"Nobody's ever regretted paying off the mortgage."

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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aj76er
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Re: "Nobody's ever regretted paying off the mortgage."

Post by aj76er »

bmelikia wrote: Wed Apr 14, 2021 2:06 pm
bertilak wrote: Wed Apr 14, 2021 12:21 pm Paying down does not improve cash flow by one penny.
Paying down your mortgage can improve cash flow if you elect to recast your mortgage during the course of your mortgage pay down process.

Our monthly PITI used to be $1,600.00/month but now it is around $775.00/month due to recasting our mortgage during pay down.

We will have our mortgage hopefully paid off by the end of June 2021.
The downside is that you’re paying more interest over the entire payment schedule.
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JBEB
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Re: "Nobody's ever regretted paying off the mortgage."

Post by JBEB »

aj76er wrote: Mon Apr 19, 2021 8:25 pm
bmelikia wrote: Wed Apr 14, 2021 2:06 pm
bertilak wrote: Wed Apr 14, 2021 12:21 pm Paying down does not improve cash flow by one penny.
Paying down your mortgage can improve cash flow if you elect to recast your mortgage during the course of your mortgage pay down process.

Our monthly PITI used to be $1,600.00/month but now it is around $775.00/month due to recasting our mortgage during pay down.

We will have our mortgage hopefully paid off by the end of June 2021.
The downside is that you’re paying more interest over the entire payment schedule.
How so?

Sorry Im trying understand recasting
albireo13
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Re: "Nobody's ever regretted paying off the mortgage."

Post by albireo13 »

We have a fresh 30 yr fixed mortgage. It allowed us to buy our last last, forever house. Being 65yo, I may not see it paid off. Do I care? Naah. The monthly payment is factored into our living expenses during financial planning and we are just fine. In fact, we just refinanced to 2.625% and are doing better than we had expected. Considering tax deductions our effective rate is even lower.

Would it be better to have it paid off? Sure. Still, I don't lose any sleep over it. It's just like my cable bill, a monthly utility payment. It helps that we have decent equity. We could pay it off if we dip into our nest egg but, no reason to do that. I don't attach any emotional value to the mortgage being paid off.

Looking back over the years, a few unplanned life events prevented us from paying off our mortgage. While I thought about it, I always put my first priority into 401K investing. We are not rich but we did very well.

Different paths to getting to the same spot. It's all good and I applaud those who paid off their mortgage.
awval999
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Re: "Nobody's ever regretted paying off the mortgage."

Post by awval999 »

You may as well rename the thread:
"Nobody's ever regretted *having children*"

You'll get the same hot takes and opinions.

Paying off the mortgage is an emotional decision. Similar to choosing your life partner, having children, or selecting a retirement date. All of these things have financial implications, but they are *secondary* to the emotional life choice. Literally the definition of *personal* finance.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by LongRoad »

corn18 wrote: Mon Apr 19, 2021 5:46 pm I'll just post this again so we don't lose sight of the non-emotional side of the equation. Anyone paying cash for a house today with the 30 year fixed rate @ 2.75% is going to lose money over 30 years. A lot of money.

Image
One other issue here is that the invested funds aren't simply all being invested on day one and sitting for 30 years.

Depending on how the comparison is framed, the funds are being DCA'ed either into or out of the account based on the amortization schedule of the avoided loan.

If I invest my $500K and take a mortgage (instead of simply spending it on my house), I'm taking 360 regular equal withdrawals from that investment account over the next 30 years to pay off the loan. This considerably reduces the returns shown in this graph, and also introduces a significant sequence of returns risk, precisely as it does for a retiree planning to spend down a portfolio over a 30 year retirement. In fact, in real terms, the withdrawals are front loaded because they aren't inflation adjusted, as the 30-year retiree's are.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by nolesrule »

JBEB wrote: Tue Apr 20, 2021 5:29 am
aj76er wrote: Mon Apr 19, 2021 8:25 pm
bmelikia wrote: Wed Apr 14, 2021 2:06 pm
bertilak wrote: Wed Apr 14, 2021 12:21 pm Paying down does not improve cash flow by one penny.
Paying down your mortgage can improve cash flow if you elect to recast your mortgage during the course of your mortgage pay down process.

Our monthly PITI used to be $1,600.00/month but now it is around $775.00/month due to recasting our mortgage during pay down.

We will have our mortgage hopefully paid off by the end of June 2021.
The downside is that you’re paying more interest over the entire payment schedule.
How so?

Sorry Im trying understand recasting
When you do a recast, you make a lump sum payment that lowers the balance, and then the lender re-amortizes the loan so it ends on the original due date. This lowers the monthly payment amount, which means each month you are paying less to principal.

Compared to not doing the recast and sticking to the original mortgage payment amount after the lump sum, you end up paying more in interest because with the lower recast payment you pay less toward principal. Either way is probably still better than not having made the lump payment in terms of total interest, but the point is that there is a tradeoff to doing the recast and making the smaller payment.
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Triple digit golfer
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Re: "Nobody's ever regretted paying off the mortgage."

Post by Triple digit golfer »

corn18 wrote: Mon Apr 19, 2021 5:46 pm I'll just post this again so we don't lose sight of the non-emotional side of the equation. Anyone paying cash for a house today with the 30 year fixed rate @ 2.75% is going to lose money over 30 years. A lot of money.

Image
Nice chart. If history is any indicator, I should get at least 6% on a 60/40 portfolio over 30 years.

At what point does it make sense to pay OFF the mortgage?

Let's say I have a 30 year mortgage at 3% and I plow money into 60/40 instead of paying down the mortgage. When is it prudent to pay it off? With 15 years remaining? Seems like over most 15 year periods, you're very likely to beat 3%. 10 years? There have been lost decades, but still unlikely not to get 3%. 5 years?

In other words, when should one de-risk and take the guaranteed 3% return?
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Re: "Nobody's ever regretted paying off the mortgage."

Post by CoastLawyer2030 »

I have read every post in this thread and still can't find myself leaning one way or another. We just refinanced our mortgage to 2.88% (yay). Still, like so many others, on one hand I do not like debt; on the other I know the long term probability play is to invest in a taxable brokerage.

My hybrid plan was to have a mild mortgage payoff, in which the mortgage would be paid off by the time my kids were in school. This would require about $6,000 extra per year for 16 years (we save about $80,000-90,000 per year, so this is a fractional amount of our overall savings). The thought being that this would help for FAFSA purposes and also improve cash flow for the amount we wanted to pay out of pocket.

Now it seems there is a consensus that simply paying down the mortgage (versus paying it off) is a waste of time. Hmm.
Last edited by CoastLawyer2030 on Tue Apr 20, 2021 7:48 am, edited 1 time in total.
KlangFool
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Re: "Nobody's ever regretted paying off the mortgage."

Post by KlangFool »

Triple digit golfer wrote: Tue Apr 20, 2021 7:17 am
In other words, when should one de-risk and take the guaranteed 3% return?
Triple digit golfer,

My answer when your portfolio and EF is big enough. In my case, it meant portfolio = 25X and the EF = 3X.

