Retirement - 1 million dollars ain't enough

[calmloki]

VB:
..... Where in the world can you get rates of return anywhere near what your mortgage rate is by drawing interest ?

*cough*PenFed*cough* Three years ago PenFed CDs were paying 6.25% and I was paying them 4.99% on our house. Now paying them 3.875% on the house while the CDs signed up for in December pay 3.99%. Advantage is the cash is sitting there ready for our use in case of dire immediate need or great investment opportunity. But yes, that's rare, PenFed, and pure luck here.

 

[Danmar]

I'm a firm believer in the maxim "Retirement and debt don't mix". This would be the accepted wisdom where I come from.

 

[W2R]

I'm a firm believer in the maxim "Retirement and debt don't mix". This would be the accepted wisdom where I come from.

I was brought up on "Neither a borrower nor a lender be", but had to borrow anyway. Never liked it, and now that I am debt free I really appreciate the simplicity of my personal finances.

 

[ERD50]

VB:
...

What many fail to appreciate is the risk normalized returns on either a paid off house or in equity investments. The house being the low risk approach and equities being considerably higher. That concept was lost on many a few years ago. It should be painfully obvious to most people now.

You mention foregone opportunity cost interest. Where in the world can you get rates of return anywhere near what your mortgage rate is by drawing interest ?

I'll sidestep the pay it off or not debate, but - if one really believes that long term investment returns will not exceed current mortgage rates, they might want to do some adjustments to their WR. 5% minus 3% inflation leaves only 2% WR, less after accounting some for for the volatility.

-ERD50

 

[bbbamI]

Ok...now I've got it....PenFed (cough)...Wellesley (Pssst).....

 

[MasterBlaster]

I'll sidestep the pay it off or not debate, but - if one really believes that long term investment returns will not exceed current mortgage rates, they might want to do some adjustments to their WR. 5% minus 3% inflation leaves only 2% WR, less after accounting some for for the volatility.

-ERD50

I didn't say what you posted - you have twisted my words.

What I said was that paying off the mortgage is low risk. Investing in equities is considerably higher risk. Therefore to compare results (long term, short term or otherwise) one need adjust the returns by the risk factor. That should be painfully obvious post bubble.

 

[ERD50]

I didn't say what you posted - you have twisted my words.

What I said was that paying off the mortgage is low risk. Investing in equities is considerably higher risk. Therefore to compare results (long term, short term or otherwise) one need adjust the returns by the risk factor. That should be painfully obvious post bubble.

sorry - didn't mean to twist your words. I was just using that comment as a springboard to what I posted.


Maybe we are just looking at different angles of the thing. All I said was that *if* one is thinking that long term returns are going to be very low, they probably want to cut back their spending, independent of a mortgage, no mortgage, half a mortgage or anything else.

I don't know for sure, but I think that those long runs of inflation and flat markets int he 70's were worse for a retirement portfolio than the recent bubbles, but I could be wrong about that.


-ERD50

 

[Vincent Brannigan]

Gosh its a long time ago but I actually wrote an article on this subject

.Housing for Moderate Income Households. Authors.Brannigan, Vincent M.; Meeks, Carol B. Descriptors:T.Consumer Economics; Homeowners; Investment; Maintenance; Middle Income Housing

Abstract:A brief narrative description of the journal article, document, or resource.Describes equity leasing, a program that enables people to acquire housing without an up-front investment but with an incentive to maintain and improve the property. Under this proposal, lessees would acquire a leasehold interest in a house and own the right to use the property for a continuously extended lease term. (JOW)

The entity from which ERIC acquires the content, including journal, organization, and conference names, or by means of online submission from the author.
Advancing the Consumer Interest, v3 n1 p5-9 1991

 

[brewer12345]

She's going to direct her own investments at 8? Brew, you're really slacking. I was thinking 7 and the CFA by 6.

She is distracted by her art career.

 

[explanade]

Another perspective on "the number."

Even brings up the dreaded "annuity" word.

 

[Vincent Brannigan]

Why is "annuity" dreaded? Social security and all defined benefit pensions are annuities.

 

[explanade]

Maybe "dreaded" isn't the best word but annuities have been the subject of some contentious discussions here.

The Forbes column says to annuitize $2 million and then buy life insurance with the excess payments above a typical 4-5% withdraw on a $2 million portfolio to leave money to heirs. That suggestion may raise hackles.

 

[rescueme]

Why is "annuity" dreaded? Social security and all defined benefit pensions are annuities.

Yes, works for me (I've had an SPIA for the past three years, in retirement).

Disclaimer: Not all annuities are the same, nor even the "good one's" should be used without proper planning...