Here’s What a $2 Million Retirement Looks Like in America - WSJ

[all4j]

I can't help but wonder how much rigor is used by some touting the after tax benefits of investing vs mortgage. Especially when I see 'present' tense used!

 

[Car-Guy]

Hah. My 66 Bonneville had a 389 four barrel. I could actually get almost 17 mpg until I stepped on it and opened up the 2 extra barrels. Then I made frequent stops at the gas station.

I think my 455 burned gas just sitting there... But gas was only ~30 to 40 cents a gallon in those days... I don't recall the size of the gas tank but it probably could have been classified as a fuel storage facility or used as part of the strategic reserve. (well maybe not that big)

I think that car had the biggest CI engine in any car I ever had... (Not even close on HP though) I had a couple of 454's over the years too... All were real gas hogs.

 

[finnski1]

I think my 455 burned gas just sitting there... But gas was only ~30 to 40 cents a gallon in those days... I don't recall the size of the gas tank but it probably could have been classified as a fuel storage facility.

I think that had the biggest CI engine in any car I ever had... (Not even close on HP though) I had a couple of 454's over the years too... All were real gas hogs.

Oh yeah and stopping the car from high speed was a bit of an adventure in itself. Still had a lot of good times in it.

 

[rodi]

LOL - It seems like threads on any topic can revert to some of the old chestnut questions we ponder
- Should I pay off my mortgage?
- Should I take SS at 62, FRA, or 70?
- Should I roth convert to the top of my tax bracket?

Probably 1/3 of the posts in this thread (maybe more) have gone away from the article and onto the payoff the mortgage or not topic.

Since we're discussing this
- I paid off my mortgage when it was down to about $40k. But prior to that had been making extra principal payments.
- I'm planning to wait till 70 for SS... but will remain flexible in my thinking.
- I roth convert.

And I don't own any muscle cars - but do own a 2000 Dodge Ram Van painted out like the Mystery Machine from Scooby Doo. We use it for camping. It only gets 13 miles/gallon. Sigh.

 

[luckydude]

I used the $100K and a 1% difference to have a simple example in my previous post. In my first example in this thread, I used a $300K mortgage, 6% difference between low fixed rate mortgage and investing in TIPS and I bonds. The difference currently could easily be $18K, which can then be invested each year to make even more money. Even at $500 average for 30 years, that is $15K, plus the investment income on the $15K.

We have a current thread on saving money on buy nothing groups, freecycle sites, deals at Dollar Tree and Dunkin Donuts, so it seems like a lot of posters here would be pretty happy with an extra $1K or $500 a year, and thrilled with the $18K or even more on the mortgage differential.

That's true. If the timing is right and it's relatively risk free to execute, it would seem to be an easy way to generate some additional income in retirement.

 

[SecondAttempt]

This is also how I look at it. The math supports keeping a mortgage if the interest rate is low enough that investment returns are likely to exceed interest costs. For me, the extra liquidity gives me peace of mind, whereas for others, they’d rather have no debt than an extra pile of cash.

I have a $400,000 2.75% fixed rate mortgage on a $1+ million house. I get dozens of offers to refinance every week by email and snail mail, most from financial institutions I have business with including my current mortgage company.

There is no way I would refinance because I think my rate is ridiculously low.

Current 30 year treasury is 3.45% so if I were inclined to pay off my mortgage with cash, which I actually could, I would be sacrifing a lot.

 

[PatrickA5]

For those of you with a lot of equity but still carry a mortgage (for investment purposes), did you ever think of doing a cash out refinance and have even more money to invest?

Seems logical to me if you have a million dollar house and a $400,000 mortgage and you're confident you're going to make money, you'd want to mortgage to the max and make even more money.

Of course, now days rates are bad so too late for that for a while.

 

[daylatedollarshort]

For those of you with a lot of equity but still carry a mortgage (for investment purposes), did you ever think of doing a cash out refinance and have even more money to invest?

Seems logical to me if you have a million dollar house and a $400,000 mortgage and you're confident you're going to make money, you'd want to mortgage to the max and make even more money.

Of course, now days rates are bad so too late for that for a while.

We refinance with no point, no fee mortgages with cash out every time mortgage rates drop lower than our current mortgage. It doesn't cost anything except for out time. We can always pay off the loan or refinance if interest rates drop, and if they go up we can bank the investment difference, like this year. It is just a math decision for us.

 

[scrabbler1]

Daylatedollarshort, your math exercise reminds me of the spreadsheet I created in the late 1990s when I was considering paying off my mortgage. I compared the reduced investment income and reduced net interest paid (after taxes; I was itemizing at the time) compared to the status quo of more investment income and more net interest paid.