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Triple digit golfer
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Re: "Nobody's ever regretted paying off the mortgage."

Post by Triple digit golfer »

KlangFool wrote: Tue Apr 20, 2021 7:44 am
Triple digit golfer wrote: Tue Apr 20, 2021 7:17 am
In other words, when should one de-risk and take the guaranteed 3% return?
Triple digit golfer,

My answer when your portfolio and EF is big enough. In my case, it meant portfolio = 25X and the EF = 3X.

KlangFool
Correct me if I'm wrong, but it seems that you'd only pay anything extra on a mortgage when you're financially independent. Is that correct?
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Re: "Nobody's ever regretted paying off the mortgage."

Post by KlangFool »

CoastLawyer2030 wrote: Tue Apr 20, 2021 7:42 am
My hybrid plan was to have a mild mortgage payoff, in which the mortgage would be paid off by the times my kids were in school. This would require about $6,000 extra per year for 16 years (we save about $80,000-90,000 per year, so this is a fractional amount of our overall savings).
CoastLawyer2030,

As long as you are sure that you do not need to take a student loan. It would seem to make more sense to me that you invest the money in the taxable account first. Only pay off the mortgage a few years before the kid started college.

<<This would require about $6,000 extra per year for 16 years (we save about $80,000-90,000 per year, so this is a fractional amount of our overall savings). >>

Which is one way to look at it. The other way is unless and until you reach your FI number, you could use all the possible money to speed up the process.

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Re: "Nobody's ever regretted paying off the mortgage."

Post by KlangFool »

Triple digit golfer wrote: Tue Apr 20, 2021 7:47 am
KlangFool wrote: Tue Apr 20, 2021 7:44 am
Triple digit golfer wrote: Tue Apr 20, 2021 7:17 am
In other words, when should one de-risk and take the guaranteed 3% return?
Triple digit golfer,

My answer when your portfolio and EF is big enough. In my case, it meant portfolio = 25X and the EF = 3X.

KlangFool
Correct me if I'm wrong, but it seems that you'd only pay anything extra on a mortgage when you're financially independent. Is that correct?
Yes.

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Re: "Nobody's ever regretted paying off the mortgage."

Post by manatee2005 »

“Nobody ever regretted paying off the mortgage”

Only Sith deal in absolutes.

My friend has a 1 mil house paid off, when I told him I doubled my money in the market in 2020 he regretted paying it off.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by manatee2005 »

Triple digit golfer wrote: Tue Apr 20, 2021 7:47 am
KlangFool wrote: Tue Apr 20, 2021 7:44 am
Triple digit golfer wrote: Tue Apr 20, 2021 7:17 am
In other words, when should one de-risk and take the guaranteed 3% return?
Triple digit golfer,

My answer when your portfolio and EF is big enough. In my case, it meant portfolio = 25X and the EF = 3X.

KlangFool
Correct me if I'm wrong, but it seems that you'd only pay anything extra on a mortgage when you're financially independent. Is that correct?
No.
LongRoad
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Re: "Nobody's ever regretted paying off the mortgage."

Post by LongRoad »

CoastLawyer2030 wrote: Tue Apr 20, 2021 7:42 am I have read every post in this thread and still can't find myself leaning one way or another. We just refinanced our mortgage to 2.88% (yay). Still, like so many others, on one hand I do not like debt; on the other I know the long term probability play is to invest in a taxable brokerage.

My hybrid plan was to have a mild mortgage payoff, in which the mortgage would be paid off by the time my kids were in school. This would require about $6,000 extra per year for 16 years (we save about $80,000-90,000 per year, so this is a fractional amount of our overall savings). The thought being that this would help for FAFSA purposes and also improve cash flow for the amount we wanted to pay out of pocket.

Now it seems there is a consensus that simply paying down the mortgage (versus paying it off) is a waste of time. Hmm.
I don't see anything wrong with your plan. The objections seem to center either on the funds being paid to the mortgage being unavailable when you have a personal 'liquidity event', or the expectation that investing in stocks has a greater likely return.

If you're saving/investing $80K+ a year, are you going to miss that $6000 in case of an emergency? Can you earn more than 2.88% guaranteed on any fixed income investment over your timeframe?
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galving
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Re: "Nobody's ever regretted paying off the mortgage."

Post by galving »

"Nobody" as in anyone ever in the history of the humankind?
There's at least someone who's regretted paying off the mortgage at some point.

Though generally speaking, it is a good feeling and likely that the majority of the people paying off the mortgage believe its a good decision.
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vanbogle59
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Re: "Nobody's ever regretted paying off the mortgage."

Post by vanbogle59 »

manatee2005 wrote: Tue Apr 20, 2021 7:56 am “Nobody ever regretted paying off the mortgage”

Only Sith deal in absolutes.

My friend has a 1 mil house paid off, when I told him I doubled my money in the market in 2020 he regretted paying it off.
Only doubled? Clearly you missed the BTC runup.
Should we start a new topic: "Nobody ever regretted selling VTSAX and going all in on BTC?"
Apples/oranges.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by CoastLawyer2030 »

KlangFool wrote: Tue Apr 20, 2021 7:50 am
CoastLawyer2030 wrote: Tue Apr 20, 2021 7:42 am
My hybrid plan was to have a mild mortgage payoff, in which the mortgage would be paid off by the times my kids were in school. This would require about $6,000 extra per year for 16 years (we save about $80,000-90,000 per year, so this is a fractional amount of our overall savings).
CoastLawyer2030,

As long as you are sure that you do not need to take a student loan. It would seem to make more sense to me that you invest the money in the taxable account first. Only pay off the mortgage a few years before the kid started college.

<<This would require about $6,000 extra per year for 16 years (we save about $80,000-90,000 per year, so this is a fractional amount of our overall savings). >>

Which is one way to look at it. The other way is unless and until you reach your FI number, you could use all the possible money to speed up the process.

KlangFool
I agree about positioning ourselves not to need student loans.

My rebuttal to the bolded is that I view small mortgage payoff versus investing almost as a rounding error. With my savings rate this high, dedicating less than 8% of savings to extra mortgage payoff doesn't move the needle that much in terms of my overall FI number.
CoastLawyer2030
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Re: "Nobody's ever regretted paying off the mortgage."

Post by CoastLawyer2030 »

LongRoad wrote: Tue Apr 20, 2021 7:59 amIf you're saving/investing $80K+ a year, are you going to miss that $6000 in case of an emergency? Can you earn more than 2.88% guaranteed on any fixed income investment over your timeframe?
This is why I largely lean towards slight mortgage payoff. In a couple years my deferred comp account will be $150,000. Our Roths will be $100,000. Our brokerages will be $200,000.

As I've posted in more detail before, I call these "flex assets" that will get me through any liquidity crisis. And when we make $175,000 a year and spend $75,000 a year, maintaining such a moderate standard of living is in itself a hedge against a liquidity crisis.
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Re: "Nobody's ever regretted paying off the mortgage."

