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08-19-2017, 02:12 AM
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#41
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Thinks s/he gets paid by the post
Join Date: Dec 2010
Location: Midwest
Posts: 1,795
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Sure sounds like this has become the Dave Ramsey/Credit Card thread.....
Back to OP. Not being able to retire with a mortgage is, IMHO over hyped. A reasonable mortgage (mine is $600 a month) should not be considered anti-retirement. Personally, I would rather have cash in hand than to pay off a 3% mortgage. We like to take the occasional risk and pay cash for value investments that occasionally pop up. What could be better than paying 3% (to the mortgage company)?
Cash flow in retirement is your friend. If you can pay a mortgage out of your anticipated cash flow, and don't feel "poor", what is the big deal? Yes, you probably should not use 30-40% of your monthly cash flow, but what about 15-20%?
Many confuse psychological concerns with financial. Yes, psychologically, it might feel better NOT to have a mortgage in retirement. But that does not mean it would be the best financial strategy. Certainly not with a 3% mortgage....
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08-19-2017, 05:45 AM
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#42
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Confused about dryer sheets
Join Date: Jul 2017
Posts: 7
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L
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08-19-2017, 09:32 AM
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#43
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Thinks s/he gets paid by the post
Join Date: Dec 2014
Location: St. Charles
Posts: 3,915
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Quote:
Originally Posted by donheff
I find it amazing that so many people use debit cards instead of credit cards.
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This amazes me as well. Independent of any cash back offer, you get free float and much better protection from fraud and identity theft. Plus the previously mentioned extended warranty.
__________________
If your not living on the edge, you're taking up too much space.
Never slow down, never grow old!
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08-19-2017, 08:03 PM
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#44
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Thinks s/he gets paid by the post
Join Date: Jun 2017
Location: Chicagoland
Posts: 1,127
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Quote:
Originally Posted by samclem
All this is great. Now the next step: As each of the two auto loans get paid off, immediately increase the size of that direct deposit to your investment account by the same amount as the expiring loan payment. You guys are already used to living without that money, this is a painless way to increase the amount you put away every month.
And, along the same lines, when you get a pay increase in future years, dedicate a big slug of it to your retirement investments. This is what helped us a lot--we increased our spending as my career progressed, but at about 50% of the increased pay. The rest went into the retirement portfolio. We didn't feel deprived (we were spending more money, after all), and it significantly increased the level of our savings.
If you never see it, you don't miss it.
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Thank you. Absolutely.
Discussed doing just this with the DW: Once the car loan is paid off, that amount immediately gets added to the automatic deposit into our retirement savings. Assuming I get a raise this year, the amount of the raise gets added. If I get a bonus, it goes in as well.
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08-19-2017, 08:10 PM
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#45
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Thinks s/he gets paid by the post
Join Date: Jun 2017
Location: Chicagoland
Posts: 1,127
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Quote:
Originally Posted by brucethebroker
Back to OP. Not being able to retire with a mortgage is, IMHO over hyped. A reasonable mortgage (mine is $600 a month) should not be considered anti-retirement. ... If you can pay a mortgage out of your anticipated cash flow, and don't feel "poor", what is the big deal? Yes, you probably should not use 30-40% of your monthly cash flow, but what about 15-20%?
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I agree with you. But, in my case, our mortgage is $2,300/mo and we have 12 years remaining. As things stand right now, at my current savings level, I don't want to have to service that debt with retirement funds.
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08-20-2017, 12:28 AM
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#46
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Moderator
Join Date: Jul 2017
Posts: 5,762
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I my have regretted how I handled some of my investing but I've never regretted paying off my mortgage early.
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08-20-2017, 06:24 AM
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#47
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Thinks s/he gets paid by the post
Join Date: Jan 2011
Location: Fair Lawn
Posts: 2,959
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Quote:
Originally Posted by MarieIG
I my have regretted how I handled some of my investing but I've never regretted paying off my mortgage early.
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+1 My feelings are the same. As I've mentioned in other threads on this topic, one should not discount the emotional aspect (at least for some) of being rid of the mortgage, and of course other debt.
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08-20-2017, 06:37 AM
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#48
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,358
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Opposite for me.... we have a mortgage.... refinanced for lower rate and a little cash out just before I retired 6 years ago.... the monthly payment is on autopay and is automatically logged into Quicken... other than seeing those entries in my bank account and in Quicken and a monthly piece of mail acknowledging our payment I do not give our mortgage a second thought.