I had a 1-year ARM and interest rates were rising in the mid-1990s, sop paying off the mortgage was beginning to look more likely. But what ended up tipping the scale toward paying it off were 2 things: the reduced cap gains rates effective in 1997, so locking in some cap gains was looking better, and hitting the standard deduction on my state income tax return, reducing some of the tax benefit from eliminating the deductible mortgage interest on that return.

So, I paid off the mortgage and never looked back.

 

[COcheesehead]

I have about 2%+ arbitrage on mortgage interest vs our bond ladder. Plus we pay our own healthcare insurance which when added to mortgage interest and a few other deductions allows us to take more than the standard deduction which actually increases the arbitrage. It’s just math.

 

[Vacation4us]

For non savers I would say a paid off house is essential. I have a friend who has refi multiple times and owes less than 200k on her 2 million dollar house. BUT despite being a CPA ( divorced and SAHM for most of her earning years) she has very little saved.

Her and current DH are not high earners. Probably will only have SS unless they sell their home. ( which I don’t see happening for various reasons). Their early to mid 50’s.

A paid off home would probably help their situation. Not happening. She has lived there 22 years. I feel for them, even though their home far outshines mine.

 

[Koolau]

I found the article mildly interesting - sort of peeking in the windows of the neighbors to see how they live. Having said that, the article didn't provide enough information to really compare experiences. Nor did the article really give much info to folks not yet retired. Clearly, if you have a couple of mil and high 5 figure pension/ss income, you can make it. Big surprise.

The parts about what to do all day were, again, kinda interesting, but not particularly applicable to most folks IMHO. More to the point, most folks find something to do in retirement. That's important to know, I guess. YMMV

 

[brett]

I found the article mildly interesting - sort of peeking in the windows of the neighbors to see how they live. Having said that, the article didn't provide enough information to really compare experiences. Nor did the article really give much info to folks not yet retired. Clearly, if you have a couple of mil and high 5 figure pension/ss income, you can make it. Big surprise.

The parts about what to do all day were, again, kinda interesting, but not particularly applicable to most folks IMHO. More to the point, most folks find something to do in retirement. That's important to know, I guess. YMMV

Agree. I find most of the comparisons meaningless.

How can they be relevant when there are so many different financial situations, COL areas, residence situations, health situations, and spending habits.

For me it was nothing other than a nice story about people doing well in retirement.

It often looks and feels like filler to me.

I find the same with most of those retirement articles...financial and lifestyle.

 

[topdawg4ever]

Depends where you live and what you're doing for health insurance. We just started COBRA which comes to just under 2K/month so that's 24K/yr right there. Add 8K for property taxes. Food, other insurances, gas, travel, entertainment, home and auto maintenance, taxes, etc. and it's not hard at all to get over 100K. I'm estimating our need to be 130K/year.

How’s taxes work at $130k a year?

 

[old medic]

Reading stuff like this makes me wonder how I can manage to be retired We must be poor... But appear to be in the SIRE crowd.
According to my SS statement, I have only made $1.2M since I started pumping gas at 15 years old.

 

[Koolau]

Reading stuff like this makes me wonder how I can manage to be retired We must be poor... But appear to be in the SIRE crowd.
According to my SS statement, I have only made $1.2M since I started pumping gas at 15 years old.

Sounds about right. I haven't looked back at my record, but just back-of-the-envelope that doesn't sound out of line (I retired in '05 after 35 years.) YMMV

 

[Andre1969]

This SS earnings stuff made me curious enough to look. I'm at around $1.7M total wage income, in raw dollars. But, that's from 1986 until now. So when you factor in inflation, some of you earlier-starters are probably well ahead of me.

 

[Music Lover]

For non savers I would say a paid off house is essential.

Non savers or those with a DB pension plan. I earned a low salary but because of my DB pension I was able to retire comfortably with a paid off house. Carrying a mortgage into retirement didn't make sense in my situation.

But if I was sitting on a stash like some people here have I would probably think differently.

 

[ncbill]

For non savers I would say a paid off house is essential. I have a friend who has refi multiple times and owes less than 200k on her 2 million dollar house. BUT despite being a CPA ( divorced and SAHM for most of her earning years) she has very little saved.

Her and current DH are not high earners. Probably will only have SS unless they sell their home. ( which I don’t see happening for various reasons). Their early to mid 50’s.

A paid off home would probably help their situation. Not happening. She has lived there 22 years. I feel for them, even though their home far outshines mine.

Even a house with mortgage can help tremendously.

My relative had to refinance their home when laid off unexpectedly around age 60...cashed in her pension to make it to SS at age 62, never worked again though she tried, even going back to school (via federal student loans that probably never saw a single payment...stuck Uncle Sam with those at her death)

But she managed to add a HELOC later to help with lumpy expenses.

Even though she ended up borrowing as much as possible that allowed her to stay in her home of ~35 years until only a few months before her death.

And I was still able to get around half the sales price of her home to her beneficiaries.