Post by KlangFool »

CoastLawyer2030 wrote: Tue Apr 20, 2021 8:26 am
KlangFool wrote: Tue Apr 20, 2021 7:50 am
CoastLawyer2030 wrote: Tue Apr 20, 2021 7:42 am
My hybrid plan was to have a mild mortgage payoff, in which the mortgage would be paid off by the times my kids were in school. This would require about $6,000 extra per year for 16 years (we save about $80,000-90,000 per year, so this is a fractional amount of our overall savings).
CoastLawyer2030,

As long as you are sure that you do not need to take a student loan. It would seem to make more sense to me that you invest the money in the taxable account first. Only pay off the mortgage a few years before the kid started college.

<<This would require about $6,000 extra per year for 16 years (we save about $80,000-90,000 per year, so this is a fractional amount of our overall savings). >>

Which is one way to look at it. The other way is unless and until you reach your FI number, you could use all the possible money to speed up the process.

KlangFool
I agree about positioning ourselves not to need student loans.

My rebuttal to the bolded is that I view small mortgage payoff versus investing almost as a rounding error. With my savings rate this high, dedicating less than 8% of savings to extra mortgage payoff doesn't move the needle that much in terms of my overall FI number.
If you had done the calculation, then go ahead. Just make sure that this amount doesn't push your FI date one year earlier.

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Re: "Nobody's ever regretted paying off the mortgage."

Post by KlangFool »

CoastLawyer2030 wrote: Tue Apr 20, 2021 8:28 am
LongRoad wrote: Tue Apr 20, 2021 7:59 amIf you're saving/investing $80K+ a year, are you going to miss that $6000 in case of an emergency? Can you earn more than 2.88% guaranteed on any fixed income investment over your timeframe?
This is why I largely lean towards slight mortgage payoff. In a couple years my deferred comp account will be $150,000. Our Roths will be $100,000. Our brokerages will be $200,000.

As I've posted in more detail before, I call these "flex assets" that will get me through any liquidity crisis. And when we make $175,000 a year and spend $75,000 a year, maintaining such a moderate standard of living is in itself a hedge against a liquidity crisis.
CoastLawyer2030,

Assuming that you have 450K and saving 85K per year and your target is 25X 75K = 1.875 million.

You will reach your number in 9+ years with a 7% annual return.

Starting Net Worth $450,000
Annual Savings $85,000 $1,875,000
Years
Annual Return Rate 7 8 9 10
5.00% $1,325,266 $1,476,529 $1,635,356 $1,802,123
6.00% $1,390,110 $1,558,516 $1,737,027 $1,926,249
7.00% $1,458,193 $1,645,267 $1,845,436 $2,059,616

Assuming that you save extra 6K per year.

You will reach your number in 8+ years with a 7% annual return.

Starting Net Worth $450,000
Annual Savings $91,000 $1,875,000
Years
Annual Return Rate 7 8 9
5.00% $1,374,118 $1,533,824 $1,701,515
6.00% $1,440,473 $1,617,901 $1,805,975
7.00% $1,510,118 $1,706,826 $1,917,304

How much is reaching your FI target one year earlier worth to you?

I reached my FI number with my severance pay last year. I made it barely just in time.

6K per year over 16 years and earning 5% extra per year is worth 131K.

Starting Net Worth $0
Annual Savings $6,000
Years
Annual Return Rate 16
4.00% $130,947

KlangFool
Last edited by KlangFool on Tue Apr 20, 2021 9:04 am, edited 1 time in total.
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delamer
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Re: "Nobody's ever regretted paying off the mortgage."

Post by delamer »

CoastLawyer2030 wrote: Tue Apr 20, 2021 7:42 am I have read every post in this thread and still can't find myself leaning one way or another. We just refinanced our mortgage to 2.88% (yay). Still, like so many others, on one hand I do not like debt; on the other I know the long term probability play is to invest in a taxable brokerage.

My hybrid plan was to have a mild mortgage payoff, in which the mortgage would be paid off by the time my kids were in school. This would require about $6,000 extra per year for 16 years (we save about $80,000-90,000 per year, so this is a fractional amount of our overall savings). The thought being that this would help for FAFSA purposes and also improve cash flow for the amount we wanted to pay out of pocket.

Now it seems there is a consensus that simply paying down the mortgage (versus paying it off) is a waste of time. Hmm.
Not a waste of time, but a waste of cash. 8-)

If you pay it off, then you free up income to use for other expenses. But as you are paying it down, you are sinking cash into a non-liquid asset.

I believe it was KlangFool who once suggested that the best option is to invest your excess cash into a taxable account rather than making additional principal payments. Then once you have enough in the taxable account to completely pay off the mortgage, do so. That way, you keep your liquidity in the shorter term, but can pay off the mortgage in the longer term (assuming that’s your goal).

Recasting is an interesting hybrid option.
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vineviz
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Re: "Nobody's ever regretted paying off the mortgage."

Post by vineviz »

Triple digit golfer wrote: Tue Apr 20, 2021 7:17 am
Nice chart. If history is any indicator, I should get at least 6% on a 60/40 portfolio over 30 years.
It’s not an indicator, sadly.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
graspau
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Re: "Nobody's ever regretted paying off the mortgage."

Post by graspau »

delamer wrote: Tue Apr 20, 2021 9:02 am Recasting is an interesting hybrid option.
We did a recast, and it was nice to drop the minimum payment in a situation of little to no job security. We still paid the old amount and had the extra go to principal, but if laid off, it was a nice drop in fixed expenses we could go to in a pinch without having to pay the whole loan off in one chunk.
CoastLawyer2030
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Re: "Nobody's ever regretted paying off the mortgage."

Post by CoastLawyer2030 »

delamer wrote: Tue Apr 20, 2021 9:02 am
CoastLawyer2030 wrote: Tue Apr 20, 2021 7:42 am I have read every post in this thread and still can't find myself leaning one way or another. We just refinanced our mortgage to 2.88% (yay). Still, like so many others, on one hand I do not like debt; on the other I know the long term probability play is to invest in a taxable brokerage.

My hybrid plan was to have a mild mortgage payoff, in which the mortgage would be paid off by the time my kids were in school. This would require about $6,000 extra per year for 16 years (we save about $80,000-90,000 per year, so this is a fractional amount of our overall savings). The thought being that this would help for FAFSA purposes and also improve cash flow for the amount we wanted to pay out of pocket.

Now it seems there is a consensus that simply paying down the mortgage (versus paying it off) is a waste of time. Hmm.
Not a waste of time, but a waste of cash. 8-)

If you pay it off, then you free up income to use for other expenses. But as you are paying it down, you are sinking cash into a non-liquid asset.

I believe it was KlangFool who once suggested that the best option is to invest your excess cash into a taxable account rather than making additional principal payments. Then once you have enough in the taxable account to completely pay off the mortgage, do so. That way, you keep your liquidity in the shorter term, but can pay off the mortgage in the longer term (assuming that’s your goal).

Recasting is an interesting hybrid option.
The more I read this thread, the more I lean towards that option and away from my slow paydown option.
manatee2005
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Re: "Nobody's ever regretted paying off the mortgage."

Post by manatee2005 »

vanbogle59 wrote: Tue Apr 20, 2021 8:20 am
manatee2005 wrote: Tue Apr 20, 2021 7:56 am “Nobody ever regretted paying off the mortgage”

Only Sith deal in absolutes.

