Mortgage in Retirement Years?

[roob1]

Assuming you have current and continued solid financial solvency, and could own your residence outright with no financial impact on your lifestyle:

Given low mortgage rates 2.5%-3.5%, how would you feel about holding a mortgage on your residence in your retirement years?

[Brwne]

Assuming you have current and continued solid financial solvency, and could own your residence outright with no financial impact on your lifestyle:

Given low mortgage rates 2.5%-3.5%, how would you feel about holding a mortgage on your residence in your retirement years?

We decided to carry a mortgage at these low rates because investment returns are generally higher. The caveat - the cash you would have used to pay off the mortgage (and the Bond?) must be invested and not spent.

[dewilson58]

Assuming you have current and continued solid financial solvency, and could own your residence outright with no financial impact on your lifestyle:Given low mortgage rates 2.5%-3.5%, how would you feel about holding a mortgage on your residence in your retirement years?


The question is: How would you feel?? :ohdear:

[Malsua]

Assuming you have current and continued solid financial solvency, and could own your residence outright with no financial impact on your lifestyle:

Given low mortgage rates 2.5%-3.5%, how would you feel about holding a mortgage on your residence in your retirement years?

I'm a big fan of having no debt, but you can easily make 4+% in the market with relatively safe investments. There are no guarantees and the bottom could drop out. As long as you can live long enough for it to recover, it seems like a better route to maintain or build wealth. You do need to pay attention though. Dumping a big chunk into an equity fund or a money market fund and forgetting about it is not a good choice either.

That said, if you can afford a mortgage with your SS/pensions/etc. maybe just get the lowest possible payment and spend the rest? If you're not planning on bequeathing your assets, spend it. The house will still build wealth that someone will get when you check out.

I guess the bottom line is how risk averse you are and how liquid you are. If you have 500k in a checking account and are paying a mortgage, you're losing value due to inflation, do one or the other. Pay off the mortgage or open a vanguard account and start buying to your risk tolerance.

[davem4616]

We paid off the mortgage (but not the bond) because it's a nice feeling. After the 2008 crash we became very savvy about where we put our money...keeping all our savings in the stock market hoping to get rich is akin to putting it on a table in Las Vegas. We still have some money in the market as a hedge on inflation, but the overwhelming majority is in other vehicles and investments. For us, it's about enjoying our wealth and sharing our wealth...we are well past the era of accumulating wealth.

[CoachKandSportsguy]

keeping all our savings in the stock market hoping to get rich is akin to putting it on a table in Las Vegas. We still have some money in the market as a hedge on inflation, but the overwhelming majority is in other vehicles and investments. For us, it's about enjoying our wealth and sharing our wealth...we are well past the era of accumulating wealth.

Smart! actually, I like the phrase "we are well past the era of accumulating wealth". Yes, in retirement its about preserving wealth. . . Now sure about paying off the mortgage but not the bond, since both are expenses with rented money. I don't want any debt for retirement, as my income is limited with zero time to recover. . .

So if you can afford your lifestyle using investment money to bridge yourself to max Social Security, then using up 100% of your social security, and not spend your savings/investments, except for an ocassional big trip, you should be ok. A working couple with max social for both is at least $70K a year. . . which should be enough without dipping into remaining savings for awhile. . .

interest is always an added expense. . . you can't get around it. . . and the assumption that you can always make more in the market may not hold true during your holding period. . . maybe in the past, but that isn't your holding period

[petsetc]

We are in our 70's and just refinanced at 2.75% for 30 years. Statistically the market will far out preform 2.75% AND I suspect I will not live 'til pay-off. From a purely logical view, it makes no sense to me to not reap the benefit of OPM (other people's money). On the other-hand, my wife thinks debt-free is better. So far, I've won this battle. It's about your individual comfort zone.

As for the bond, even though the interest rate is higher, I believe that a paid-off bond is not recoverable in resale.

JMHO

[dewilson58]

So if you can afford your lifestyle using investment money to bridge yourself to max Social Security, then using up 100% of your social security, and not spend your savings/investments, except for an ocassional big trip, you should be ok.
Not wise for a majority of people............unfortunately a majority of people who follow this misnomer die prior to the benefit. Waiting for SS max is supported by old financial advice.

[villagetinker]

To the OP original question, we have no problem with a mortgage in retirement, and actually planned for it for many of the reason cited above. We did however pay off the bond due to the much higher interest rate. So i guess to answer your question, we have no concerns having a monthly mortgage payment in retirement.

