... So I get 1% on $123k in a cd but pay 5.25% on that $123k in the mortgage, sure sounds like a bad choice, at this point I wouldn't put the $123k into equities. ...
At any given point in time prevailing mortgage rates will always be higher than "safe" savings returns. From an admittedly simplified financial perspective, that means paying off the mortgage - or making additional payments to principal - will almost always [always?] yield a better return.
Clearly, it is not going to help you to borrow money @ 5% to earn 1%. I am certain that no one who says 'run the numbers before you decide a payoff is a great thing' would advocate that. What we are saying is if you stick to a reasonable AA overall - the numbers seem to say that there is an (probably slight) advantage to holding a mortgage (with the caveat that
Good4Gone pointed out - FIRECALC doesn't model available mort rates), or at least that there is no great advantage to a pay-off.
It's a long term view - over 30 years, it is reasonable to expect our overall AA returns to exceed those fixed mort payments? That is a risk I'm willing to take. You can chose not to, but I doubt it will make a big difference either way.
And if you are so focused on the 'guarantee' of not losing money to the market by tying it up in a not-very-liquid asset, why not just keep sticking more and more of your portfolio into a money market? You don't need a house to park money, there are other ways. If it's good for that amount, wouldn't it be better for more? Your mort pay-off money is not 'invested' in the house (that's no guarantee anyhow), the person with a mort has the same amount tied to the house, so that's a wash.
Then there's that great emotional feeling, like that bumper sticker says: "don't laugh, it's paid for."
Well, I can't see any reason to publicize my financial situation/decisions, but if I did, my Bumper Sticker might read "Don't laugh - I'm borrowing money @ 3% with some tax benefits and keeping it invested for the long term." But why should anyone care?
Getting back to FIRECALC - I think you can use the spreadsheet output to look at the few failures, or the few worst outcomes, and see what years those were, and if there were opportunities for low mortgage rate arbitrage. If mort rates are not attractive, one would not choose this route - it's an option, and one that allows for 'do-overs' (re-fi).
-ERD50