My friend has a 1 mil house paid off, when I told him I doubled my money in the market in 2020 he regretted paying it off.
Only doubled? Clearly you missed the BTC runup.
Should we start a new topic: "Nobody ever regretted selling VTSAX and going all in on BTC?"
Apples/oranges.
I didn’t miss the Bitcoin runup, have had Bitcoin since 2015. I think at some point the government will confiscate it so it’s not a major part of my portfolio.
Last edited by manatee2005 on Tue Apr 20, 2021 9:11 am, edited 1 time in total.
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queso
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Re: "Nobody's ever regretted paying off the mortgage."

Post by queso »

CoastLawyer2030 wrote: Tue Apr 20, 2021 9:08 am
delamer wrote: Tue Apr 20, 2021 9:02 am
CoastLawyer2030 wrote: Tue Apr 20, 2021 7:42 am I have read every post in this thread and still can't find myself leaning one way or another. We just refinanced our mortgage to 2.88% (yay). Still, like so many others, on one hand I do not like debt; on the other I know the long term probability play is to invest in a taxable brokerage.

My hybrid plan was to have a mild mortgage payoff, in which the mortgage would be paid off by the time my kids were in school. This would require about $6,000 extra per year for 16 years (we save about $80,000-90,000 per year, so this is a fractional amount of our overall savings). The thought being that this would help for FAFSA purposes and also improve cash flow for the amount we wanted to pay out of pocket.

Now it seems there is a consensus that simply paying down the mortgage (versus paying it off) is a waste of time. Hmm.
Not a waste of time, but a waste of cash. 8-)

If you pay it off, then you free up income to use for other expenses. But as you are paying it down, you are sinking cash into a non-liquid asset.

I believe it was KlangFool who once suggested that the best option is to invest your excess cash into a taxable account rather than making additional principal payments. Then once you have enough in the taxable account to completely pay off the mortgage, do so. That way, you keep your liquidity in the shorter term, but can pay off the mortgage in the longer term (assuming that’s your goal).

Recasting is an interesting hybrid option.
The more I read this thread, the more I lean towards that option and away from my slow paydown option.
As I posted upthread, I used to be in the camp that believed in taking a hybrid approach of mostly taxable investing but throwing a bit extra at the mortgage simultaneously (in my case $1k/mo so $12k/yr total extra principal payments). I did that for years, but stopped last year when I refinanced into a 15 year @ 2%. I just couldn't make the math work in a way that satisfied me that it was a good use of extra cash so now that is going into taxable and I am just paying the minimum on the mortgage. I probably have enough in taxable to pay off the mortgage 6 times over, but so far I can't convince myself that is a good idea either. :happy
Last edited by queso on Tue Apr 20, 2021 9:12 am, edited 2 times in total.
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Triple digit golfer
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Joined: Mon May 18, 2009 5:57 pm

Re: "Nobody's ever regretted paying off the mortgage."

Post by Triple digit golfer »

KlangFool wrote: Tue Apr 20, 2021 8:57 am
CoastLawyer2030 wrote: Tue Apr 20, 2021 8:28 am
LongRoad wrote: Tue Apr 20, 2021 7:59 amIf you're saving/investing $80K+ a year, are you going to miss that $6000 in case of an emergency? Can you earn more than 2.88% guaranteed on any fixed income investment over your timeframe?
This is why I largely lean towards slight mortgage payoff. In a couple years my deferred comp account will be $150,000. Our Roths will be $100,000. Our brokerages will be $200,000.

As I've posted in more detail before, I call these "flex assets" that will get me through any liquidity crisis. And when we make $175,000 a year and spend $75,000 a year, maintaining such a moderate standard of living is in itself a hedge against a liquidity crisis.
CoastLawyer2030,

Assuming that you have 450K and saving 85K per year and your target is 25X 75K = 1.875 million.

You will reach your number in 9+ years with a 7% annual return.

Starting Net Worth $450,000
Annual Savings $85,000 $1,875,000
Years
Annual Return Rate 7 8 9 10
5.00% $1,325,266 $1,476,529 $1,635,356 $1,802,123
6.00% $1,390,110 $1,558,516 $1,737,027 $1,926,249
7.00% $1,458,193 $1,645,267 $1,845,436 $2,059,616

Assuming that you save extra 6K per year.

You will reach your number in 8+ years with a 7% annual return.

Starting Net Worth $450,000
Annual Savings $91,000 $1,875,000
Years
Annual Return Rate 7 8 9
5.00% $1,374,118 $1,533,824 $1,701,515
6.00% $1,440,473 $1,617,901 $1,805,975
7.00% $1,510,118 $1,706,826 $1,917,304

How much is reaching your FI target one year earlier worth to you?

I reached my FI number with my severance pay last year. I made it barely just in time.

KlangFool
Would you mind checking my numbers?

Let's just assume $20,000 annual savings (just a bad case scenario), $80k annual expenes, current portfolio $1 million.

I see that I get to 25x expenses:

5%: 11 years
6%: 10 years
7%: 9 years

If I assume my current savings of $60,000, I'll get to 25x expenses:

5%: 10 years
6%: 8 years
7%: 7 years

This tells me a few things, none of which are a surprise to an experienced Boglehead:

1. Increased rate of return doesn't really get me financially independent a whole lot sooner.
2. Current portfolio balance is a larger driver than returns at this point.
3. New contributions tripling only get me financially independent a year or two sooner.
4. If my expenses were higher and/or I wanted to get to 35x instead of 25x, then new contributions would be more of a contributing factor. But being only 10 years from the goal, new contributions don't have a lot of time to compound, so they don't play a relatively large part of reaching the goal compared to current balance.


At this point, I think the important thing is to not get overly greedy, keep my nose to the grindstone and keep saving.
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willthrill81
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Re: "Nobody's ever regretted paying off the mortgage."

Post by willthrill81 »

awval999 wrote: Tue Apr 20, 2021 6:54 am Paying off the mortgage is an emotional decision.
Sometimes, but not always. Paying down/off one's mortgage often provides a higher return than what fixed income can provide. When someone says that their AA is X/Y, it's pretty uncommon for someone to say criticize it on the basis of the person having made it for 'emotional reasons', even though that's very often the case.
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
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willthrill81
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Location: USA

Re: "Nobody's ever regretted paying off the mortgage."

Post by willthrill81 »

Triple digit golfer wrote: Tue Apr 20, 2021 9:12 am
KlangFool wrote: Tue Apr 20, 2021 8:57 am
CoastLawyer2030 wrote: Tue Apr 20, 2021 8:28 am
LongRoad wrote: Tue Apr 20, 2021 7:59 amIf you're saving/investing $80K+ a year, are you going to miss that $6000 in case of an emergency? Can you earn more than 2.88% guaranteed on any fixed income investment over your timeframe?
This is why I largely lean towards slight mortgage payoff. In a couple years my deferred comp account will be $150,000. Our Roths will be $100,000. Our brokerages will be $200,000.