[CoachKandSportsguy]

Not wise for a majority of people............unfortunately a majority of people who follow this misnomer die prior to the benefit. Waiting for SS max is supported by old financial advice.

its now common advice from CFPs for people who have large 401K savings from many years of employment. And the years of investments since 401Ks have evolved have been very good ones. . . and people working part time after 65 learned from their depression era parents. . . don't always need to take it right away.

max social security start is now 69 i believe, and you are thinking that majority of people will die between 65 and 69? The median age of death is approximately 78. If you believe that you will die prior to 70, I agree, but if you only have 4 more years to live assuming you are in good shape from outside living in the villages, you've got bigger issues than money. But waiting gives you a higher income during your largest decade of active traveling. . . (phrased analytically to support my thesis) :boxing2:

so I am not sure I understand how you get to your generalized answer. . .

[charlieo1126@gmail.com]

I have only put down 20% on all the homes and condos (14) I have owned I have better things to do with my money,I’m 82 and in 3 rd year of new mortgage and quite comfortable with the rate

[Stu from NYC]

Could we get ahead by having a mortgage on our home probably yes.

However it is nice having no debt except for the bond.

When we are here longer and if we decide this is our house for years to come the bond will go away.

Real estate people have told us that most of the time you will not recover the bond if you pay it off early.

[manaboutown]

I started taking my SS when I hit full retirement age, in my case 65 and 10 months, which I do not regret doing. A financially very conservative friend of mine waited until age 70. As I do not need the income I put it into the stock market. My thought was and still is that if congress needs the money they will reduce or eliminate SS payments or tax away SS to recipients having over a certain level of income. Given the pandemic IMHO this could happen sooner rather than later...

People are risk averse in different ways. I still have a fixed rate mortgage on my house but it is in lieu of a mortgage I would need on a rental property which would of course come at a higher interest rate.

[rjn5656]

We just sold a house in the villages with no mortgage. We bought a new house with a 2.7 mortgage. Using the money in relatively safe investments. Can pay off at any time.

[dewilson58]

its now common advice from CFPs for people who have large 401K savings from many years of employment. And the years of investments since 401Ks have evolved have been very good ones. . . and people working part time after 65 learned from their depression era parents. . . don't always need to take it right away.

max social security start is now 69 i believe, and you are thinking that majority of people will die between 65 and 69? The median age of death is approximately 78. If you believe that you will die prior to 70, I agree, but if you only have 4 more years to live assuming you are in good shape from outside living in the villages, you've got bigger issues than money. But waiting gives you a higher income during your largest decade of active traveling. . . (phrased analytically to support my thesis) :boxing2:

so I am not sure I understand how you get to your generalized answer. . .
No, No, No silly boy, Trix are for kids.
Not assuming they die by 70.........even thou a lot do.


If you do a spreadsheet, (as an example) a couple can take in a couple hundred thousand dollars during the period from early SS to late SS. As a result, at 71 they have over $300k more in saving. Now........how long before the late SS catches up with the early SS and eliminates the $300k pot???? The answer: Well past most people's life expectancy.

[CoachKandSportsguy]

oh, that argument! Yes, I know of that argument, I haven't spent much time with it, as one of my projects, after this pandemic work load is eliminated and my work load goes back to normal, is to build a universal retirement planning calculator, to input annual expenses and all income sources, tax rates, etc, to play what if games to optimize different goals at different age brackets with the goal of maximizing taxable assets and minimize tax deferred assets, which pass tax free to heirs . . . ie, the opposite of a working couple, as now one is not working, and has limited time left. .

CFP requires like 4 years of work history to get the final participation trophy. . . after passing the exam. . .

Also note, that there are situations in which to take extra money out of tax deferred retirements accounts instead of spending taxable assets down, resulting in the very win-win of tax free going in and tax free coming out,

but thanks for clarifying your argument, as always. .

sportsguy

[dewilson58]

Is this right?? about 35mil people in their 60's and 5mil people die in their 60's??


Higher than I though.

[CoachKandSportsguy]

If you do a spreadsheet, (as an example) a couple can take in a couple hundred thousand dollars during the period from early SS to late SS. As a result, at 71 they have over $300k more in saving. Now........how long before the late SS catches up with the early SS and eliminates the $300k pot???? The answer: Well past most people's life expectancy.

So being a financial modeler, the model only took 5 minutes to build, using today's social security answers, as I am 62, and just barely qualified for the max, assuming total income only:

and the answer is
Taking full retirement at 67, (estimated for modeling purposes for my age) equals the same total income as taking it a 62 at 85 years old

Taking full retirement at 70, equals the same total income as taking it a 62 at 84 years old.

Taking but not using between 62 and 69yrs, 11 months and 30 days, assumes a benefits savings of about $234K, assuming taking benefits on your birthday as month 1, using benefit inflation model of 2%, $242K at 3% and $250K at 4% annual benefit increase.

However, I think that the real issue is cost of life style, which isn't being taken into account, as at age 70, the annual income difference is 45.5K per year versus $37.2 per year at 4% inflation if taken at age 62. . . or 8,000+ more a year for a cushion, $16K for a max couple if delayed.

