Can we do this?

[Weebit]

Hello – thanks for all of you who ask and answer questions here. It's a HUGE help.

I’m stuck.

We are doing some scenario planning to see what’s possible.

We’re 6-9 years from retirement and we're contemplating a remodel of our home.

I’m 59; DH is 51. We both work; contribute maximums to 403B, 457, 401K – with employer contributions we put over $100K away pre-tax each year. Neither of us hate our jobs.

If we do the remodeling and extend the life of our mortgage from ending in 2035 to 2052 (a 15-year to a 30-year (and yes, I am watching interest rates!)), there seems to be almost no difference in our Firecalc success rates. 100% in both instances.

The FIDO tool is giving us “scores” of 83 if we pay off the mortgage in 2035; 76 if we extend the mortgage until 2052.

I have our retirement year currently set to 2028, the earliest we would likely consider retiring.

Should I attribute this difference to the Monte Carlo methodology of FIDO and the haircut that was mentioned in a previous thread (that I read many times -thank you!) Or should I be digging to see if I made a mistake somewhere?

Many thanks,
Judy

 

[qwerty3656]

I'm surprise it is dropping like that. Did you adjust the payments down to the lower amount (for the longer amortization)? While you are still working, did you show that you are saving more (the difference in payments)?

 

[COcheesehead]

There seems to be a disconnect between the two tools. I’d see how much FireCalc tells you can take out and see if that matches the budget you built at Fidelity. The Fido tool is pretty comprehensive.

 

[Weebit]

I'm surprise it is dropping like that. Did you adjust the payments down to the lower amount (for the longer amortization)? While you are still working, did you show that you are saving more (the difference in payments)?

The principle and interest payment will stay the same...if no remodel, then we'll pay it off in 2035; if we remodel, we'll have the same payment for another 15 years.

 

[Weebit]

There seems to be a disconnect between the two tools. I’d see how much FireCalc tells you can take out and see if that matches the budget you built at Fidelity. The Fido tool is pretty comprehensive.

On the front page of Firecalc, I say we spend $193K a year. When I do "investigate" and ask "how much can I spend and stay close to 100%," it says $253,570.

Now I know why everyone loves Firecalc. JOKING!!! I must have an error somewhere. Time to print and peruse.

Other ideas welcome!

 

[qwerty3656]

The principle and interest payment will stay the same...if no remodel, then we'll pay it off in 2035; if we remodel, we'll have the same payment for another 15 years.

Oh, I thought it was borrowing the same amount 15 vs 30 years. I guess, at least directionally, it makes sense to go down if you do the remodel because you are paying more money. I suppose you could try to capture the increased value in your home of the remodel, but I don't know if you want to get into that detail.

 

[COcheesehead]

On the front page of Firecalc, I say we spend $193K a year. When I do "investigate" and ask "how much can I spend and stay close to 100%," it says $253,570.

Now I know why everyone loves Firecalc. JOKING!!! I must have an error somewhere. Time to print and peruse.

Other ideas welcome!

That was my first thought. Different data sets between the tools.

I used three different tools prior to retiring and they all more or less gave me the same answer.

 

[TheWizard]

I'm not so keen on you extending your fixed mortgage for 15 additional years.
If your existing mortgage started as a 30 year, then you are halfway through it, 15 years in. So you can afford to pay more each month then you could in 2007 when it started, right?

Consider a HELOC as well, but you need to compare numbers.

I am NOT one of those who says you really should have your mortgage paid off before retiring. If you have way sufficient income in retirement you can do as you please.

I paid my mortgage off a few years ago, about six years into retirement and got a nice inflation fighting boost in disposable income as a result...

 

[Dtail]

The Fidelity tool and the Firecalc tool will not be different by that percentage.
I use both of them regularly and typically Fidelity is around 3% lower.
I would recheck all your inputs on both.
If you wish to provide us with the info, we can run the Firecalc calculator for you.

 

[mrfeh]

I'm not so keen on you extending your fixed mortgage for 15 additional years..

+1

 

[Weebit]

Thanks for the thoughts. I realized today that in FIDO I had budgeted for replacement cars for each of us and hadn't put that in Firecalc. I did that just now and it EDIT: it doesn't bring my Firecalc score down at all. Still 100%. So I've printed out both analyses and will go down them with a finer-toothed comb.

ONE DIFFERENCE: I did select Bernicke Model in Firecalc. With a "constant spending power" selected, success goes down to 95.5%.

Re: Mortgage. Due to low interest rates, we refied in 2020 with a 15-year mortgage, so we haven't had this mortgage since 2007. DH also feels some discomfort with taking a mortgage into retirement, but we need the facts to balance (and educate) our emotional side when making this decision. Hence, this analysis.

I am getting the sense that if we can afford the $4K mortgage for the first few years of retirement, that level of spending is sustainable for the remainder of our lives / mortgage. This seems to be especially true once our SS payments kick in. Either one (as estimated now) would cover that mortgage payment.

Thank you, all! More when I uncover the other disconnects....