Up The Retirement Wallet????

[LuxLiving]

Re: Up The Retirement Wallet????

Ima - I can see your point. And I'm hoping ours is paid off before The Hubster retires.

OTOH, we are seriously considering selling out and buying 'down' or rather downsizing into a smaller home with less acreage to keep up. Depends. We MIGHT subdivide our land and sell the surrounding as lots with us just staying put in the house w/a small yard.

However, if we do cash out then comes the quandry. Do you just plop all of that hard earned equity back into another home w/no payment and hope that you can find one cheap enough to have some left over to save or do you maximize the earning capacity of those dollars by putting down a small down payment and then investing the rest in some safe investments that will pull hopefully MORE than the mortgage payments????

I am apuzzled about this one and see the wisdom in getting the money out of the house as per Ric Edelman's "The Truth About Money", but still I LIKE the thought of never making another house payment. This is the Big Question that I've been pondering of late.

Anybody else have thoughts on this???

[greedy4chips]

Re: Up The Retirement Wallet????

We plan on having 30x our current income, which is the highest it has ever been and will reduce by 1/3 when the wife becomes a SAHM again when I go back to work. Or 50x my projected income from my brand new shiny degree in 9 months.

However, if we do cash out then comes the quandry. Do you just plop all of that hard earned equity back into another home w/no payment and hope that you can find one cheap enough to have some left over to save or do you maximize the earning capacity of those dollars by putting down a small down payment and then investing the rest in some safe investments that will pull hopefully MORE than the mortgage payments????

I am apuzzled about this one and see the wisdom in getting the money out of the house as per Ric Edelman's "The Truth About Money", but still I LIKE the thought of never making another house payment. This is the Big Question that I've been pondering of late.

Anybody else have thoughts on this???

I ran some basic number for you on 2 calculators, a 15 or 30 mortgage comparison calculator, and a savings calculator.

My assumptions were $100,000 saved at 5% vs paid for mortgage which is 6% or 6.25% (15/30 respectively). Assuming you have enough to easily make the monthly payments on the mortgage you will pay (from savings) a total of $152k and $222k for 15 and 30 yr respectively. Meanwhile your $100k will grow to $208k and $432k during the same time period for a net profit of $56k and $210k assuming a 5% return. Taxes are not part of this equation!

However if you were to put the monthly mortgage payments away into a 5% earning investment you will have $25k after the 15yr payments are invested and $62k if investing the 30 yr mortgage payments reducing the above net profit totals.

For peace of mind and I would pay off a house vs the 15 yr mortgage everytime. As far as the 30 yr I would be more apt to choose saving vs a paid for mortgage (strictly based on numbers) if you could find a safe investment earning you 7% you would have $761k in savings.

I would certainly look into the numbers if you could gain 1% or more and have 30 years to use the power of compounding interest to make it beneficial!

That's my opinion and of course the specific numbers are based on current rates and who knows where they will be when you want to make this choice. A good accountant could certainly walk you through the numbers much more effectively taking into account your reduced retirement savings to make monthly payments and tax consequences/benefits.

Good luck with your decision!

[Ima saver]

Re: Up The Retirement Wallet????

My home has been paid for, for over 30 years and it has given me a lot of peace of mind.