So enough with the financial planning, I have to get outside on a 50 degree new england december day

[retiredguy123]

In my opinion, it is more than a financial calculation. I had my one and only mortgage of $35K when I was 29. I couldn't sleep, so I paid it off in about 3 years. I have been totally debt free since then. I would guess that, if you actually compared people who live debt free to those who routinely borrow money, you will find that the debt free people have achieved a substantially higher net worth.

[dewilson58]

So being a financial modeler, the model only took 5 minutes to build, using today's social security answers, as I am 62, and just barely qualified for the max, assuming total income only:and the answer is
Taking full retirement at 67, (estimated for modeling purposes for my age) equals the same total income as taking it a 62 at 85 years oldTaking full retirement at 70, equals the same total income as taking it a 62 at 84 years old. Taking but not using between 62 and 69yrs, 11 months and 30 days, assumes a benefits savings of about $234K, assuming taking benefits on your birthday as month 1, using benefit inflation model of 2%, $242K at 3% and $250K at 4% annual benefit increase.However, I think that the real issue is cost of life style, which isn't being taken into account, as at age 70, the annual income difference is 45.5K per year versus $37.2 per year at 4% inflation if taken at age 62. . . or 8,000+ more a year for a cushion, $16K for a max couple if delayed.So enough with the financial planning, I have to get outside on a 50 degree new england december day


:clap2:



Mine knocks on the door of 90, probably I'm assuming 1% more return.


But either age, 85 or 90................80% of retirees do not live that long. Bummer.


50 degrees & lobster sounds pretty good.


Happy Holidays.


:MOJE_whot:

[manaboutown]

No, No, No silly boy, Trix are for kids.
Not assuming they die by 70.........even thou a lot do.


If you do a spreadsheet, (as an example) a couple can take in a couple hundred thousand dollars during the period from early SS to late SS. As a result, at 71 they have over $300k more in saving. Now........how long before the late SS catches up with the early SS and eliminates the $300k pot???? The answer: Well past most people's life expectancy.

"The break-even point represents when the cumulative benefits even out. So if you wait until age 70 to start taking benefits, it would take you until age 79 to break even with the benefit amount you’d receive if you started taking them at age 62. If you were to start receiving benefits at age 66, it would take you until age 75 to break even with the benefits you’d receive if you started them at 62."

How to Calculate Your Social Security Break-Even Age - SmartAsset (https://smartasset.com/retirement/social-security-break-even-age)

[dewilson58]

"The break-even point represents when the cumulative benefits even out. So if you wait until age 70 to start taking benefits, it would take you until age 79 to break even with the benefit amount you’d receive if you started taking them at age 62. If you were to start receiving benefits at age 66, it would take you until age 75 to break even with the benefits you’d receive if you started them at 62."

How to Calculate Your Social Security Break-Even Age - SmartAsset (https://smartasset.com/retirement/social-security-break-even-age)


Wrong. Bad model.

[manaboutown]

Wrong. Bad model.

How so?

[dewilson58]

How so?


The model from that website does not take everything into account.


For a fee, Coach could give you a valid model.


:coolsmiley:

[Stu from NYC]

In my opinion, it is more than a financial calculation. I had my one and only mortgage of $35K when I was 29. I couldn't sleep, so I paid it off in about 3 years. I have been totally debt free since then. I would guess that, if you actually compared people who live debt free to those who routinely borrow money, you will find that the debt free people have achieved a substantially higher net worth.

Interesting.

In our case we could easily make the payments but the idea of being debt free appeals to both of us.

We were able to take advantage of what was called the marriage loophole.

I took SS at 65 and a year later my wife turned 65. She filed and than stopped it.

As a result she could on her own get half of my SS and delay taking hers until age 70 when she got 40% more based on her earning.

[CoachKandSportsguy]

There are alot of poor models out there, and all depends upon the level at which one qualifies, ie the starting point, as well as the rate of benefit inflation, so when I am down there full time, I will help out anyone with their model. . . The rate of benefit increase will push out the 62 yo starting as there will be a higher amount versus the starting point given today. .. but the model doesn't include any inflation increase in the 70 yo start, so if that is included, then you get closer to dewilson's age of 90. . . again, all about future assumptions, which will be wrong but you won't know how wrong until we get there. . .

But the reason why I have a problem with the cumulative earnings cross over, is that there is a behavioral finance component to the decision, which is called "sufficing income level". Everyone has an income level above which they don't want to work harder as their current income level suffices their desires. So the difference in income level in perpetuity is important for me to maintain a life style for the time i have remaining, given my own personal history. . . ie, that 22% increase in monthly income between taking at 70 and taking at 62 will be significant if there is any shortfall in the economy during my 70's, or other financial issues. . .its 11% more over 67, which makes the decision a bit harder to wait. . . but that's a 3.0%-4.0% increase in perpetual salary per year of waiting. . .

so that's why this total cumulative benefit analysis is not bogus, but not an applicable model to judge when to take the money, but lifestyle with income/assets and total expenses are more important. But that requires a much more thoughtful and personalized financial model with different goals.

