I have always believed it is pretty clear from the financial side of the house that it is better to keep a mortgage if you are disciplined enough to invest your extra cash instead of spending it. However, I also believe that peace of mind has value and I am paying off my mortgage at an accelerated pace, paying about 30% extra per year.
I was considering the fact that I would be carrying a mortgage in retirement, and what the implications would be for paying it off. Playing with my budget spreadsheet, I realized that if you accepted the 4% SWR, it makes sense to pay off your mortgage once you are retired. This is especially true if you are FIRE and have the cash to pay for emergency expenses even after paying off the mortgage.
Consider my situation. I have about $70,000 in principle remaining with a $750 mortgage payment. At a 4% SWR, I need $225,000 in the bank to make the payment. If I just paid off the balance of $70,000, I would have $155,000 left, and withdrawing at 4% from the $155,000 I would be able to spend an extra $6,200 on myself as compared to keeping the mortgage.
I realize the downside is that I would miss out on the fact that 4% is conservative and my $225,000 would most likely grow larger. On the other hand, if I really believed this was likely, I would be living on a 6% SWR instead of 4%. I think I will pay it off.
Has this been discussed before? Did I actually think of something new? Probably not likely in this forum.
I was considering the fact that I would be carrying a mortgage in retirement, and what the implications would be for paying it off. Playing with my budget spreadsheet, I realized that if you accepted the 4% SWR, it makes sense to pay off your mortgage once you are retired. This is especially true if you are FIRE and have the cash to pay for emergency expenses even after paying off the mortgage.
Consider my situation. I have about $70,000 in principle remaining with a $750 mortgage payment. At a 4% SWR, I need $225,000 in the bank to make the payment. If I just paid off the balance of $70,000, I would have $155,000 left, and withdrawing at 4% from the $155,000 I would be able to spend an extra $6,200 on myself as compared to keeping the mortgage.
I realize the downside is that I would miss out on the fact that 4% is conservative and my $225,000 would most likely grow larger. On the other hand, if I really believed this was likely, I would be living on a 6% SWR instead of 4%. I think I will pay it off.
Has this been discussed before? Did I actually think of something new? Probably not likely in this forum.