Planning my last 20 years, how much to spend. (Part 2)

[JBTX]

If she dies I lose about 20% of my income stream. If there is no mortgage then my income stream will sustain the property until I can no longer do the maintenance, at which time I will have to sell it and move into an old folks home.

If I die first, and there is no mortgage, her income stream will support the property. She would not be able to sustain mortgage payments. Nor would she be able to care for the type of property we are looking at.

As I read this, if you have no mortgage either way your income stream will support you, barring anything unusual.

The alternative if you took a mortgage would be you then have cash which to invest and pay off the mortgage. There is obviously some risk to this.

You could invest the cash in various fixed income or cash instruments at rates that currently lag your mortgage rate. Obviously that isn’t optimal. Also your investments may be taxable and mortgage interest likely not deductible.

You could do the mortgage and hope that in time rates go lower, sooner or later they probably will, and refinance to a lower rate. Or rates could go up and your mortgage is locked in but cash and short term bond rates increase.

You could do the mortgage and invest some of the money in stocks. Obviously that could work out but is even more risky.

It doesn’t seem there is a ton of upside to mortgage in your situation. If you did maybe I’d do half. My answer would probably be different if rates were very low like they used to be.

 

[mathjak107]

Arbitrage works or else so many uber wealthy people would not do it.

when it works out and is safe with a known outcome .

not the same thing as rolling the dice with tens of thousands in interest to earn an extra percent or 2 for the layman at best , and to lose money a lot more in a down market .

it increases sequence risk which is another factor in retirement

 

[RetiredHappy]

If she dies I lose about 20% of my income stream. If there is no mortgage then my income stream will sustain the property until I can no longer do the maintenance, at which time I will have to sell it and move into an old folks home.

If I die first, and there is no mortgage, her income stream will support the property. She would not be able to sustain mortgage payments. Nor would she be able to care for the type of property we are looking at.

I don't like the answer that if you die first, your spouse is left in a pickle and have to sell the property 1) if there is a mortgage 2) she cannot care for the property. We don't take care of our own property and pay people to do the pool, yard and pest control. So no matter who is left behind, the person does not need to make another move immediately, or ever.

Is there a property that you can buy where the surviving spouse can remain living on it? I would also go with no mortgage because of your wife.

 

[d2reid]

Wile E. Coyote..."or unexpected medical bills"

Pretty sure we have this one covered with our Medicare Advantage medical insurance. It has a max out of pocket of $5100 per year then pays 100%.

MathJak107... "has to spend their retirement money for unexpected bills"

What unexpected bills? I am trying to imagine an unexpected bill that we don't already have a contingency for. Back in my working years we had unexpected bills; Septic tank fill line failed. Transmission failed. Kids rode their bicycle through the neighbors fence. Root canal. In our RV traveling years mechanical breakdown was the biggest unexpected bill. But all of these things are now easily handled in our income stream.

JBTX..."You could do the mortgage and invest some of the money in stocks."

I am way too late for the stock market to be a good investment for me. I took some funds 2 years ago and started buying and selling stocks. Of course I don't have a clue what I was doing, so made some pretty poor choices. But, I did get lucky and made some good choices also. Over 2 years I had a 3% growth in my investment. Then I found out I had to pay taxes on that. When CD rates went above 4% I sold all my stocks and got CD's. All that to say, stock market is not for me.

RetiredHappy..."I don't like the answer that if you die first, your spouse is left in a pickle.....So no matter who is left behind, the person does not need to make another move immediately, or ever. Is there a property that you can buy where the surviving spouse can remain living on it? I would also go with no mortgage because of your wife.

Your post created another intense marital discussion. These are healthy, but somewhat stressful. It also incited a discussion with the children, all of them told me to quit worrying so much, they of course would help mom out after my demise. Quite frankly, they are very capable of helping. Between her stating her preferences and the kids statement of intention I am going to not frett so much about it.

 

[mathjak107]

i was referring to wile coyote in general terms about her comment about some having to take a mortgage and have no choice .

i said it’s no different when retirement accounts have to be hit from unexpected spending.

there is no choice in either case

 

[pb4uski]

1. Run FIRECalc with $300k less than what you have ($300k?), which assumes that you buy a $300k house with your existing nestegg.