As I've posted in more detail before, I call these "flex assets" that will get me through any liquidity crisis. And when we make $175,000 a year and spend $75,000 a year, maintaining such a moderate standard of living is in itself a hedge against a liquidity crisis.
CoastLawyer2030,

Assuming that you have 450K and saving 85K per year and your target is 25X 75K = 1.875 million.

You will reach your number in 9+ years with a 7% annual return.

Starting Net Worth $450,000
Annual Savings $85,000 $1,875,000
Years
Annual Return Rate 7 8 9 10
5.00% $1,325,266 $1,476,529 $1,635,356 $1,802,123
6.00% $1,390,110 $1,558,516 $1,737,027 $1,926,249
7.00% $1,458,193 $1,645,267 $1,845,436 $2,059,616

Assuming that you save extra 6K per year.

You will reach your number in 8+ years with a 7% annual return.

Starting Net Worth $450,000
Annual Savings $91,000 $1,875,000
Years
Annual Return Rate 7 8 9
5.00% $1,374,118 $1,533,824 $1,701,515
6.00% $1,440,473 $1,617,901 $1,805,975
7.00% $1,510,118 $1,706,826 $1,917,304

How much is reaching your FI target one year earlier worth to you?

I reached my FI number with my severance pay last year. I made it barely just in time.

KlangFool
Would you mind checking my numbers?

Let's just assume $20,000 annual savings (just a bad case scenario), $80k annual expenes, current portfolio $1 million.

I see that I get to 25x expenses:

5%: 11 years
6%: 10 years
7%: 9 years

If I assume my current savings of $60,000, I'll get to 25x expenses:

5%: 10 years
6%: 8 years
7%: 7 years

This tells me a few things, none of which are a surprise to an experienced Boglehead:

1. Increased rate of return doesn't really get me financially independent a whole lot sooner.
2. Current portfolio balance is a larger driver than returns at this point.
3. New contributions tripling only get me financially independent a year or two sooner.
4. If my expenses were higher and/or I wanted to get to 35x instead of 25x, then new contributions would be more of a contributing factor. But being only 10 years from the goal, new contributions don't have a lot of time to compound, so they don't play a relatively large part of reaching the goal compared to current balance.


At this point, I think the important thing is to not get overly greedy, keep my nose to the grindstone and keep saving.
Your numbers look right (and are actually similar to ours), and I agree with your conclusions. Increasing one's saving rate and achieving higher returns have a diminishing marginal impact on the time it takes to reach FI, especially when you have a decade or less left to go.
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
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vanbogle59
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Re: "Nobody's ever regretted paying off the mortgage."

Post by vanbogle59 »

KlangFool wrote: Tue Apr 20, 2021 8:57 am I reached my FI number with my severance pay
CHEATER!
LOL
Seriously, congratulations.
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AerialWombat
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Re: "Nobody's ever regretted paying off the mortgage."

Post by AerialWombat »

willthrill81 wrote: Tue Apr 20, 2021 9:12 am
awval999 wrote: Tue Apr 20, 2021 6:54 am Paying off the mortgage is an emotional decision.
Sometimes, but not always. Paying down/off one's mortgage often provides a higher return than what fixed income can provide. When someone says that their AA is X/Y, it's pretty uncommon for someone to say criticize it on the basis of the person having made it for 'emotional reasons', even though that's very often the case.
I can’t speak for the entire 30/70 AA crowd, but yeah, it’s 100% emotional. There is zero mathematical logic to it.
For entertainment purposes only.
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Triple digit golfer
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Re: "Nobody's ever regretted paying off the mortgage."

Post by Triple digit golfer »

willthrill81 wrote: Tue Apr 20, 2021 9:15 am
Triple digit golfer wrote: Tue Apr 20, 2021 9:12 am
KlangFool wrote: Tue Apr 20, 2021 8:57 am
CoastLawyer2030 wrote: Tue Apr 20, 2021 8:28 am
LongRoad wrote: Tue Apr 20, 2021 7:59 amIf you're saving/investing $80K+ a year, are you going to miss that $6000 in case of an emergency? Can you earn more than 2.88% guaranteed on any fixed income investment over your timeframe?
This is why I largely lean towards slight mortgage payoff. In a couple years my deferred comp account will be $150,000. Our Roths will be $100,000. Our brokerages will be $200,000.

As I've posted in more detail before, I call these "flex assets" that will get me through any liquidity crisis. And when we make $175,000 a year and spend $75,000 a year, maintaining such a moderate standard of living is in itself a hedge against a liquidity crisis.
CoastLawyer2030,

Assuming that you have 450K and saving 85K per year and your target is 25X 75K = 1.875 million.

You will reach your number in 9+ years with a 7% annual return.

Starting Net Worth $450,000
Annual Savings $85,000 $1,875,000
Years
Annual Return Rate 7 8 9 10
5.00% $1,325,266 $1,476,529 $1,635,356 $1,802,123
6.00% $1,390,110 $1,558,516 $1,737,027 $1,926,249
7.00% $1,458,193 $1,645,267 $1,845,436 $2,059,616

Assuming that you save extra 6K per year.

You will reach your number in 8+ years with a 7% annual return.

Starting Net Worth $450,000
Annual Savings $91,000 $1,875,000
Years
Annual Return Rate 7 8 9
5.00% $1,374,118 $1,533,824 $1,701,515
6.00% $1,440,473 $1,617,901 $1,805,975
7.00% $1,510,118 $1,706,826 $1,917,304

How much is reaching your FI target one year earlier worth to you?

I reached my FI number with my severance pay last year. I made it barely just in time.

KlangFool
Would you mind checking my numbers?

Let's just assume $20,000 annual savings (just a bad case scenario), $80k annual expenes, current portfolio $1 million.

I see that I get to 25x expenses:

5%: 11 years
6%: 10 years
7%: 9 years

If I assume my current savings of $60,000, I'll get to 25x expenses:

5%: 10 years
6%: 8 years
7%: 7 years

This tells me a few things, none of which are a surprise to an experienced Boglehead:

1. Increased rate of return doesn't really get me financially independent a whole lot sooner.
2. Current portfolio balance is a larger driver than returns at this point.
3. New contributions tripling only get me financially independent a year or two sooner.
4. If my expenses were higher and/or I wanted to get to 35x instead of 25x, then new contributions would be more of a contributing factor. But being only 10 years from the goal, new contributions don't have a lot of time to compound, so they don't play a relatively large part of reaching the goal compared to current balance.


At this point, I think the important thing is to not get overly greedy, keep my nose to the grindstone and keep saving.
Your numbers look right (and are actually similar to ours), and I agree with your conclusions. Increasing one's saving rate and achieving higher returns have a diminishing marginal impact on the time it takes to reach FI, especially when you have a decade or less left to go.
I am considering loosening the purse strings a little bit and allowing some more entertainment spending. We've saved $180k the last three years and $72k last year and that is even after buying a new roof, furnace, and air conditioner. Nothing crazy, I'm thinking a nice vacation every couple years and maybe some more allowance for fun family things. Memories, not stuff. Probably $5-6k a year would do it.