[Velvet]

My mortgage decisions are guided in part by what I want to leave in my will.

[retiredguy123]

My mortgage decisions are guided in part by what I want to leave in my will.
So, if whoever is getting the house makes you mad, you can always take out a huge mortgage? Just kidding.

[manaboutown]

So, if whoever is getting the house makes you mad, you can always take out a huge mortgage? Just kidding.

Better yet a reverse mortgage? Also only kidding.

[dewilson58]

So, if whoever is getting the house makes you mad, you can always take out a huge mortgage? Just kidding.
I'm still struggling with: "what I want to leave in my will"
:crap2:

[Mikef99]

This is a decision you will need to make based on all the information you have. I agree with and have a mortgage currently beause the rate was so low and my investment rate of return has been in the double digits. Why would you not borrow at say 2.5% if you make 10% or more? Financially it is a sound move for me.
Social security is the same if you are in poor health or none of your relatives live to 60 or you need it to live yes take it now, but if you have the means to do without until 70 (by pensions, cash or you continue to work ) the Social secity is returning a rate of about 8% ( I believe ) for the years leading to 70, You may consider a delay even if you wait a year per the tables you should end the same. You can figure it out,,,in mine if I live to I think it was 79 I will have more money. Since my parents lived to 86 and did not have a healthly lifestyle that should not be an issue. My financial planner made my life expectency 90 ( he also said it was just a guess and he would adjust to my idea if I knew something ) But you also never know, I have seen children die 20-30 years younger than their parents. You also could talk about quality of life and what will you need the monies for after a certain age....

[CoachKandSportsguy]

My mortgage decisions are guided in part by what I want to leave in my will.

That's not a lifestyle choice, that's being guided by the afterlife. . .

I am not sure how a planner deals with that one. . . . other than an amortization table. . .

[Bay Kid]

I don't owe anyone except the tax man and I will the rest of my days.

[biker1]

Thanks for those numbers. I am more interested in the full retirement age (66 and 4 months) vs. age 70 scenario. When I ran the numbers assuming 2% COLA but no investment return on the money, the benefits would be equal at age 81. Assuming 5% return on all benefits (as an annual rate applied monthly) pushed the age out to 87.

So being a financial modeler, the model only took 5 minutes to build, using today's social security answers, as I am 62, and just barely qualified for the max, assuming total income only:

and the answer is
Taking full retirement at 67, (estimated for modeling purposes for my age) equals the same total income as taking it a 62 at 85 years old

Taking full retirement at 70, equals the same total income as taking it a 62 at 84 years old.

Taking but not using between 62 and 69yrs, 11 months and 30 days, assumes a benefits savings of about $234K, assuming taking benefits on your birthday as month 1, using benefit inflation model of 2%, $242K at 3% and $250K at 4% annual benefit increase.

However, I think that the real issue is cost of life style, which isn't being taken into account, as at age 70, the annual income difference is 45.5K per year versus $37.2 per year at 4% inflation if taken at age 62. . . or 8,000+ more a year for a cushion, $16K for a max couple if delayed.

So enough with the financial planning, I have to get outside on a 50 degree new england december day

[dewilson58]

Thanks for those numbers. I am more interested in the full retirement age (66 and 4 months) vs. age 70 scenario. When I ran the numbers assuming 2% COLA but no investment return on the money, the benefits would be equal at age 81. Assuming 5% return on all benefits (as an annual rate applied monthly) pushed the age out to 87.


Bingo.

[biker1]

Spreadsheets, or in my case a 20 line Fortran program (I'm an old school PDE solver), are wonderful things.

Bingo.

[tsmall22204]

There are so many financial know it all's in the Villages. Paying off your home is a personal choice if you can do so. Paying off your bond saves 6%. Do what makes sense to you.

[b0bd0herty]

Assuming you have current and continued solid financial solvency, and could own your residence outright with no financial impact on your lifestyle:

Given low mortgage rates 2.5%-3.5%, how would you feel about holding a mortgage on your residence in your retirement years?

I started to refi with Citizens First last year to take advantage of the lower rates. they wanted closing costs of $17,000 to refi $300,000. To me, it was just legalized usury and we canceled the loan. Then they said they would lower the closing costs by $7,000 which kind of supported my opinion.

Plan to stay here another (fingers crossed) 25 years and with no one to leave my estate to, will just go with a Reverse Mortgage.

[Cranford61]

In my opinion, it is more than a financial calculation. I had my one and only mortgage of $35K when I was 29. I couldn't sleep, so I paid it off in about 3 years. I have been totally debt free since then. I would guess that, if you actually compared people who live debt free to those who routinely borrow money, you will find that the debt free people have achieved a substantially higher net worth.
Atta boy! Ben Franklin would be proud of you. “Never a borrower nor a lender be”.

