No more mortgage!

It's great that you saved enough to pay off your mortgage. Congrats!

But, was paying it off the right thing to do vs. investing the money? I hesitate to bring this up and pee in the punch bowl, but you just said in another thread:

My spending is planned to be 7%-9% WR from 55-70. Then when SS kicks in, it goes to -0.1% (I'm making money). I just need to make it to SS without going completely broke and then I can live forever on my COLA pension and SS.

I stopped using firecalc and use the Flexible Retirement Planner. It is easier to model different scenarios.
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Maybe you can make it pretty easily to age 70. Otherwise, it seems like it might have been better to not go cash poor by paying off your mortgage, but rather leverage your house to make it to age 70.

Part of this forum is to learn, right?

Again, congrats on being able to put aside that much over the last 6 years. That's remarkable.
 
RunningBum said:
It's great that you saved enough to pay off your mortgage. Congrats!

But, was paying it off the right thing to do vs. investing the money? I hesitate to bring this up and pee in the punch bowl, but you just said in another thread:



Maybe you can make it pretty easily to age 70. Otherwise, it seems like it might have been better to not go cash poor by paying off your mortgage, but rather leverage your house to make it to age 70.

Part of this forum is to learn, right?

Again, congrats on being able to put aside that much over the last 6 years. That's remarkable.
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Curious what makes you think we are cash poor?

I do need to correct the data in my previous post. We have a 5.6% WR until age 70, then it goes to zero.
 
corn18 said:
Curious what makes you think we are cash poor?

I do need to correct the data in my previous post. We have a 5.6% WR until age 70, then it goes to zero.
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You said
I just need to make it to SS without going completely broke
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That sounded like you are concerned about it, and you also previously mentioned a 7-9% WR. If it was on the high end, that would seem risky, with a legitimate concern that perhaps you are cash poor.

Now you say it's only 5.6%. That's very doable for 15 years.

Wasn't intending to ruffle your feathers. But in general, in the "pay off the mortgage or not" question, I think people too often overlook being cash poor before they can easily start tapping retirement accounts, pensions, and social security.
 
RunningBum said:
You said

That sounded like you are concerned about it, and you also previously mentioned a 7-9% WR. If it was on the high end, that would seem risky, with a legitimate concern that perhaps you are cash poor.

Now you say it's only 5.6%. That's very doable for 15 years.

Wasn't intending to ruffle your feathers. But in general, in the "pay off the mortgage or not" question, I think people too often overlook being cash poor before they can easily start tapping retirement accounts, pensions, and social security.
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Understood. No ruffled feathers. I am always on the lookout for something I missed. I completely missed taking into account reduced survivor benefits on my pension and SS when planning my laddered term life insurance. Someone on bogleheads asked me if I had accounted for that in my plan, and I realized I had not. Helped me make a better plan.
 
Congratulations. In 6 years... it's quite an achievement. Our mortgage is payoff is also becoming a reality in a very near future. Can't wait for the feeling of having $0 debt including mortgage :)
 
f35phixer said:
Congrats Hole, Offer stills stand to come back to PAX !!!!!!!!!!

I'm out Dec 2020. Can't wait, I'll be 62 so getting that extra 10% in pension will be nice. Wife is done Dec 24, 2019....
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Good Luck & Congrats !!
 
Great job.
Personally got mortgage off my back years ago. Unfortunately still have to pay property, school, fire and mosquito taxes.:mad:
 
Congrats Tom! Impressive that you made such a change to reach your goals. I too read The Millionaire Next Door and found it very thought provoking. I wish I could have read it 30 years ago.
 
freedomatlast said:
We bought our first house in 1984. Paid it off in 1990. Never had a mortgage on any primary residence since. This has been a huge factor in our ability to save and invest and to becoming FI.
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How could this be true?

A 70/30 portfolio is up over 12x since 1990. In order to pay off the mortgage, you had to pull funds that could have stayed invested. So you have less invested after the pay off. You missed much of the big bull that was the 90's.

Sure, you can direct the old mortgage payments to savings, but for many, many years those would just be going towards getting your portfolio back to where you were. So how can this be a "huge factor" in becoming FI? Can you show me the numbers - even a rough cut should be obvious if it was a "huge factor".

-ERD50
 
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I’m sure there are scenarios where it’s financially better to have a mortgage, especially given the low rate environment we’ve been for some time now. However, I’m one of those people that felt great when I paid off my mortgage. Something about actually owning my house free and clear was simply a dream that came true. It was a great day. Congratulations to the OP on owning his home mortgage free.
 
with no mortgage and zero debt, it's easier to take more risks on investment.

