I don't think he gets it!!

[jwkde]

From NY Times Jan 6

Resolved: Charles Farrell - NYTimes.com

 

[travelover]

No offense, but that was not worth reading.

 

[W2R]

I think that his suggestions to financially prepare for retirement by saving 25% of income and paying off the mortgage can be helpful to the average retiree wannabe. The advantages of paying off the mortgage or not has been debated on this board so maybe that is not such a clearcut advantage for all. I thought it was a key move for me as an individual. And many of us saved more than 25% of income in order to retire comfortably.

 

[target2019]

Hi! My name is Ed, and my Capital to Income Ratio is 5.

Charlie forgot to mention that you gain some tax benefit from that home interest.

 

[ERD50]

Regardless of whether it is right/wrong/indifferent for an individual, there is a flaw in his logic:

So for every dollar of mortgage debt I pay off, I’m guaranteed to save myself 4.8 percent in interest, which is just like making 4.8 percent. Since there aren’t too many places where I can make a guaranteed return of 4.8 percent, it makes more sense for me to pay down the debt than invest that money in a low-yielding CD or savings account.

The flaw is the assumption that you need, want and/or benefit from a 'guaranteed return of 4.8 percent'. It sounds nice, but it comes at a potential cost. It is reasonable to approach our investments with the thought that a balanced portfolio will provide higher long term returns than current low mortgage rates. So that is the (opportunity) cost.

A lousy analogy:

Let's say I live in an area that rarely sees significant hail. I could pay extra for a roof that was 'guaranteed' against hail damage. Do I need the guarantee? Was it worth the cost? Would my insurance cover the damage anyhow?

Believe it or not, I don't care to debate this, just throwing that out as food for thought.

-ERD50

 

[BigNick]

The flaw is the assumption that you need, want and/or benefit from a 'guaranteed return of 4.8 percent'. It sounds nice, but it comes at a potential cost. It is reasonable to approach our investments with the thought that a balanced portfolio will provide higher long term returns than current low mortgage rates. So that is the (opportunity) cost.

True, but we all have some part of our portfolio in CDs/cash/MM accounts, and 4.8% on those would be very nice. As long as your emergency fund is OK, paying down your mortgage with your cash allocation seems reasonable, especially (but not only) if you have a sufficiently flexible mortgage that you can get at it again.

On the other hand, in somewhere like the Netherlands where mortgage rate interest is fully tax-deductible and most middle-class people are on a marginal tax rate somewhere around 50%, it typically pays to have a 30-year, interest-only mortgage, and put the money which would go towards repayments into stocks. Last time I checked, the Netherlands had no capital gains tax, just a flat 30% tax on a notional 4% return on assets. So if you make 8% on your portfolio over the lifetime of your mortgage, that will be 6.8% net, while the money which you're borrowing at 4.8% is only costing you 2.4%. Renting your home is, unsurprisingly, pretty rare among average and higher income earners in the Netherlands.

 

[calmloki]

Regardless of whether it is right/wrong/indifferent for an individual, there is a flaw in his logic:

.....
Believe it or not, I don't care to debate this, just throwing that out as food for thought.

-ERD50

Are you feeling ok today?

 

[Rich_by_the_Bay]

Probably a good time to remind ourselves that posting a raw link with no comment is less helpful than doing so with a brief description so readers can decide whether to pursue it.

Old moderators die hard...

 

[ERD50]

Are you feeling ok today?

Thanks, made me laugh out loud!

In some ways, no, I'm not feeling OK today. Been through way too much circular and painful arguing/discussion this holiday But it is OK, because it has to be, what choice do we have?

And I can laugh at it, so it really is OK, ummm I guess.

-ERD50

 

[Independent]

Probably a good time to remind ourselves that posting a raw link with no comment is less helpful than doing so with a brief description so readers can decide whether to pursue it.

Old moderators die hard...

I post on another forum where the "correct" response to an OP with a link but no discussion is to reply with a picture from an old sitcom, without comment.
"ALF" is popular, but I saw a nice photo from Gilligan's Island recently.

 

[Nords]

Probably a good time to remind ourselves that posting a raw link with no comment is less helpful than doing so with a brief description so readers can decide whether to pursue it.
Old moderators die hard...

"No Naked Links!!"

 

[Ed_The_Gypsy]

Can we go back to sadly perverted humor?

 

[freebird5825]

"No Naked Links!!"

If Link is naked, I wanna see him.

PS How as that, Ed the Gypsy?

 

[Gumby]

Well, he's not naked, but here's Linc with friends Julie and Pete.

 

[calmloki]

Well, he's not maked, but here's Linc with some friends.

Dang you're fast!

 

[kumquat]

Probably a good time to remind ourselves that posting a raw link with no comment is less helpful than doing so with a brief description so readers can decide whether to pursue it.

Old moderators die hard...

Wasn't there a, now banned, poster who used to post raw [-]links[/-] pictures with a bit of comment? Is this an invitation for him to return using links?

 

[Nords]

Is this an invitation for him to return using links?

Are you volunteering to be his moderator?

I object to naked links because they're just repeating a headline feed without perspective or interpretation. This is a discussion board, not an "OMG!!" Twitter feed.