[greenflash245]

really, I would not want a. mortgage during retirement years

[toeser]

Assuming you have current and continued solid financial solvency, and could own your residence outright with no financial impact on your lifestyle:

Given low mortgage rates 2.5%-3.5%, how would you feel about holding a mortgage on your residence in your retirement years?

Personal opinion: Unless circumstances forced me, I would never hold debt of any kind in retirement and that includes mortgages, car loans, credit cards, or anything else.

[toeser]

Interesting.

In our case we could easily make the payments but the idea of being debt free appeals to both of us.

We were able to take advantage of what was called the marriage loophole.

I took SS at 65 and a year later my wife turned 65. She filed and than stopped it.

As a result she could on her own get half of my SS and delay taking hers until age 70 when she got 40% more based on her earning.

Did exactly the same thing. Now my wife gets considerably more SS than me, which is great because statistically I will be gone first and she will be better protected.

[Gunny2403]

But, by taking SS earlier than “Full recovery” I took the “extra” cash and invested realizing an annualized return of over 8%. This more than compensates for the lower dollars I receive from SS. I factored in family history in terms of longevity. I will always be ahead of my break even point at this stage of my life. I’m 70.

[CoachKandSportsguy]

[for TOTV lawyers] For an actual decision, a person needs a comprehensive personalized model or analysis of all income sources, all assets, all liabilities, and expected expenses, and the behavioral answer to the question: "What monthly level of income are you satisfied with that you are not willing to wait any longer which you can live on and keep your lifestyle" which is based upon the after tax income for spending. [/for TOTV lawyers]

Thanks for those numbers. I am more interested in the full retirement age (66 and 4 months) vs. age 70 scenario. When I ran the numbers assuming 2% COLA but no investment return on the money, the benefits would be equal at age 81. Assuming 5% return on all benefits (as an annual rate applied monthly) pushed the age out to 87.

For the TOTV debaters for the TOTVs stuck inside due to the cold: All depends upon your age, your starting point in the SS benefits table, your income and your assumptions, whatever you think your future will be.

The previous answer i posted, does not include any personalized assumptions such as:
working for or living on income from other sources for
an assumed investment rate of return to be invested of benefits,
Medicare deductions
a tax rate of the other income,
a combined tax rate with other income
a deductible mortgage
a bond with interest
lottery wins
real estate tax rates
lot size and view
Garage Sq footage, with out without golf cart garage
tonnage of air conditioner
nor the average temperature of the inground pool.

YMMV depending on which vehicle you pick for after tax spending, and I picked blue!

[dewilson58]

Spreadsheets, or in my case a 20 line Fortran program (I'm an old school PDE solver), are wonderful things.
Fortran & IBM cards.................oh yes. :icon_wink:

[Rzepecki]

We decided to carry a mortgage at these low rates because investment returns are generally higher. The caveat - the cash you would have used to pay off the mortgage (and the Bond?) must be invested and not spent.

We did the same for the same reason.

[Stu from NYC]

I started to refi with Citizens First last year to take advantage of the lower rates. they wanted closing costs of $17,000 to refi $300,000. To me, it was just legalized usury and we canceled the loan. Then they said they would lower the closing costs by $7,000 which kind of supported my opinion.

Plan to stay here another (fingers crossed) 25 years and with no one to leave my estate to, will just go with a Reverse Mortgage.

Wow 17 grand in fees. Lennie the loan shark would give a better deal.

[PoolBrews]

Did exactly the same thing. Now my wife gets considerably more SS than me, which is great because statistically I will be gone first and she will be better protected.

Why did your wife have to start at 65 and then stop? She is entitled to 50% of your SS regardless, so she could just wait until 70 and file.

Trying to understand what I'm missing here.

[Joe C.]

I don’t like having a mortgage ..... especially in this economic downturn, so I paid off my mortgage this month. This way, if my wife’s pension (from a state up north) goes bad, at least we will have a place that the bank can’t foreclose on. Same for my annuities .... if they go bad, we still will be ok.
Better safe than sorry.

[biker1]

Fortunately the 029 punch machines have been gone for a bit (40 years). However, I do miss the 029 punch cards because they are good for taking notes and they fit perfectly in a button down shirt pocket. Fortran has morphed into a modern language with support for recursion, dynamic memory allocation, pointers, data structures, interface blocks, modules, and more. It is still doing the heavy lifting for most things scientific.

Fortran & IBM cards.................oh yes. :icon_wink:

[CoachKandSportsguy]

I don’t like having a mortgage ..... especially in this economic downturn, so I paid off my mortgage this month. This way, if my wife’s pension (from a state up north) goes bad, at least we will have a place that the bank can’t foreclose on. Same for my annuities .... if they go bad, we still will be ok.
Better safe than sorry.