Congrats to the OP, I also have not had a mortgage the last 24 years and just quit at 50. My allocation was 100% equity during the last 24 years but now 60/40.
 
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vipertom1970 said:
with no mortgage and zero debt, it's easier to take more risks on investment....
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absolutely.

nothing is certain.. job loss, major illness, other family emergency, death of a spouse, etc. those storms are easier to deal with without debt. it's not just a math problem of debt service being less than ROI for net gains without considering the risk of the debt load.

i learned that lesson a little too late. we had a new 30-yr conv mortgage in 1988 which we converted to a 15 in 1990 and paid off in 2002. we walked into ER 3-yrs later at age 55 having amassed a very nice nest egg and 100% debt free. my only regret was not eliminating that debt sooner. if we had we'd likely have a much larger nest egg.
 
rk911 said:
nothing is certain.. job loss, major illness, other family emergency, death of a spouse, etc. those storms are easier to deal with without debt.
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Why is that? Wouldn't it be better to have the flexibility of a large sum of cash invested and available in such cases? You could use it to pay the monthly mortgage and other expenses to tide you through a stretch where you might not have income. If you've got all your money tied up in the house, you've taken away that debt, but you still have other expenses you need to pay.
 
Here's a real life example... I took refinanced our mortgage in January 2012 just before I retired to lower my rate to 3.375%. My monthly payments are $1,524 on a $215,000, 15-year loan. I could have cut a check from my taxable account for $215,000 and not had a mortgage.

Portfolio Visualizer indicates that $215,000 in January 2012 in a 60/40 portfolio would be $439,850 today... less my current mortgage balance of $117,453 would leave me with $322,397 and a debt-free house.

If I had chosen to not have a mortgage and invested the $1,524/month that I have made in mortgage payments in the same 60/40 portfolio, Portfolio Visualizer indicates that I would have $200,657 and a debt-free house.

So at this point I am ahead by $121,740 as a result of the decision to keep the mortgage. While I realize that the last 6 3/4 years have had really good investment results, that is a HUGE difference.

The IRR for $1,524/month invested for 6 3/4 years growing to $200,657 would be ~14.5% annually. My mortgage interest rate is 3.375% so my spread is 11.125%. My average mortgage balance over that 6 3/4 years has been $166,227... that average balance times an 11.125% spread times 6 3/4 years is $124,825 so the $121,740 that I am ahead seems to make sense.

Is this 6 3/4 years atypical? Probably. Did I take a calculated risk? Yes. Could it have gone bad? Yes, but it wasn't a huge risk compared to our NW. My view was that it was more likely than not that my investment results would exceed my 3.375% mortgage interest rate so it was a risk worth taking and it has worked out very well.
 
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Yes, congrats! Our mortgage-burning party is in mid-January. A nice feat here in Hawaii!
 
We paid our house off in 2011 and then used savings and our mortgage payment to get our kids through school debt free. Now the kids are off the payroll and we are saving and traveling. As my husband says, as long as we pay our property taxes (which are low here in California since we have owned our house for 25 years), no one can ever take away our house!
 
samcat said:
We do and I seem to think houses are not included in lawsuits but not sure about that.
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Not quite true. If someone sues and wins a judgment against you, they become your creditor and will try to collect on that judgment by executing on any or all of your assets. A homestead exemption protects some or all of the equity in your home against that effort. Homestead exemption amounts vary by state. Here is a discussion of the California homestead exemption. https://www.nolo.com/legal-encyclopedia/the-california-homestead-exemption.html
 
Congratulations on paying your loan off.

I haven't had a mortgage for 33 years. I built my home and a few years later just paid it off. I did add on and have done some improvements but always paid cash for that. I was around 28 years old when I paid it off and I haven't had a mortgage since then.
 
samcat said:
We paid our house off in 2011 and then used savings and our mortgage payment to get our kids through school debt free. Now the kids are off the payroll and we are saving and traveling. As my husband says, as long as we pay our property taxes (which are low here in California since we have owned our house for 25 years), no one can ever take away our house!
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Yes, we paid off our house early and then put that money towards the kids tuitions. (But I can't say we have low property taxes.)
 
street said:
Congratulations on paying your loan off.

I haven't had a mortgage for 33 years. I built my home and a few years later just paid it off. I did add on and have done some improvements but always paid cash for that. I was around 28 years old when I paid it off and I haven't had a mortgage since then.
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Very impressive. We hadn't even bought our house at that age, never mind having it paid off!
 
I would rather be mortgage debt free and sleep at night. Next market correction I will yawn, roll over, and sleep an extra 30 minutes.
 
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