I recall my Dad, who was very successful, once saying that one of his few regrets was that he did not use leverage more and I took his comment to heart.
My peace of mind is in knowing that anytime that I want I can just sell some securities and pay off the mortgage. In the six years since I refinanced, my investment portfolio has earned many times the 3.375% I pay in mortgage interest.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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08-20-2017, 07:33 AM
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#49
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Recycles dryer sheets
Join Date: Oct 2012
Location: Minneapolis 'burbs
Posts: 382
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Quote:
Originally Posted by CoolRich59
More importantly, I've been cutting and pasting info from this forum and emailing it to my kids. While I regret not doing more to prepare for retirement earlier, I'm determined to "convert" my kids so that they can start applying these lessons now while they are in their 20s.
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If your kids are receptive to your advice, I recommend this blog post from Jim Collins. He talks about what advice is timely for people your kids' ages.
His "Stock Series" is a classic for a reason, so I recommend that too.
And his video on F-You Money is awesome.
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08-20-2017, 08:04 AM
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#50
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2005
Location: Northern IL
Posts: 26,887
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Quote:
Originally Posted by CoolRich59
I agree with you. But, in my case, our mortgage is $2,300/mo and we have 12 years remaining. As things stand right now, at my current savings level, I don't want to have to service that debt with retirement funds.
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Can you explain how "service(ing) that debt with retirement funds" is a factor?
The math tells me that if you pay it off pre-retirement, you then have less post-retirement funds. Seems like mostly a wash to me, not a go/no-go decision point.
Some people mention taxes from the extra cash flow required to pay the monthly mortgage, but wasn't the money used to pre-pay the mortgage taxed? And if not, then it is available for the monthly payments. Again, seems like mostly a wash to me.
-ERD50
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08-20-2017, 08:27 AM
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#51
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Thinks s/he gets paid by the post
Join Date: Mar 2017
Posts: 1,659
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There are sound reasons for paying off a car loan early, even if it has a low interest rate.
I'm a long-distance commuter, and if I let my 6 year loan run its course without prepayments, I'd have driven over 150K miles before my car is paid for. That leaves too much possibility of large repair bills and car payments at the same time.
Now that our remaining college tuition is in the bank, I'm making payments that will pay the car off in four years.
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08-20-2017, 08:39 AM
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#52
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2005
Location: Northern IL
Posts: 26,887
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Quote:
Originally Posted by Out of Steam
There are sound reasons for paying off a car loan early, even if it has a low interest rate.
I'm a long-distance commuter, and if I let my 6 year loan run its course without prepayments, I'd have driven over 150K miles before my car is paid for. That leaves too much possibility of large repair bills and car payments at the same time.
Now that our remaining college tuition is in the bank, I'm making payments that will pay the car off in four years.
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I'm often struck by how the "pay it off" crowd seems to fully ignore one side of the equation!
If you don't pre-pay the loan, that money is available to you, for, Oh, I dunno - paying a large repair bill?
People act like they didn't use their own money to pre-pay the loan, that it was magic money or something. Hey, pre-pay if you want, I think it mostly isn't a big deal, but don't make up advantages for it that don't exist. Best to be honest with yourself.
-ERD50
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08-20-2017, 09:14 AM
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#53
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2008
Location: On a hill in the Pine Barrens
Posts: 9,719
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Myself, I wouldn't invest dollars in an uncertain future (stock market) vs. paying down a certain future (fixed mortgage at 3.9%).
Best way is to get others to manage and pay off or pay down their auto loans. Then you can confront the mortgage loan, and make additional principal payments as you see fit.
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08-20-2017, 09:22 AM
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#54
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2005
Location: Northern IL
Posts: 26,887
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Quote:
Originally Posted by target2019
Myself, I wouldn't invest dollars in an uncertain future (stock market) vs. paying down a certain future (fixed mortgage at 3.9%).
Best way is to get others to manage and pay off or pay down their auto loans. Then you can confront the mortgage loan, and make additional principal payments as you see fit.
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So your advice to a young couple buying their first home would be to not put a single penny into any investment that isn't a sure return greater than their mortgage rate (which probably means no investment at all, risk-free money isn't paying that high)?
For most people, that would mean not investing a penny for ~ 15 years (take the case of someone doubling principal on a 30 year loan). What is the likely return of the market over 15~20 years?
edit/add: a source:
https://www.thebalance.com/rolling-i...d-2009-4061795
[/edit]
Sure, it's not guaranteed. But it's not guaranteed you won't be hit by a bus on your way to the store, but we still do that.
