What I can and can't control (investment income vs spending range)

[Fermion]

$3mil in the bank and you worry about a 3.5% SWR? Which isn't even 3.5% considering you are paying down the loan on your house....money you will eventually likely get back.

Worry about cancer or heart disease.

 

[imoldernu]

I try not to give advice, but think that the "bare minimum" concept is the the best way to ease any anxiety.

Not to go to the "bare minimum", but to live whatever lifestyle is comfortable, keeping in mind plans that can be adjusted as circumstances dictate.

Our plan is to establish a very simple dollar goal for our assets, each year. A one time number to apply to total net worth. A check on this number each year, and then an adjustment to one of three plans.

1. Optimal- doing fine, doing what we want to do and no restictions.

2. Nominal - Normal living, no hardships, but fewer frills.

3. Austerity - That would be your "bare minmum". A full review of all expenses.

While we have been incredibly fortunate, though not in the same bracket as many here on ER, our past 25+ years have been spent in our optimal plan.

That said, we have no appetite for "managing" our assets, per se. Ultra conservative investments that have offered no surprises during out retirement. Our major asset decisions were made early on... house, investments, lifestyle, and decisions on recurring expenses, such as cars, travel and entertainment.

We used 1990, our first retirement year to establish a baseline budget, and while there have been changes since then, our actual expenses have closely tracked inflation. Basically no surprises that have caused anxiety.

Again, no day to day worries or actions... no difficulty in making money decisions. When there are any interim disruptions, involving major expenses, we don't panic or try to make changes, but continue with our once a year look at net worth. If and when that changes, we can adapt, but in the meantime sleep well at night.

 

[ivinsfan]

I think you hit it on the head.

I think my biggest decision is whether to
1) pay off the house and have lower average returns with less volitility
2) move to a cheaper place and increase spending flexibility
3) Keep things as they are and not be so stressed about what is essentially an amazingly great situation.

I really appreciate the forum's indulgence. I'm new to this stuff and there's VERY few places where I can be open and transparent. Family and Friends can potentially provide support, but I'm sure you all know the challenges of that

Yes, you don't seem too comfortable with choice number 3. Number 2 involves moving and all the stresses and expenses that come with selling/buying.In number one the rise and fall of your homes value is locked in and having a monthly payment won't make much difference,. (except for the interest money you would be paying). It would just cut down your exposure to the market, which might make you less stressed out. I don't think anyone can guarantee constant upside in the housing market. Why don't you and your wife go to the area you are considering for the relo and actually check houses and the prices of homes you find acceptable. I know a few people that have relocated and they seem to overvalue their own home and underestimate what the "perfect" home in a new area will cost. Not to mention fees and expenses related to moving.

All in all, it's your call and at your age another year or two while you get more comfortable with your plan isn't unreasonable.

 

[daylatedollarshort]

There isn't a guarantee of an upside in the housing market, but Shiller says in general houses do keep up with inflation. With stock valuations high and fixed income rates low, a house may not be such a bad way to diversify an investment portfolio going forward. Moving makes sense if you find some place you love that also costs less. If you don't find any place you would rather live, and can easily afford to stay where you are at, why move? To save money off your annual expenses to do what else? Invest in the stock market or bonds at current valuations?

 

[RenoJay]

The market is high now. You could sell equities and pay off the mortgage which would vastly reduce your monthly nut. I'm a worrier by nature, and I recently paid off the mortgage and the car and it's helped calm those little non stop voices in the head which can't help but perform constant mathematical equations.


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[Meadbh]

You seem to be in a state of high anxiety and I am not sure that anything we say will calm you. However, here goes:

One way of looking at your house (other than a place to live) is that it is an asset that, statistically speaking, over the lllllooonnnggg term, is likely to appreciate at something approximating the rate of inflation (which is, IIRC, about 3%). To pay for this asset, you have a mortgage at 3.75%. The mortgage interest is tax free, so effectively your true rate is lower. How much lower depends on how much interest you are paying each month (check your amortization table). For argument's sake, let us suppose that after tax, your mortgage is costing you 3.3%. As long as the effective interest rate on the mortgage is greater than the expected appreciation rate of the home, paying off the mortgage would appear to be a rational economic decision.

If you were to pay down the mortgage now, and run your numbers through FireCalc, what would you find? How would you feel without debt? How would it feel to halve your monthly expenses? Would it reduce your anxiety?

We can propose all the rational solutions in the world, but your peace of mind is paramount. Based on your posts so far, I think you are not psychologically ready to ER. You need to decide how important this house is to you. If it is essential, then you either take the risk of ER with high expenses, pay off the mortgage and start ER with a lower investable portfolio (but the same net worth), or keep working until you are comfortable with your numbers. It's as simple as that. Your choice.

 

[audreyh1]

I retired late in 1999. I was quite concerned about the astronomical P/E at the time. So I decided to take two years to average my lump sum into my planned asset allocation (stock funds and bond funds).

Well, some severe market drops did come, and as I kept averaging in, the market kept dropping. I stretched out my buys a little. The market went down for 3 years straight! I finally finished the DCA in Oct 2002, and lo and behold, the market started to recover shortly thereafter.

This is just an anecdote. But averaging in over a multi year period when faced with a pricy equity market worked out well for me. It was the luck of the draw. I didn't try to time. If I had gone all in after the first drop I would have been worse off. That kind of one off timing is impossible.

 

[bmcgonig]

Why wouldn't you pay off the mortgage ? It's like getting 3.75% risk free on that money versus what you are now getting in your fixed income investments which must be a lot less?


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