But at the same time, I want to be responsible. We're a one-income household for the time being, we have a child to send to college in 14 years, and will have no pensions. We have almost $1.1 million plus another $40k in our daughter's 529 plan. $300k left on the mortgage for 29 years at 2.99%, so not paying that off anytime soon, likely.

Lowering savings by $5k a year for the next 10 years at a 6% return will result in $66k less of a nest egg in a decade. We're talking less than 1 year of expenses to build some great memories and do some really fun things.

I think I just talked myself into it. Maybe.
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willthrill81
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Location: USA

Re: "Nobody's ever regretted paying off the mortgage."

Post by willthrill81 »

Triple digit golfer wrote: Tue Apr 20, 2021 9:33 am
willthrill81 wrote: Tue Apr 20, 2021 9:15 am
Triple digit golfer wrote: Tue Apr 20, 2021 9:12 am
KlangFool wrote: Tue Apr 20, 2021 8:57 am
CoastLawyer2030 wrote: Tue Apr 20, 2021 8:28 am

This is why I largely lean towards slight mortgage payoff. In a couple years my deferred comp account will be $150,000. Our Roths will be $100,000. Our brokerages will be $200,000.

As I've posted in more detail before, I call these "flex assets" that will get me through any liquidity crisis. And when we make $175,000 a year and spend $75,000 a year, maintaining such a moderate standard of living is in itself a hedge against a liquidity crisis.
CoastLawyer2030,

Assuming that you have 450K and saving 85K per year and your target is 25X 75K = 1.875 million.

You will reach your number in 9+ years with a 7% annual return.

Starting Net Worth $450,000
Annual Savings $85,000 $1,875,000
Years
Annual Return Rate 7 8 9 10
5.00% $1,325,266 $1,476,529 $1,635,356 $1,802,123
6.00% $1,390,110 $1,558,516 $1,737,027 $1,926,249
7.00% $1,458,193 $1,645,267 $1,845,436 $2,059,616

Assuming that you save extra 6K per year.

You will reach your number in 8+ years with a 7% annual return.

Starting Net Worth $450,000
Annual Savings $91,000 $1,875,000
Years
Annual Return Rate 7 8 9
5.00% $1,374,118 $1,533,824 $1,701,515
6.00% $1,440,473 $1,617,901 $1,805,975
7.00% $1,510,118 $1,706,826 $1,917,304

How much is reaching your FI target one year earlier worth to you?

I reached my FI number with my severance pay last year. I made it barely just in time.

KlangFool
Would you mind checking my numbers?

Let's just assume $20,000 annual savings (just a bad case scenario), $80k annual expenes, current portfolio $1 million.

I see that I get to 25x expenses:

5%: 11 years
6%: 10 years
7%: 9 years

If I assume my current savings of $60,000, I'll get to 25x expenses:

5%: 10 years
6%: 8 years
7%: 7 years

This tells me a few things, none of which are a surprise to an experienced Boglehead:

1. Increased rate of return doesn't really get me financially independent a whole lot sooner.
2. Current portfolio balance is a larger driver than returns at this point.
3. New contributions tripling only get me financially independent a year or two sooner.
4. If my expenses were higher and/or I wanted to get to 35x instead of 25x, then new contributions would be more of a contributing factor. But being only 10 years from the goal, new contributions don't have a lot of time to compound, so they don't play a relatively large part of reaching the goal compared to current balance.


At this point, I think the important thing is to not get overly greedy, keep my nose to the grindstone and keep saving.
Your numbers look right (and are actually similar to ours), and I agree with your conclusions. Increasing one's saving rate and achieving higher returns have a diminishing marginal impact on the time it takes to reach FI, especially when you have a decade or less left to go.
I am considering loosening the purse strings a little bit and allowing some more entertainment spending. We've saved $180k the last three years and $72k last year and that is even after buying a new roof, furnace, and air conditioner. Nothing crazy, I'm thinking a nice vacation every couple years and maybe some more allowance for fun family things. Memories, not stuff. Probably $5-6k a year would do it.

But at the same time, I want to be responsible. We're a one-income household for the time being, we have a child to send to college in 14 years, and will have no pensions. We have almost $1.1 million plus another $40k in our daughter's 529 plan. $300k left on the mortgage for 29 years at 2.99%, so not paying that off anytime soon, likely.

Lowering savings by $5k a year for the next 10 years at a 6% return will result in $66k less of a nest egg in a decade. We're talking less than 1 year of expenses to build some great memories and do some really fun things.

I think I just talked myself into it. Maybe.
We came to the same conclusion. Increasing our 50% saving rate to something like 55% would significantly reduce our discretionary spending but only reduce the time to reach FI by about a year. In our view, it wasn't worth that at all, especially since I don't care to retire until our daughter graduates HS.

Many focus on reducing spending to build larger portfolios, but many with large portfolios later in life would rather have smaller balances and more memories made earlier in their lives. It can be a difficult balancing act.
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
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vanbogle59
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Re: "Nobody's ever regretted paying off the mortgage."

Post by vanbogle59 »

AerialWombat wrote: Tue Apr 20, 2021 9:31 am I can’t speak for the entire 30/70 AA crowd, but yeah, it’s 100% emotional. There is zero mathematical logic to it.
Is it likely to support the lifestyle you desire? In a manner that allows you to sleep at night?
If yes, sounds to me like: X = "Oh, yeah"
Even if N=1. So what?

What other math do you need?
KlangFool
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Re: "Nobody's ever regretted paying off the mortgage."

Post by KlangFool »

vanbogle59 wrote: Tue Apr 20, 2021 9:30 am
KlangFool wrote: Tue Apr 20, 2021 8:57 am I reached my FI number with my severance pay
CHEATER!
LOL
Seriously, congratulations.
Thanks. It was a very close call.

KlangFool
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Triple digit golfer
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Re: "Nobody's ever regretted paying off the mortgage."

Post by Triple digit golfer »

willthrill81 wrote: Tue Apr 20, 2021 9:37 am We came to the same conclusion. Increasing our 50% saving rate to something like 55% would significantly reduce our discretionary spending but only reduce the time to reach FI by about a year. In our view, it wasn't worth that at all, especially since I don't care to retire until our daughter graduates HS.

Many focus on reducing spending to build larger portfolios, but many with large portfolios later in life would rather have smaller balances and more memories made earlier in their lives. It can be a difficult balancing act.
Exactly. When we were very young, I wanted to save as much as possible to let compounding work for us. We're not financially independent yet, but off to a really good start. Now we're at a midpoint where maybe we can let our foot off the gas just a bit and still reach our goals in an acceptable time frame while allowing some additional spending. Working an extra year to be able to have 10 years of good family memories and experiences seems worth it to me.
delamer
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Re: "Nobody's ever regretted paying off the mortgage."

Post by delamer »

queso wrote: Tue Apr 20, 2021 9:11 am
CoastLawyer2030 wrote: Tue Apr 20, 2021 9:08 am
delamer wrote: Tue Apr 20, 2021 9:02 am
CoastLawyer2030 wrote: Tue Apr 20, 2021 7:42 am I have read every post in this thread and still can't find myself leaning one way or another. We just refinanced our mortgage to 2.88% (yay). Still, like so many others, on one hand I do not like debt; on the other I know the long term probability play is to invest in a taxable brokerage.