This attitude is one of retirement is for the protection of wealth, not the maximization of wealth, is very healthy. The probability for state pension bankruptcies and other bankruptcies is not zero, and not a fixed probability. That's why there are re-insurance companies, to insure insurance companies. That is also the basis of the behavioral bias "recency bias"

Most if not all accidents or mistakes come from the assumption that all possible outcomes are assumed to be taken into account. Then after the accident the harmed usually says something to the effect that "I didn't see that coming". Same can be said for personal financial outcomes. Free and clear eliminates any risk of being called away for reasons beyond your control, or loss of assets/income backing the payment.
Ask pete carroll with the play which lost the superbowl to the patriots. Not one play has a probability of 100% guaranteed outcome, not even a kneel down.

Our 25 year mortgage, taken in 2014, will be paid off this year (2021), after 6-7 years, for this reason.

So Joe picked blue as well. . .

[Stu from NYC]

Why did your wife have to start at 65 and then stop? She is entitled to 50% of your SS regardless, so she could just wait until 70 and file.

Trying to understand what I'm missing here.

If she did not file she would not get anything from SS.

By filing and than stopping she gets 50% of her husband's SS until she goes ahead and completes application. By waiting till 70 she maxes out her SS.

[CoachKandSportsguy]

https://www.talkofthevillages.com/forums/attachments/villages-florida-general-discussion-73/87480d1608997985-mortgage-retirement-years-fortran-jpg

my wife's book, not mine. . . .

[tvbound]

We decided to carry a mortgage at these low rates because investment returns are generally higher. The caveat - the cash you would have used to pay off the mortgage (and the Bond?) must be invested and not spent.

We plan on doing the same thing, for these reasons and one other. If I give in to the current requests for consulting piling up, the mortgage will help write-off the additional income. Primary residence interest rates remain at historic lows, so the difference between even what conservative investments can make (albeit, I've been leery of the inflated market on equities before the pandemic and only seeing it get worse, once the full ramifications are recognized by Wall Street) and the interest paid on a small mortgage, makes sense for us.

[Tom M]

As much as people want to be analytical about money, the truth is that money evokes emotional responses. That's the key.

Do you feel happy with your financial decision of keeping a mortgage and investing that money instead in something that can earn more (after tax) than the mortgage costs - so you can leave more for your heirs? Great, go for it.

Do you feel happy with the security of having debts paid of and no need to try to find investments that have a risk of falling in value? Great, pay off your mortgage.

Trying to convince a person who loves investing and the market return potential that paying off a mortgage at such a low rate is the wrong thing to do is just as bad as trying to convince a fixed return asset preservationist that paying off debt is bad.

The good news is that most people are great at rationalization and will end up being happy with the choice they made.

[biker1]

Anyone over the age of 60 who developed software should find the following very funny:

Real Programmers Don't Use Pascal (https://www.pbm.com/~lindahl/real.programmers.html)



https://www.talkofthevillages.com/forums/attachments/villages-florida-general-discussion-73/87480d1608997985-mortgage-retirement-years-fortran-jpg

my wife's book, not mine. . . .

[CoachKandSportsguy]

As much as people want to be analytical about money, the truth is that money evokes emotional responses. That's the key.

The good news is that most people are great at rationalization and will end up being happy with the choice they made.

The definition of behavioral finance.:bigbow: However, by exposing the hidden biases, with financial education, one can potentially see the benefit of different options on their lifestyle.

But not always. CFP had constantly recommended to my dad to gift money from this estate prior to his death for estate tax, usefullness and control reasons. My dad could not do it, did not see or understand the benefit, as he was a depression era engineer with physics approach. his response was largely a depression generational response and partly a personality type bias. Concepts and abstract future were incomprehensible to him. ie, I put up his mailbox without taking measurements, and he did not like that at all. . . measurements assured him of his process were correct.

So totally agree with Tom M, which is why when posting on an open global forum, one has to accept the debaters, the lawyers, and the common knowledge statements. Good read:
Amazon.com (https://www.amazon.com/Death-Expertise-Campaign-Established-Knowledge/dp/0190865970/)

[manaboutown]

///

[manaboutown]

As much as people want to be analytical about money, the truth is that money evokes emotional responses. That's the key.

Do you feel happy with your financial decision of keeping a mortgage and investing that money instead in something that can earn more (after tax) than the mortgage costs - so you can leave more for your heirs? Great, go for it.

Do you feel happy with the security of having debts paid of and no need to try to find investments that have a risk of falling in value? Great, pay off your mortgage.

Trying to convince a person who loves investing and the market return potential that paying off a mortgage at such a low rate is the wrong thing to do is just as bad as trying to convince a fixed return asset preservationist that paying off debt is bad.

The good news is that most people are great at rationalization and will end up being happy with the choice they made.

I use what I call my 'sleep at night' test. I pretend I have done a financial thing and then see how I can sleep with that decision.

