| lindaelane |
12-27-2020 09:54 AM |
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.
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