My hybrid plan was to have a mild mortgage payoff, in which the mortgage would be paid off by the time my kids were in school. This would require about $6,000 extra per year for 16 years (we save about $80,000-90,000 per year, so this is a fractional amount of our overall savings). The thought being that this would help for FAFSA purposes and also improve cash flow for the amount we wanted to pay out of pocket.

Now it seems there is a consensus that simply paying down the mortgage (versus paying it off) is a waste of time. Hmm.
Not a waste of time, but a waste of cash. 8-)

If you pay it off, then you free up income to use for other expenses. But as you are paying it down, you are sinking cash into a non-liquid asset.

I believe it was KlangFool who once suggested that the best option is to invest your excess cash into a taxable account rather than making additional principal payments. Then once you have enough in the taxable account to completely pay off the mortgage, do so. That way, you keep your liquidity in the shorter term, but can pay off the mortgage in the longer term (assuming that’s your goal).

Recasting is an interesting hybrid option.
The more I read this thread, the more I lean towards that option and away from my slow paydown option.
As I posted upthread, I used to be in the camp that believed in taking a hybrid approach of mostly taxable investing but throwing a bit extra at the mortgage simultaneously (in my case $1k/mo so $12k/yr total extra principal payments). I did that for years, but stopped last year when I refinanced into a 15 year @ 2%. I just couldn't make the math work in a way that satisfied me that it was a good use of extra cash so now that is going into taxable and I am just paying the minimum on the mortgage. I probably have enough in taxable to pay off the mortgage 6 times over, but so far I can't convince myself that is a good idea either. :happy
We followed a similar path. Our last 2 mortgages were 10 year loans. (We ended up refinancing when we did a major remodel.) The amount of each payment that is applied to principal is so much higher with the shorter loans and you get a lower interest rate too (yes, I know those things are related). Psychologically and financially, the shorter loan term is really beneficial if you can carry the larger monthly payment.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. | | Alexandre Dumas, fils
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JoeRetire
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Re: "Nobody's ever regretted paying off the mortgage."

Post by JoeRetire »

Triple digit golfer wrote: Tue Apr 20, 2021 7:17 am In other words, when should one de-risk and take the guaranteed 3% return?
When the risk keeps you awake at night.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
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vanbogle59
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Re: "Nobody's ever regretted paying off the mortgage."

Post by vanbogle59 »

willthrill81 wrote: Tue Apr 20, 2021 9:37 am Many focus on reducing spending to build larger portfolios, but many with large portfolios later in life would rather have smaller balances and more memories made earlier in their lives. It can be a difficult balancing act.
I am 62. If you can set your priorities first, then arrange your finances to meet them, you are playing the game right.
Not everyone has that luxury. Enjoy it if you do. Congratulations.
Remember, you could get hit by a bus tomorrow.

As the wizard said: "All we have to decide is what to do with the time that is given us." :sharebeer
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willthrill81
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Re: "Nobody's ever regretted paying off the mortgage."

Post by willthrill81 »

vanbogle59 wrote: Tue Apr 20, 2021 9:45 am
willthrill81 wrote: Tue Apr 20, 2021 9:37 am Many focus on reducing spending to build larger portfolios, but many with large portfolios later in life would rather have smaller balances and more memories made earlier in their lives. It can be a difficult balancing act.
I am 62. If you can set your priorities first, then arrange your finances to meet them, you are playing the game right.
Not everyone has that luxury. Enjoy it if you do. Congratulations.
Remember, you could get hit by a bus tomorrow.

As the wizard said: "All we have to decide is what to do with the time that is given us." :sharebeer
Well said, especially the Mithrandir quote. :D
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
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vanbogle59
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Re: "Nobody's ever regretted paying off the mortgage."

Post by vanbogle59 »

willthrill81 wrote: Tue Apr 20, 2021 9:49 am Well said, especially the Mithrandir quote. :D
I thought you might appreciate that. :D
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corn18
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Re: "Nobody's ever regretted paying off the mortgage."

Post by corn18 »

willthrill81 wrote: Tue Apr 20, 2021 9:37 amMany focus on reducing spending to build larger portfolios, but many with large portfolios later in life would rather have smaller balances and more memories made earlier in their lives. It can be a difficult balancing act.
This is our focus. We want to spend as much as possible on memories between 55-70. It is a difficult balancing act.
Don't do something, just stand there!
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vanbogle59
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Re: "Nobody's ever regretted paying off the mortgage."

Post by vanbogle59 »

corn18 wrote: Tue Apr 20, 2021 10:08 am This is our focus. We want to spend as much as possible on memories between 55-70. It is a difficult balancing act.
Do you mean balancing competing priorities? Or choosing what to do financially?
Because, to me, that sounds like a perfectly sound platform on which to build a financial plan.

When the kids were HS age, we always thought our priority for the empty-nest years would be to spend as much time in National Parks as possible.
Then grandbabies came along in FL.
Turns out, we enjoy time with them even more than time in Yellowstone. :D
Change of plan.

In both cases, it makes it pretty easy to figure out the impacts to our finances.

Good luck!
KlangFool
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Re: "Nobody's ever regretted paying off the mortgage."

Post by KlangFool »

Triple digit golfer wrote: Tue Apr 20, 2021 9:12 am
KlangFool wrote: Tue Apr 20, 2021 8:57 am
CoastLawyer2030 wrote: Tue Apr 20, 2021 8:28 am
LongRoad wrote: Tue Apr 20, 2021 7:59 amIf you're saving/investing $80K+ a year, are you going to miss that $6000 in case of an emergency? Can you earn more than 2.88% guaranteed on any fixed income investment over your timeframe?
This is why I largely lean towards slight mortgage payoff. In a couple years my deferred comp account will be $150,000. Our Roths will be $100,000. Our brokerages will be $200,000.

As I've posted in more detail before, I call these "flex assets" that will get me through any liquidity crisis. And when we make $175,000 a year and spend $75,000 a year, maintaining such a moderate standard of living is in itself a hedge against a liquidity crisis.
CoastLawyer2030,

Assuming that you have 450K and saving 85K per year and your target is 25X 75K = 1.875 million.

You will reach your number in 9+ years with a 7% annual return.

Starting Net Worth $450,000
Annual Savings $85,000 $1,875,000
Years
Annual Return Rate 7 8 9 10
5.00% $1,325,266 $1,476,529 $1,635,356 $1,802,123
6.00% $1,390,110 $1,558,516 $1,737,027 $1,926,249
7.00% $1,458,193 $1,645,267 $1,845,436 $2,059,616

Assuming that you save extra 6K per year.

You will reach your number in 8+ years with a 7% annual return.

Starting Net Worth $450,000
Annual Savings $91,000 $1,875,000
Years
Annual Return Rate 7 8 9
5.00% $1,374,118 $1,533,824 $1,701,515
6.00% $1,440,473 $1,617,901 $1,805,975
7.00% $1,510,118 $1,706,826 $1,917,304

How much is reaching your FI target one year earlier worth to you?