[manaboutown]

I started to refi with Citizens First last year to take advantage of the lower rates. they wanted closing costs of $17,000 to refi $300,000. To me, it was just legalized usury and we canceled the loan. Then they said they would lower the closing costs by $7,000 which kind of supported my opinion.

Plan to stay here another (fingers crossed) 25 years and with no one to leave my estate to, will just go with a Reverse Mortgage.

Whoa! The fees on a reverse mortgage would be even higher than $17K!

[Jayhawk]

I started to refi with Citizens First last year to take advantage of the lower rates. they wanted closing costs of $17,000 to refi $300,000. To me, it was just legalized usury and we canceled the loan. Then they said they would lower the closing costs by $7,000 which kind of supported my opinion.

Plan to stay here another (fingers crossed) 25 years and with no one to leave my estate to, will just go with a Reverse Mortgage.

The ONLY things that would cause a refi to have $17,000 in closing costs would be if you were buying the rate down even lower than the "par rate" (the advertised rate) or if you had to have significant upfront mortgage insurance for being over 80% leveraged. There are no standard closing costs that would climb to $17k on a $300k loan. You are leaving out some key facts.

[CoachKandSportsguy]

If I give in to the current requests for consulting piling up, the mortgage will help write-off the additional income.

Yes, but but only getting a 20%-30% reduction in taxes for every interest dollar spent still reduces after tax income by the 80%-70% of interest paid, so the logic is a behavioral emotional response to paying taxes, not a rational plan after tax income maximization approach. A rational after tax maximization income approach is to eliminate all cash expenses, because there is only a tax rate % benefit of additional expenses. - Expense out + tax % savings = cash out of your pocketbook of more than 0 expenses. The only expenses to deduct for income maximization are those required to produce the income. optional mortgage interest is not required in your stated case.

There is never a free lunch for taxes. . and personally, I love paying more taxes because it means that I am wealthier, after all proper after tax income maximization approaches have been applied. . .

:boxing2:

sportsguy

[jebartle]

We paid off the mortgage (but not the bond) because it's a nice feeling. After the 2008 crash we became very savvy about where we put our money...keeping all our savings in the stock market hoping to get rich is akin to putting it on a table in Las Vegas. We still have some money in the market as a hedge on inflation, but the overwhelming majority is in other vehicles and investments. For us, it's about enjoying our wealth and sharing our wealth...we are well past the era of accumulating wealth.

Hmm, have I mentioned that there is no bond in lake county!

[rccooper22]

There are so many financial know it all's in the Villages. Paying off your home is a personal choice if you can do so. Paying off your bond saves 6%. Do what makes sense to you.

Is the 6% on the bond tax deductible?

[retiredguy123]

Is the 6% on the bond tax deductible?
Not tax deductible if it is your personal residence and not rental property.

[dewilson58]

Is the 6% on the bond tax deductible?
Deductible until audit.

[retiredguy123]

Deductible until audit.
Like everything else.

[lennythenet]

Dep

[tvbound]

Yes, but but only getting a 20%-30% reduction in taxes for every interest dollar spent still reduces after tax income by the 80%-70% of interest paid, so the logic is a behavioral emotional response to paying taxes, not a rational plan after tax income maximization approach. A rational after tax maximization income approach is to eliminate all cash expenses, because there is only a tax rate % benefit of additional expenses. - Expense out + tax % savings = cash out of your pocketbook of more than 0 expenses. The only expenses to deduct for income maximization are those required to produce the income. optional mortgage interest is not required in your stated case.

There is never a free lunch for taxes. . and personally, I love paying more taxes because it means that I am wealthier, after all proper after tax income maximization approaches have been applied. . .

:boxing2:

sportsguy

With respect, you've forgotten or ignored the rest of my post. The deduction against potential income is simply an additional part of the equation, with the difference in actualized returns on investments outweighing the mortgage interest, being the primary reason. Pure math and logic, no "behavioral emotional response" involved

[Stu from NYC]

Deductible until audit.

Do they still do that?

[retiredguy123]

Do they still do that?
No, you can stop filing tax returns now.

Let me know how it works out.

[manaboutown]

Is the 6% on the bond tax deductible?

If a large entity does not issue you a Form 1098 on interest paid to it the interest is likely not deductible on Schedule A as an itemized deduction. IRS computers match up 1098s and 1099s on interest earned with what is reported on tax returns to assure accuracy and compliance. Of course as previously posted bond interest is likely deductible on a home held for rental as an expense.

"Form 1098. The standard Form 1098 is the "Mortgage Interest Statement," which comes from the company that services your mortgage loan. Mortgage interest on first and second homes is generally deductible for taxpayers who itemize their deductions."

from Guide to 1098 Tax Forms - TurboTax Tax Tips & Videos (https://turbotax.intuit.com/tax-tips/home-ownership/guide-to-1098-tax-forms/L8s74M2aZ)

[J1ceasar]

Noooooo . Getting money upfront, especially if you decide your going to die early is best

[Garywt]

We actually have 2 mortgages, Florida and Mass. Someday in the next 13 years we will sell our Mass home and just stay in our trailer in NH but for now we have the mortgages which both have escrows to take care of the taxes etc.

