Just found this forum

[clay]

I'm 57, a professor who loves his work, but I've been at it 33 years and there are a lot of other things I want to do. (My experience is that many people thinking about retirement fall into two broad groups: Will I be bored? and Can I afford it? I'm definitely in the second).

I'll just begin with a couple of questions, the first naive and the second, I'm sure, a FAQ (so maybe just point me to some relevant links).

1. What does FIRE stand for?

2. We recently bought a house with a 6.25% loan. We could pay it off, but it would take about 1/5 of our retirement savings. While I realize that all sorts of details here would be relevant, are they some good general ways to start thinking about whether paying the mortgage off before retiring would be a good idea?

 

[Fred333]

Welcome to the forum.

 

[REWahoo]

1. What does FIRE stand for?

This one's easy...
http://www.early-retirement.org/forums/f32/acronyms-slang-frequently-used-forum-19058.html

As for the mortgage payoff question, that's a topic of hot debate. My opinion is you do whatever helps you sleep better at night...in my case I paid it off early when I retired at age 57.

 

[clay]

Thanks

Thanks for the helpful reply.

I noticed your signature: "If I owned Texas and Hell, I would rent out Texas and live in Hell." - Philip Sheridan

Are you an Okie, by any chance (I live ten miles outside Norman). I see that bumper sticker around here a lot

 

[Rustic23]

He's a Texan that encourages folks to move there.

and, Welcome. FireCalc can help you with number 2, and you will get lots of opinions here.

 

[REWahoo]

He's a Texan that encourages folks to move there.

To Oklahoma...yeah!

 

[TexasGal]

Hello and welcome! There is so much that can be learned here. I am still reading through old threads and finding lots of wisdom.

TG

 

[clay]

TexasGal

I won't hold being from Texas against you.

 

[REWahoo]

I won't hold being from Texas against you.

And TG & I won't hold the fact you settled on the wrong side of the Red River against you. After all, somebody has to live in Oklahoma or the Canadians might claim it.

 

[TexasGal]

I won't hold being from Texas against you.

I'll be glad to share some of our Texas varmints with you across the river. They are cute little critters, really. Grasshoppers bigger than little dogs, chiggers with teeth bigger than their bodies, fire ants that never let go . . . I'd love to share. Look for 'em . . . they'll be floating over shortly . . . coming just for you.

 

[clay]

ok

>And TG & I won't hold the fact you settled on the wrong side of the Red River against you.

They offered me a job here

 

[MasterBlaster]

We recently bought a house with a 6.25% loan. We could pay it off, but it would take about 1/5 of our retirement savings. While I realize that all sorts of details here would be relevant, are they some good general ways to start thinking about whether paying the mortgage off before retiring would be a good idea?

This topic comes up again and again on this forum and every other finance forum.

Here is a link to one such discussion:

http://www.early-retirement.org/forums/f28/pay-off-mortgage-retirement-26765.html

Perhaps we should put one of these threads in the "best of" section.

 

[clay]

This topic comes up again and again on this forum and every other finance forum.

Here is a link to one such discussion:

http://www.early-retirement.org/forums/f28/pay-off-mortgage-retirement-26765.html

Perhaps we should put one of these threads in the "best of" section.

Yes, a good place for it. I'm sure this is a perennial concern on this and many other forums (my situation must be quite common) and one without an obvious answer--at least to non-specialists like me. I also realize that the "right" answer depends on myriad details, including one's ability to "sleep at night" (increasingly important to me).

In thinking about all this, I've been inclined to ask myself if I would invest money with a margin call of 6.25% (our current interest rate). The answer is NO, which suggests that we pay the mortgage off. But I'm not sure this is the best way to think about the situation.

Before retirement the mortgage just seemed like another expense, but with retirement looming (Thank God!), it's murkier. But one thing that is clear is that the 6.25% reduction is a sure thing, and any investment I might elect right now that promises to better it is iffy. Moreover, my time horizon isn't infinite anymore (like it was when I was 20--is this a common feeling on this forum?).

Many thanks for the link. Just checked it, and it looks very useful.

 

[packrat44]

I'm 57, a professor who loves his work, but I've been at it 33 years and there are a lot of other things I want to do.

Clay, welcome to the forum. What field do you teach?

 

[chinaco]

Hi Clay.

 

[tightasadrum]

I'm 57, a professor who loves his work,

2. We recently bought a house with a 6.25% loan. We could pay it off, but it would take about 1/5 of our retirement savings. While I realize that all sorts of details here would be relevant, are they some good general ways to start thinking about whether paying the mortgage off before retiring would be a good idea?

Hey Clay,

What's field do you work in?

*********

I haven't read the link on paying off the loan, but I'm betting it talks about "effective" costs or something like that. Don't hold me to these numbers, but...

If you are able to itemize your federal tax, and if you're in the 28% tax bracket, then I believe your effective cost on a 6.5% loan is around 4.7%.

If my numbers are correct, you could invest the money instead of paying off the loan in a 5% MM and be around .22% to the good. Of course rates could change up or down. On a $100000 balance, that's $220 per year.

How much would you be willing to fork over each year to not have a mortgage? Of course, there is also the opportunity cost from the money you no longer have available. Another negative wrinkle may be whether the money is in a tax-deferred account like a 403B or an IRA. You would also have to pay the taxes to use it.

There is the intangible of knowing you don't have to pay the mortgage each month, and for some that feeling would trump the added cost.

Oh, what would you do with the extra money each month? Invest it or spend it? I begin to see why this subject gets so much ink. I have always kept the mortgage, although I have been known to pay extra on the principle for reasons even I can't surmise. If I'm screwed up on these numbers, we're sure to hear from the experts on this board before the sun goes down.

 

[clay]

Clay, welcome to the forum. What field do you teach?

Thanks. I teach philosophy (logic, reasoning, phil. of science, decision theory). It's been a good run, but life is short, and many other things I want to do and try.