If that's not what you meant, then please explain what appears to be a contradiction to me.
-ERD50
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08-20-2017, 11:58 AM
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#55
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2008
Location: On a hill in the Pine Barrens
Posts: 9,719
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Quote:
Originally Posted by ERD50
So your advice to a young couple buying their first home would be to not put a single penny into any investment that isn't a sure return greater than their mortgage rate (which probably means no investment at all, risk-free money isn't paying that high)?
For most people, that would mean not investing a penny for ~ 15 years (take the case of someone doubling principal on a 30 year loan). What is the likely return of the market over 15~20 years?
edit/add: a source:
https://www.thebalance.com/rolling-i...d-2009-4061795
[/edit]
Sure, it's not guaranteed. But it's not guaranteed you won't be hit by a bus on your way to the store, but we still do that.
If that's not what you meant, then please explain what appears to be a contradiction to me.
-ERD50
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I'm discussing a situation with a family of four that is well along in life.
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08-20-2017, 12:21 PM
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#56
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2005
Location: Northern IL
Posts: 26,887
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Quote:
Originally Posted by target2019
I'm discussing a situation with a family of four that is well along in life.
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So your approach would change with age? How so?
The mortgage discussed by the OP has ~ 12 years to go, so similar time frame to the 15 year period I discussed.
My link says the worst 15 year period in the market was ~ + 3.7%, so it seems likely to exceed current mortgage rates if history is any guide at all.
Personal decision to take that bet of course, but I can't see any reason to advise against it.
-ERD50
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08-20-2017, 12:42 PM
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#57
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Thinks s/he gets paid by the post
Join Date: Jun 2017
Location: Chicagoland
Posts: 1,127
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Quote:
Originally Posted by Maenad
If your kids are receptive to your advice, I recommend this blog post from Jim Collins. He talks about what advice is timely for people your kids' ages.
His "Stock Series" is a classic for a reason, so I recommend that too.
And his video on F-You Money is awesome.
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Thank you. I am going to forward this to them.
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08-20-2017, 01:02 PM
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#58
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Thinks s/he gets paid by the post
Join Date: Jun 2017
Location: Chicagoland
Posts: 1,127
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Quote:
Originally Posted by ERD50
Can you explain how "service(ing) that debt with retirement funds" is a factor?
The math tells me that if you pay it off pre-retirement, you then have less post-retirement funds. Seems like mostly a wash to me, not a go/no-go decision point.
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Thanks ERD50. My thinking - admittedly new on this topic - is: The early numbers say that I will need appx $3,500-$4,000/mo to cover all expenses except the mortgage. Adding the mortgage would put me at $5,800-$6,300/mo., and I *think* that'd be too much coming out of retirement funds.
I have learned a lot in my short time here and am not embarrassed to say I still have a lot to learn. So, please don't anyone be shy in opining!
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08-20-2017, 01:07 PM
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#59
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Thinks s/he gets paid by the post
Join Date: Jun 2017
Location: Chicagoland
Posts: 1,127
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Quote:
Originally Posted by ERD50
Best to be honest with yourself.
-ERD50
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Don't know if this forum allows signature lines, but this would be a good one.
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08-20-2017, 01:42 PM
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#60
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2007
Posts: 13,227
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Quote:
Originally Posted by CoolRich59
Thanks ERD50. My thinking - admittedly new on this topic - is: The early numbers say that I will need appx $3,500-$4,000/mo to cover all expenses except the mortgage. Adding the mortgage would put me at $5,800-$6,300/mo., and I *think* that'd be too much coming out of retirement funds.
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You can take a smaller amount out of a smaller nest egg, or a bigger amount out of a bigger nest egg. It's more or less of a wash. It's your choice, but don't just look at the expense side of the equation. I think that's what drives people like ERD and I a bit crazy, when someone says "But I'll have more expenses!" without seeming to consider that they'll also have more money with which to pay those expenses, provided you are investing the difference.
Looking at average investment returns, with the current mortgage rates it almost always favors leveraging a mortgage to be able to invest more. However, that investment return is not without risk.
I happen not to have a mortgage, but I feel that without having that payment to worry about I can be more aggressive in my investments. Perhaps that's flawed thinking since I'm not really leveraged with a mortgage.
It is comforting to have no debts other than the interest free credit card float. I've thought about taking on a mortgage at various times while rates were very low, but just haven't been compelled or convinced enough to go through the process.
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