I reached my FI number with my severance pay last year. I made it barely just in time.

KlangFool
Would you mind checking my numbers?

Let's just assume $20,000 annual savings (just a bad case scenario), $80k annual expenes, current portfolio $1 million.

I see that I get to 25x expenses:

5%: 11 years
6%: 10 years
7%: 9 years

If I assume my current savings of $60,000, I'll get to 25x expenses:

5%: 10 years
6%: 8 years
7%: 7 years

This tells me a few things, none of which are a surprise to an experienced Boglehead:

1. Increased rate of return doesn't really get me financially independent a whole lot sooner.
2. Current portfolio balance is a larger driver than returns at this point.
3. New contributions tripling only get me financially independent a year or two sooner.
4. If my expenses were higher and/or I wanted to get to 35x instead of 25x, then new contributions would be more of a contributing factor. But being only 10 years from the goal, new contributions don't have a lot of time to compound, so they don't play a relatively large part of reaching the goal compared to current balance.


At this point, I think the important thing is to not get overly greedy, keep my nose to the grindstone and keep saving.
Triple digit golfer,

20K numbers

5% -> 11+ years
6% -> 9+ years
7% -> 8+ years

Starting Net Worth $1,000,000
Annual Savings $20,000
Years
Annual Return Rate 7 8 9 10 11 12
5.00% $1,569,941 $1,668,438 $1,771,860 $1,880,452 $1,994,475 $2,114,199
6.00% $1,671,507 $1,791,797 $1,919,305 $2,054,464 $2,197,731 $2,349,595
7.00% $1,778,862 $1,923,382 $2,078,019 $2,243,480 $2,420,524 $2,609,961


60K numbers
5% -> 7+ years
6% -> 7 years
7% -> 6+ years

Starting Net Worth $1,000,000
Annual Savings $60,000
Years
Annual Return Rate 5 6 7 8
5.00% $1,607,819 $1,748,210 $1,895,621 $2,050,402
6.00% $1,676,451 $1,837,038 $2,007,261 $2,187,696
7.00% $1,747,596 $1,929,928 $2,125,023 $2,333,774

KlangFool
40% VWENX | 12.5% VFWAX/VTIAX | 11.5% VTSAX | 16% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 40% Wellington 40% 3-funds 20% Mini-Larry
av111
Posts: 223
Joined: Mon Jan 26, 2015 1:27 pm

Re: "Nobody's ever regretted paying off the mortgage."

Post by av111 »

Suppose
Mortgage = 1m
Rate = 3% fixed for 30 years
Monthly PI = 4250

Windfall (after taxes) = 1m

Two situations
A. Payoff mortgage with windfall. Invest monthly savings into the market religiously
B. Invest the windfall into the market. No other investment in the market

Future Stock market returns
Year 1 = down 20%
Year 2 = down 10
Year 3 down 5
Year 4 down 5
Year 5 up 1
Year 6 up 2
Year 7 down 3
Year 8 up 5
Year 9 down 1
Year 10 up 5

Knowing all this, which plan would you choose (A or Bl financially and psychologically
AV111
User avatar
corn18
Posts: 2215
Joined: Fri May 22, 2015 6:24 am

Re: "Nobody's ever regretted paying off the mortgage."

Post by corn18 »

av111 wrote: Tue Apr 20, 2021 11:14 am Suppose
Mortgage = 1m
Rate = 3% fixed for 30 years
Monthly PI = 4250

Windfall (after taxes) = 1m

Two situations
A. Payoff mortgage with windfall. Invest monthly savings into the market religiously
B. Invest the windfall into the market. No other investment in the market

Future Stock market returns
Year 1 = down 20%
Year 2 = down 10
Year 3 down 5
Year 4 down 5
Year 5 up 1
Year 6 up 2
Year 7 down 3
Year 8 up 5
Year 9 down 1
Year 10 up 5

Knowing all this, which plan would you choose (A or Bl financially and psychologically
Take it out the full 30 years.
Don't do something, just stand there!
User avatar
watchnerd
Posts: 8410
Joined: Sat Mar 03, 2007 11:18 am
Location: Seattle, WA, USA

Re: "Nobody's ever regretted paying off the mortgage."

Post by watchnerd »

av111 wrote: Tue Apr 20, 2021 11:14 am Suppose
Mortgage = 1m
Rate = 3% fixed for 30 years
Monthly PI = 4250

Windfall (after taxes) = 1m

Two situations
A. Payoff mortgage with windfall. Invest monthly savings into the market religiously
B. Invest the windfall into the market. No other investment in the market

Future Stock market returns
Year 1 = down 20%
Year 2 = down 10
Year 3 down 5
Year 4 down 5
Year 5 up 1
Year 6 up 2
Year 7 down 3
Year 8 up 5
Year 9 down 1
Year 10 up 5

Knowing all this, which plan would you choose (A or Bl financially and psychologically
Game theory experiments without an element of chance or differing probabilistic outcomes seem kind of pointless.

Whether 10 years or 30 years, you've presented a situation where the decision is obvious via simple math because, in your example, I can predict the future.
60% Global Market Stocks (VT,FM) | 38% Global Market Bonds | 2% Alts || LMP TIPS/STRIPS || RSU + ESPP
Wannaretireearly
Posts: 1436
Joined: Wed Mar 31, 2010 4:39 pm

Re: "Nobody's ever regretted paying off the mortgage."

Post by Wannaretireearly »

CoastLawyer2030 wrote: Tue Apr 20, 2021 7:42 am I have read every post in this thread and still can't find myself leaning one way or another. We just refinanced our mortgage to 2.88% (yay). Still, like so many others, on one hand I do not like debt; on the other I know the long term probability play is to invest in a taxable brokerage.

My hybrid plan was to have a mild mortgage payoff, in which the mortgage would be paid off by the time my kids were in school. This would require about $6,000 extra per year for 16 years (we save about $80,000-90,000 per year, so this is a fractional amount of our overall savings). The thought being that this would help for FAFSA purposes and also improve cash flow for the amount we wanted to pay out of pocket.

Now it seems there is a consensus that simply paying down the mortgage (versus paying it off) is a waste of time. Hmm.
I have a similar mortgage rate. About a year and a half left. This thread is influencing me to pay this off if/when I get some new cash to pay it off. Logic may be simple, that equity prices are sky high and I'd rather pay off a smallish mortgage than 'buy high'. Shoot me ;) as others have said, both are great options!
This time next year, we'll be millionaires!
Random Poster
Posts: 2459
Joined: Wed Feb 03, 2010 10:17 am

Re: "Nobody's ever regretted paying off the mortgage."

Post by Random Poster »

galving wrote: Tue Apr 20, 2021 8:15 am "Nobody" as in anyone ever in the history of the humankind?
There's at least someone who's regretted paying off the mortgage at some point.

Though generally speaking, it is a good feeling and likely that the majority of the people paying off the mortgage believe its a good decision.
Just talking out loud here, but, presumably, if one stays in their mortgaged house long enough, they will eventually pay off the mortgage.

Do they regret reaching that point? Do they immediately then remortgage the house?

I doubt it.
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