pb4uski
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I view having a mortgage in retirement only as being a leverage play and earning a spread on what I invest over the interest I pay on my mortgage based on the relative risk of the investments (60/40 AA) and my mortgage interest rate.
Historically, a 60/40 AA has returned 8.9%, but for planning purposes I haircut this historical return significantly, to 5.5%. Since I am comfortable with the risk and view it as a "good" bet, I refinanced at 3.375% just before I retired and have a mortgage in retirement. So far, it has worked out well.
One caution however. I'm my case my mortgage is less than 10% of my portfolio. If my mortgage were 50% of my portfolio or more then I would not be so comfortable carrying a mortgage in retirement.
I did find the firecalc results of having a mortgage surprising. Let's say that you refinance for $200k and invest the proceeds in a 60/40 balanced fund and the balanced fund pays the mortgage payment of $1,000/month (30 years at ~4.4%). Firecalc suggests that 104 of 114 trials (91.2%) the fund would survive the mortgage. In only 2 of 114 trials the fund would be significantly underwater, and would end up slightly underwater in another 8 trials. However, the upside is significant with an average ending balance in the fund of $476,124 after paying off the mortgage.
Historically, a 60/40 AA has returned 8.9%, but for planning purposes I haircut this historical return significantly, to 5.5%. Since I am comfortable with the risk and view it as a "good" bet, I refinanced at 3.375% just before I retired and have a mortgage in retirement. So far, it has worked out well.
One caution however. I'm my case my mortgage is less than 10% of my portfolio. If my mortgage were 50% of my portfolio or more then I would not be so comfortable carrying a mortgage in retirement.
I did find the firecalc results of having a mortgage surprising. Let's say that you refinance for $200k and invest the proceeds in a 60/40 balanced fund and the balanced fund pays the mortgage payment of $1,000/month (30 years at ~4.4%). Firecalc suggests that 104 of 114 trials (91.2%) the fund would survive the mortgage. In only 2 of 114 trials the fund would be significantly underwater, and would end up slightly underwater in another 8 trials. However, the upside is significant with an average ending balance in the fund of $476,124 after paying off the mortgage.
FIRECalc looked at the 114 possible 30 year periods in the available data, starting with a portfolio of $200,000 and spending your specified amounts each year thereafter.
Here is how your portfolio would have fared in each of the 114 cycles. The lowest and highest portfolio balance throughout your retirement was $-390,594 to $2,181,032, with an average of $476,124. (Note: values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 10 cycles failed, for a success rate of 91.2%.
Withdrawals 12,000
Plan End 30.....
Starting Portfolio 200,000
Percent in Stocks 60%
Expense Ratio 0.18%.......
Inflation Rate selected* 0%
Fixed income model * LongInterest
Override start year* 1871
Terminal Value* 0.....