi my portfolio has earned 14.25% annualized which far exceeds my 3.375% mortgage rate so it is very unlikely that I will lose out on that deal.
Those numbers are from the tail-end of the QE cycle and resulting asset inflation. I'm talking about the upcoming period when all that goodness unwinds. The past is in the books. Everyday, you make a decision to continue holding debt based on expected future market returns.

Bottom line: I think ERD50's point is valid. One should be a bit cautious relying too heavily on raw FIRECalc history to justify holding a mortgage. There are some simple ways to adjust the analysis to get more reasonable success rates. Then, it's a matter of risk tolerance, timing, and how one feels about bond and stock performance in a rising rate environment.

I'm not against the concept of holding a mortgage in retirement and leaving the would-be payoff funds in a 60/40 portfolio. Especially anything sub-4% for 20-30 years. It's hard to imagine how that could go wrong. But if your timeframe is 10-15 years or less, and your rate is north of 4.0-4.5%, I think the decision analysis should include more than a quick FIRECalc run.

Retired at 52 in July 2013. On to better things...
AA: 55% stock, 15% real estate, 27% bonds, 3% cash
WR: 2.0% SI: 2 pensions, some rental income, SS later
Cobra9777 is online now   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-04-2014, 11:03 AM   #22
Recycles dryer sheets
Join Date: Apr 2011
Location: Castro Valley
Posts: 468
I paid off my mortgage in 2004 with 9 years remaining. Balance $180K at 4.75%. For the heck of it, I did some calculations to see how my decision turned out. For my case using my assumptions, they came out very close to equal with a slight edge to paying off the mortgage.

The one variable that I could not predict is would I have stayed the course during the stock market crash? Since I have never had a large sum in an after tax account loose 50%, I cannot guarantee that I would not panic and sell at the wrong time. It was easy not to panic in a before tax retirement account that I don't plan to access for a long time.

jkern is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Keep investing or payoff mortgage? Joe Bass FIRE and Money 32 07-15-2008 07:21 PM
Mortgage-keep or payoff---with dollar amounts rayvt FIRE and Money 1 05-18-2008 07:12 PM
mortgage payoff from investing jIMOh Young Dreamers 15 02-07-2008 10:31 AM
Analyzing the mortgage payoff option sgeeeee FIRE and Money 43 06-22-2005 10:29 PM
Another payoff the mortgage outlook dm FIRE and Money 12 10-13-2004 01:27 PM

» Quick Links

All times are GMT -6. The time now is 08:10 AM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2018, vBulletin Solutions, Inc.