2. Now run FIRECalc with a $300k mortgage... so include the entire $600k in investments... on the Other Income/Spending tab include Off-Chart Spending for the amount of your annual mortgage payments starting in the year you plan to buy the house and uncheck the Inflation Adj? box and then add a Pension Income for the same amount starting in the year that your mortgage will be paid off and uncheck the Inflation Adj? box.

Be sure to adjust the Your Portfolio tab to reflect your asset allocation.

Which of the two FIRECalc results do you prefer?

 

[albireo13]

It depends on a lot of things.
Would your retirement budget support a mortgage payment in the cash flow? What rate can you get on the mortgage?

How big a nest egg do you want leftover in retirement?

We were lucky to have a low mortgage rate, 2.625% fixed with a sizable balance. We have run the numbers and have decided to keep the loan rather than kill it.
We can always change our mind down the road and pay it off.

If we pay it off now, there is no going back.

 

[MatatuPuncher]

Just chiming in regarding the weather as I've lived nearby. It is definitely not moderate. There is serious humidity in the summer and you'll need a/c. Doing anything outside sucks. Winter is not that long but has some severe cold spells with no good skiing or other outdoor winter type stuff.

Just fyi. Best of luck and God bless.

 

[Route246]

Regarding your wife's thinking you may need money for something I feel the same way. That something for me is quality long term care. We are all an accident or illness away from needing long term care not covered by insurance or medicare. 24-hour caregivers are not covered and the last thing my wife and I want is to burden ourselves with the guilt of not being able to afford 24-hour caregiving if that were ever needed.

My mother and father both required 24-hour care and died at home. A 24-hour caregiving crew is a godsend when things get tough. My parents saved for this and both of them were able to die peacefully, comfortably and without depending on being in "a home" or skilled nursing facility or one of those type of places. My mother was in skilled nursing care after her stroke and she would plead with us to bring her home which we were able to do once we prepped the house and got the caregivers lined up. She never complained after that, never complained about her condition and left us with a smile on her face, appreciating being home in familiar surroundings.

Hospice care and Medicare took care of everything except for the caregivers. The hospital bed and all supplies arrived the same day.

This is not cheap. My wife and I are prepared and talk about this frequently. You never know when you will need this and for how long. Although unpleasant to think about it is a nice feeling that neither of us will be a burden (financially) on our family.

I posted back in January of 2023 about planning my last 20 years.

https://www.early-retirement.org/forums/f29/planning-my-last-20-years-finding-a-place-116418.html

We have pretty much desided on Johnson City, TN. Family is within reach. Airports are within reach. Weather is moderate. The Appalachian Mountains are nearby. The area is economically depressed. They have a medical college. They have a very active senior center.

So coming off the road after 12 years what do we want and more importantly, how much should we invest. I am thinking that we should take 50% of our cash assetts and purchase property outright. No mortgage, no paying interest. DW argues that we may need that money for something. At 68 I am not sure what that "something" could be. The only thing we don't have is a fixed place to live.

So my question for the group is: Do we keep the cash in the bank, or spend it on a house?

 

[mmurphy111]

We have a similar situation and have decided to use the cash and get a line of credit against the value of the house “just in case”. The LOC costs $75 per year but it is worth it for us!

 

[llolly]

If you're pulling most of the money out of savings or CD's -- then it is unlikely that the stay invested type advice matters as much because it is likely that you'd be paying as much or more for the mortgage as what you're making on the money -so you'd just be exchanging like investment for like.

As far as whether your wife can (physically/financially) stay in the house without you - this one I think is more key than many people think because my limited experience (with 2 different parents, mine and DH's) is it is hard to get the remaining parent to move even when it would make things much better for them and everyone else too (and I'm talking simply a move to a different house not moving to care facility). And I am pretty sure that both DH and I would(will?) be hard to move out of current house :/ (which is not badly set up for that instance thankfully but that could change of course).