[TNLAKEPANDA]

I like being Debt Free

[CoachKandSportsguy]

With respect, you've forgotten or ignored the rest of my post. The deduction against potential income is simply an additional part of the equation, with the difference in actualized returns on investments outweighing the mortgage interest, being the primary reason. Pure math and logic, no "behavioral emotional response" involved

I believe that your post said "If I give in to the current requests for consulting piling up, the mortgage will help write-off the additional income." That statement is the one to which I was responding, and to which the common knowledge fails. My argument versus this statement still stands.

However, what you are stating now is that this statement isn't the primary reason, but an incorrect common knowledge argument to support your primary reasoning, which is that the current investment of the principal is greater than the interest rate of the mortgage, which is an income maximization position.

To that I have no disagreement:ho: to the statement that an interest payment offsets income is a behavioral bias as stated is still valid, its a tax minimization strategy inferior to an income maximization strategy.

[DCiav]

Reverse mortgage or buy stock and rent it out using covered call options.

[Dorebea]

COBOL Girl here!
Reply to #53. CoachKandSportsguy

[cj1040]

The older spouse can start social security and the other one can claim under them while letting theirs grow to maximum then collect under their own name. We did that. Our prior 30 year home was paid off but we close on a new build at TV in Feb and decided to carry a mortgage ..locked in at 2.75 with one chance to lower it. We will not plan to ever pay it off and do other things with our money instead.

[Bill14564]

The older spouse can start social security and the other one can claim under them while letting theirs grow to maximum then collect under their own name. We did that. Our prior 30 year home was paid off but we close on a new build at TV in Feb and decided to carry a mortgage ..locked in at 2.75 with one chance to lower it. We will not plan to ever pay it off and do other things with our money instead.

I believe this is no longer allowed as of 2016.

[biker1]

You can do that as long as you were born before January 1 1954.


I believe this is no longer allowed as of 2016.

[lindaelane]

As a retired professor of mathematics education, I regret the misunderstandings about the word "average". Yes, the S and P does indeed average 11 percent (dividends included) over the years. But people do not realize there are very long periods of a decade or more when, if you were invested during a downturn, your investment in the S and P did not come back for over a decade.

Psychology is also in play. Most feel they can "beat the market" with wiser investments than buying an S and P index fund, but almost no one does over the long run.

I originally thought I'd "surely" do better than the 2.85% my 15 year mortgage is set to with my investments. But the $1280 P and I I pay each month interferes with cash flow and keeps me from fully living dreams of travelling the world. I will soon pay off my house earl - or at the very least put $100,000 toward a "recast", then enjoy my cash flow and travel more. I realize that the "odds" are than I will die with less than I would have through this method, but we are meant to have some enjoyment in retirement and the amount I leave to charity when I pass away should still be very nice, since I live off dividends, pension and social security, without touching principal.

By the way, I recently learned about "recast" - a gap in my education. For a fee of about $200, you can pay down some of your mortgage, your monthly payment will decrease, and you will still be paid off at the time specified in the original loan. For me, if I put down $100,000 and pay the small fee, my monthly payment drops from $1280 to $400 and I will still be paid off in 11 years (I've ben paying for four years). I can choose any amount to "recast", it does not have to he $100,000 - the fee is the same regardless of the amount put toward the recast. It is much, much less expensive in fees than a re-finance -that is perhaps why companies to not mention the possibility of recast, but as far as I know, any mortgage company will do a recast.

[Curtisbwp]

I have no problem at all. I own a home in TV and am building a home in the moubtain/lake region of maine. I have a more on both. Combined they are 18% of my income. Not a problem at all.

[Kayakguy]

Fortran & IBM cards.................oh yes. :icon_wink:

Yes, I started working for IBM in 1964, when Thomas Watson Jr bet the company on System/360.
Remember carrying those boxes of cards around being so careful not to drop them.

[roob1]

Thanking those who responded to my question for their helpful responses.

Unfortunately threads get hijacked as responders seem to be unable or unwilling to focus on the original question.....



Assuming you have current and continued solid financial solvency, and could own your residence outright with no financial impact on your lifestyle:

Given low mortgage rates 2.5%-3.5%, how would you feel about holding a mortgage on your residence in your retirement years?

[Bay Kid]

I owe, I owe, it is off to work I go. Sorry but I pay attention to Dave Ramsey. There is no good debt in my mind.

[dewilson58]

Unfortunately threads get hijacked as responders seem to be unable or unwilling to focus on the original question.....
Welcome to ToTV.

At least it did not get political.
:MOJE_whot: