Should I pay off mortgage? Has this ever been asked before?

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Teague
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Should I pay off mortgage? Has this ever been asked before?

Post by Teague » Sun Oct 29, 2017 7:42 pm

Greetings friends,

Yes, it's yet another "should I pay off the mortgage" question. My condolences...

As some of you know, I've recently retired. :D A huge thanks again to all here who helped push me over to the other side! Now I'm working on some optimization strategies. It seems to me I'd be better paying off my mortgage, or at least a lot of it, but I am asking the kind and bright folks here for their thoughts. Thank you.
_______________________________________________________________________________________________________________

Please assume the following:

12 years left on the mortgage.
Mortgage APR 3.5%
Amount owed $129,000
Value of house today (Zillow) $275,000
EDIT: Monthly payment about $930

My finances:

Emergency funds: Covered
Well insured, including umbrella.
Effective Tax Rates: 17% Federal, 6% State (I've increased estimated taxes a bit from my prior thread)
State of Residence: CA
Age: 58 “Planning age:” 102
_______________________________________________________
Current retirement assets : 875K
Assume all expense ratios are 0.1% (they are actually less)
Assume all assets are 35% S&P 500, 65% intermediate bond fund
Tax-free $70K
Taxable $25K
Tax deferred $780K
Income in retirement:
Pension with COLA starting immediately: $6100/month ($73,200 annually.)
SS starting at 67: $2500/month ($30,000 annually)
______________________________________________________________________________
Expenses in retirement:
Adequate, and about what I spend now: $6200/month ($74,400K annual)
Let’s party, and what I’m planning for: $8000/month (96K annual)
_______________________________________________________________________________________________________________

EDIT: I am right on the edge of itemizing deductions, if I bundle deductions alternate years I save about $200 every other year in taxes.

Thanks so much to anyone willing to give their opinion!
-Teague
Last edited by Teague on Sun Oct 29, 2017 8:00 pm, edited 1 time in total.
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mortfree
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by mortfree » Sun Oct 29, 2017 8:00 pm

Where are you getting the 129k to pay it off?

If you had say 50k or less on the mortgage I would pay it off.

At the current balance, I would not pay it off. (Key word is “I”)

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BolderBoy
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by BolderBoy » Sun Oct 29, 2017 8:01 pm

Teague wrote:
Sun Oct 29, 2017 7:42 pm
Effective Tax Rates: 17% Federal, 6% State (I've increased estimated taxes a bit from my prior thread)
First, it is best to get in the habit of giving your marginal tax rates and not this "effective" tax rate stuff and second, where from do you propose getting the mortgage-payoff money?

Stunning COLA pension you have coming.
“Where you stand, depends on where you sit” - Rufus Miles | "Never underestimate one's capacity to overestimate one's abilities"

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Watty
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by Watty » Sun Oct 29, 2017 8:09 pm

It would also be important to know if you are single or married since that would impact how far you are from the next higher tax bracket.
Expenses in retirement:
Adequate, and about what I spend now: $6200/month ($74,400K annual)
Let’s party, and what I’m planning for: $8000/month (96K annual)
Does that include your mortgage payment and taxes?
Last edited by Watty on Sun Oct 29, 2017 8:10 pm, edited 1 time in total.

Teague
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by Teague » Sun Oct 29, 2017 8:09 pm

BolderBoy wrote:
Sun Oct 29, 2017 8:01 pm
Teague wrote:
Sun Oct 29, 2017 7:42 pm
Effective Tax Rates: 17% Federal, 6% State (I've increased estimated taxes a bit from my prior thread)
First, it is best to get in the habit of giving your marginal tax rates and not this "effective" tax rate stuff and second, where from do you propose getting the mortgage-payoff money?

Stunning COLA pension you have coming.
The money would probably come from liquidating the $70K Roth IRA and another $30K I've got stashed for "emergencies." I'd still have emergency funds of $10K + credit cards if needed. That gets me $100K of the way there, the rest would probably be the occasional double payment when I could.
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Teague
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by Teague » Sun Oct 29, 2017 8:09 pm

Watty wrote:
Sun Oct 29, 2017 8:09 pm
It would also be important to know if you are single or married since that would impact how far you are from the next higher tax bracket.
Head of Household filing status
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KlangFool
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by KlangFool » Sun Oct 29, 2017 8:14 pm

Teague wrote:
Sun Oct 29, 2017 8:09 pm
BolderBoy wrote:
Sun Oct 29, 2017 8:01 pm
Teague wrote:
Sun Oct 29, 2017 7:42 pm
Effective Tax Rates: 17% Federal, 6% State (I've increased estimated taxes a bit from my prior thread)
First, it is best to get in the habit of giving your marginal tax rates and not this "effective" tax rate stuff and second, where from do you propose getting the mortgage-payoff money?

Stunning COLA pension you have coming.
The money would probably come from liquidating the $70K Roth IRA and another $30K I've got stashed for "emergencies." I'd still have emergency funds of $10K + credit cards if needed. That gets me $100K of the way there, the rest would probably be the occasional double payment when I could.
Teague,

You still did not answer the question about your marginal tax rate for Federal and state income taxes. That is crucial information for answering this question.

KlangFool

Teague
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by Teague » Sun Oct 29, 2017 8:16 pm

KlangFool wrote:
Sun Oct 29, 2017 8:14 pm
Teague wrote:
Sun Oct 29, 2017 8:09 pm
BolderBoy wrote:
Sun Oct 29, 2017 8:01 pm
Teague wrote:
Sun Oct 29, 2017 7:42 pm
Effective Tax Rates: 17% Federal, 6% State (I've increased estimated taxes a bit from my prior thread)
First, it is best to get in the habit of giving your marginal tax rates and not this "effective" tax rate stuff and second, where from do you propose getting the mortgage-payoff money?

Stunning COLA pension you have coming.
The money would probably come from liquidating the $70K Roth IRA and another $30K I've got stashed for "emergencies." I'd still have emergency funds of $10K + credit cards if needed. That gets me $100K of the way there, the rest would probably be the occasional double payment when I could.
Teague,

You still did not answer the question about your marginal tax rate for Federal and state income taxes. That is crucial information for answering this question.

KlangFool
OK, sorry about that.
Marginal rates:
Federal 25%
State 9.3%
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David Scubadiver
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by David Scubadiver » Sun Oct 29, 2017 8:21 pm

I look at it this way, and it may not be the right way:

You have a withdrawal rate that you are comfortable with. Let us say it is 4% of your portfolio.
If you have $1,000,000 portfolio you are going to take out $40,000 a year.

If you have a $100,000 mortgage that you are paying $9,600 a year on, the math looks like this:

If I keep my $1,000,000 portfolio I can take out $40,000 a year of which $9,600 will go to my mortgage for the next x years. So I will have $30,400 available after mortgage payments for x years, and then $40,000 forever more.
OR
If I pay off my mortgage, I have $900,000 from which I can take out 4% or $36,000, giving me $5,600 a year more, for x years and $4,000 a year less forever more.

Just plug in your numbers and see what which scenario makes you happier. Of course, make sure you are talking about only the mortgage payments which will stop when the mortgage is paid, and not including the taxes and insurance which will only go up :)
Last edited by David Scubadiver on Sun Oct 29, 2017 8:23 pm, edited 1 time in total.

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Sandtrap
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by Sandtrap » Sun Oct 29, 2017 8:23 pm

I'll let the experts here juggle the numbers.
But I do know that DW and I went into retirement with zero debts of any kind and it "felt great", less stress. House owned free and clear.
There's something to be said for that too. "Sleep factor".
Congratulations on moving forward after that big decision.
:sharebeer

Teague
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by Teague » Sun Oct 29, 2017 8:23 pm

David Scubadiver wrote:
Sun Oct 29, 2017 8:21 pm
I look at it this way, and it may not be the right way:

You have a withdrawal rate that you are comfortable with. Let us say it is 4% of your portfolio.
If you have $1,000,000 portfolio you are going to take out $40,000 a year.

If you have a $100,000 mortgage that you are paying $9,600 a year on, the math looks like this:

If I keep my $1,000,000 portfolio I can take out $40,000 a year of which $9,600 will go to my mortgage for the next x years. So I will have $30,400 available after mortgage payments for x years, and then $40,000 forever more.
OR
If I pay off my mortgage, I have $900,000 from which I can take out 4% or $36,000, giving me $5,600 a year more, for x years and $4,000 a year less forever more.

Just plug in your numbers and see what which scenario makes you happier.
OK, thanks!
Semper Augustus

Teague
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by Teague » Sun Oct 29, 2017 8:24 pm

Sandtrap wrote:
Sun Oct 29, 2017 8:23 pm
I'll let the experts here juggle the numbers.
But I do know that DW and I went into retirement with zero debts of any kind and it "felt great", less stress. House owned free and clear.
There's something to be said for that too. "Sleep factor".
Congratulations on moving forward after that big decision.
:sharebeer
Thank you so much!
Semper Augustus

radiowave
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by radiowave » Sun Oct 29, 2017 8:24 pm

Teague, you've got your basic expenses covered in retirement (and congratulations), have a solid emergency fund, and a decent taxable account for rainy day and splurging. If it "aint" broke . . .
SatuMedia Wiki: /wiki/Main_Page

Teague
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by Teague » Sun Oct 29, 2017 8:25 pm

radiowave wrote:
Sun Oct 29, 2017 8:24 pm
Teague, you've got your basic expenses covered in retirement (and congratulations), have a solid emergency fund, and a decent taxable account for rainy day and splurging. If it "aint" broke . . .
OK, got it. The enemy of a good plan is a perfect plan. :sharebeer
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Teague
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by Teague » Sun Oct 29, 2017 8:29 pm

Watty wrote:
Sun Oct 29, 2017 8:09 pm
It would also be important to know if you are single or married since that would impact how far you are from the next higher tax bracket.
Expenses in retirement:
Adequate, and about what I spend now: $6200/month ($74,400K annual)
Let’s party, and what I’m planning for: $8000/month (96K annual)
Does that include your mortgage payment and taxes?
Yes, those numbers include all that, PITI, and everything else I spend each month. Thanks for checking.
Semper Augustus

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grabiner
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by grabiner » Sun Oct 29, 2017 10:54 pm

See Paying down loans versus investing on the wiki.

Your mortgage rate is 2.41% after tax. You can earn 2.24% on Admiral shares of CA Long-Term Tax-Exempt, but 2.61% on Intermediate-Term Bond Index in an IRA. Therefore, it is probably not worth depleting your retirement accounts to pay off the mortgage. If you could pay off the mortgage all at once with taxable money, that would be a good deal, but it isn't clear that you want to make a small additional payment; that would have a duration of 11 years, while the 2.24% yield on munis is for a fund with a 7-year duration.
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Teague
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by Teague » Sun Oct 29, 2017 11:04 pm

grabiner wrote:
Sun Oct 29, 2017 10:54 pm
See Paying down loans versus investing on the wiki.

Your mortgage rate is 2.41% after tax. You can earn 2.24% on Admiral shares of CA Long-Term Tax-Exempt, but 2.61% on Intermediate-Term Bond Index in an IRA. Therefore, it is probably not worth depleting your retirement accounts to pay off the mortgage. If you could pay off the mortgage all at once with taxable money, that would be a good deal, but it isn't clear that you want to make a small additional payment; that would have a duration of 11 years, while the 2.24% yield on munis is for a fund with a 7-year duration.
Thank you very much! Very helpful!
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randomguy
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by randomguy » Mon Oct 30, 2017 12:00 am

Sandtrap wrote:
Sun Oct 29, 2017 8:23 pm
I'll let the experts here juggle the numbers.
But I do know that DW and I went into retirement with zero debts of any kind and it "felt great", less stress. House owned free and clear.
There's something to be said for that too. "Sleep factor".
Congratulations on moving forward after that big decision.
:sharebeer

Funny I always found having a big pile of money makes me sleep better at night:)

The OP has an income stream that pretty much pays for retirement. It really doesn't matter what is done. Trying to figure out if you will have 5k more if you pay off your mortgage or if you hold some bonds, seems like a waste of retirement time to me:) I would figure out my plan for draining the IRA (i.e. say 19-22 years depending on if you do SS at 67 or 70) a bit before RMDs kicks in. If there is excess money after partying, sure through it at the mortgage. Paying more in taxes or depleting tax-free and taxable seems like a poor choice to me.

Teague
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by Teague » Mon Oct 30, 2017 12:38 am

randomguy wrote:
Mon Oct 30, 2017 12:00 am
Sandtrap wrote:
Sun Oct 29, 2017 8:23 pm
I'll let the experts here juggle the numbers.
But I do know that DW and I went into retirement with zero debts of any kind and it "felt great", less stress. House owned free and clear.
There's something to be said for that too. "Sleep factor".
Congratulations on moving forward after that big decision.
:sharebeer

Funny I always found having a big pile of money makes me sleep better at night:)

The OP has an income stream that pretty much pays for retirement. It really doesn't matter what is done. Trying to figure out if you will have 5k more if you pay off your mortgage or if you hold some bonds, seems like a waste of retirement time to me:) I would figure out my plan for draining the IRA (i.e. say 19-22 years depending on if you do SS at 67 or 70) a bit before RMDs kicks in. If there is excess money after partying, sure through it at the mortgage. Paying more in taxes or depleting tax-free and taxable seems like a poor choice to me.
Love it, thanks!
Semper Augustus

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sergeant
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by sergeant » Mon Oct 30, 2017 2:21 am

Is there a "dirty little secret" house fund sitting around with 129k in it? :D I paid ours off a few months before retiring but the balance was much lower than yours. My recommendation is split the difference. Double up your payments and pay it off earlier that way.
Lincoln 3 EOW!

Teague
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by Teague » Mon Oct 30, 2017 8:09 am

sergeant wrote:
Mon Oct 30, 2017 2:21 am
Is there a "dirty little secret" house fund sitting around with 129k in it? :D I paid ours off a few months before retiring but the balance was much lower than yours. My recommendation is split the difference. Double up your payments and pay it off earlier that way.
Oh sergeant, you know me too well! :sharebeer No, I'm afraid not, no slush fund for the house.

Well, err, maybe... There's an inheritance that should be coming my way eventually, but I don't want to quantify my poultry before that net gain is realized, or something like that.

Your idea sounds good - I'll shovel some extra payments toward the house when convenient. Thanks! :D
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Tal-
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by Tal- » Mon Oct 30, 2017 8:42 am

Teague wrote:
Sun Oct 29, 2017 8:09 pm

The money would probably come from liquidating the $70K Roth IRA and another $30K I've got stashed for "emergencies." I'd still have emergency funds of $10K + credit cards if needed. That gets me $100K of the way there, the rest would probably be the occasional double payment when I could.
Teague - I've really enjoyed following your threads. Congrats on a job well done. And, how did your boss take the news (or does that happen today?)?

With that said, no. No - I would not liquidate/exhaust a Roth IRA to pay off a house. Your asset allocation is conservative enough to make a payoff a valid question, but even with a 35/65, I would not liquidate a Roth to pay down a loan - especially one at such a good rate.
Debt is to personal finance as a knife is to cooking.

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Re: Should I pay off mortgage? Has this ever been asked before?

Post by Teague » Mon Oct 30, 2017 9:19 am

Tal- wrote:
Mon Oct 30, 2017 8:42 am
Teague wrote:
Sun Oct 29, 2017 8:09 pm

The money would probably come from liquidating the $70K Roth IRA and another $30K I've got stashed for "emergencies." I'd still have emergency funds of $10K + credit cards if needed. That gets me $100K of the way there, the rest would probably be the occasional double payment when I could.
Teague - I've really enjoyed following your threads. Congrats on a job well done. And, how did your boss take the news (or does that happen today?)?

With that said, no. No - I would not liquidate/exhaust a Roth IRA to pay off a house. Your asset allocation is conservative enough to make a payoff a valid question, but even with a 35/65, I would not liquidate a Roth to pay down a loan - especially one at such a good rate.
Thank you. I'm currently out on medical leave, he has no idea I'm not coming back.

For anyone curious, this final straw was his going on one of his tirades, sending me an email (while I'm on medical leave) full of inaccuracies and non-truths, essentially stating he had been too lenient on me the last 20 years, and that in fact, my work has stunk all along, despite 20 years of good evaluations! And telling me to come talk to him about this once I return! cc:'d to higher ups, who will do nothing to stop him. ENOUGH!

As to just how he will find out, we'll see how the details play out in the coming days and weeks. :)

Edit: I just went online and made an extra two principal payments. Seems I had overestimated my balance a bit, with these payments it's down to $116K - and counting
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Sandtrap
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by Sandtrap » Mon Oct 30, 2017 10:33 am

randomguy wrote:
Mon Oct 30, 2017 12:00 am
Sandtrap wrote:
Sun Oct 29, 2017 8:23 pm
I'll let the experts here juggle the numbers.
But I do know that DW and I went into retirement with zero debts of any kind and it "felt great", less stress. House owned free and clear.
There's something to be said for that too. "Sleep factor".
Congratulations on moving forward after that big decision.
:sharebeer

Funny I always found having a big pile of money makes me sleep better at night:)

The OP has an income stream that pretty much pays for retirement. It really doesn't matter what is done. Trying to figure out if you will have 5k more if you pay off your mortgage or if you hold some bonds, seems like a waste of retirement time to me:) I would figure out my plan for draining the IRA (i.e. say 19-22 years depending on if you do SS at 67 or 70) a bit before RMDs kicks in. If there is excess money after partying, sure through it at the mortgage. Paying more in taxes or depleting tax-free and taxable seems like a poor choice to me.
Absolutely correct. I wish I had "Teague's" solid setup when I was younger :D . It make for a lot of options. DW and I only had our business and no alternative income streams or pensions, so we saved relatively quickly and paid cash, as I shared above.

Teague
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by Teague » Mon Oct 30, 2017 10:42 am

Sandtrap wrote:
Mon Oct 30, 2017 10:33 am
randomguy wrote:
Mon Oct 30, 2017 12:00 am
Sandtrap wrote:
Sun Oct 29, 2017 8:23 pm
I'll let the experts here juggle the numbers.
But I do know that DW and I went into retirement with zero debts of any kind and it "felt great", less stress. House owned free and clear.
There's something to be said for that too. "Sleep factor".
Congratulations on moving forward after that big decision.
:sharebeer

Funny I always found having a big pile of money makes me sleep better at night:)

The OP has an income stream that pretty much pays for retirement. It really doesn't matter what is done. Trying to figure out if you will have 5k more if you pay off your mortgage or if you hold some bonds, seems like a waste of retirement time to me:) I would figure out my plan for draining the IRA (i.e. say 19-22 years depending on if you do SS at 67 or 70) a bit before RMDs kicks in. If there is excess money after partying, sure through it at the mortgage. Paying more in taxes or depleting tax-free and taxable seems like a poor choice to me.
Absolutely correct. I wish I had "Teague's" solid setup when I was younger :D . It make for a lot of options. DW and I only had our business and no alternative income streams or pensions, so we saved relatively quickly and paid cash, as I shared above.
Yes, the benefits are very good where I worked, which combined with having to support a family, made it very hard to leave for many rough years. For what it's worth, I will be encouraging my daughter to take some business classes and to seriously consider self-employment.
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by DrGoogle2017 » Mon Oct 30, 2017 10:51 am

I wouldn’t use your Roth IRA to pay off your mortgage, you get many years of tax free earnings. However since this is a small mortgage, I would pay it off when you get your inheritance. I lean toward paying off small loans because it’s not worth the hassle to keep it. If this were a larger amount, I would say keep the mortgage because you aren’t getting any benefits with the interest deductions.

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Re: Should I pay off mortgage? Has this ever been asked before?

Post by Watty » Mon Oct 30, 2017 10:53 am

I don't see a real clear choice on paying off the mortage. As someone mentioned you could invest the money in muni funds and do OK but they risk since interest rates could rise and the muni fund could lose value.

I would probably just defer the decision for a year and reevaluate your choice a year from now.

That email you mentioned was totally inappropriate while you were out on medical leave even if everything was true and you were even worse than he said(not that I am saying that you were). If you Google "FMLA Hostile" you will find lots of information. You should really talk to a lawyer about that even it is just to help your co-workers after you leave.

One potential problem is that even if you don't plan on working again you might change your mind and want to work again and he could trash you. There may also be some problems that would affect your retirement benefits if you are fired for cause.

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Sandtrap
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by Sandtrap » Mon Oct 30, 2017 10:55 am

Teague wrote:
Mon Oct 30, 2017 10:42 am
Sandtrap wrote:
Mon Oct 30, 2017 10:33 am
randomguy wrote:
Mon Oct 30, 2017 12:00 am
Sandtrap wrote:
Sun Oct 29, 2017 8:23 pm
I'll let the experts here juggle the numbers.
But I do know that DW and I went into retirement with zero debts of any kind and it "felt great", less stress. House owned free and clear.
There's something to be said for that too. "Sleep factor".
Congratulations on moving forward after that big decision.
:sharebeer

Funny I always found having a big pile of money makes me sleep better at night:)

The OP has an income stream that pretty much pays for retirement. It really doesn't matter what is done. Trying to figure out if you will have 5k more if you pay off your mortgage or if you hold some bonds, seems like a waste of retirement time to me:) I would figure out my plan for draining the IRA (i.e. say 19-22 years depending on if you do SS at 67 or 70) a bit before RMDs kicks in. If there is excess money after partying, sure through it at the mortgage. Paying more in taxes or depleting tax-free and taxable seems like a poor choice to me.
Absolutely correct. I wish I had "Teague's" solid setup when I was younger :D . It make for a lot of options. DW and I only had our business and no alternative income streams or pensions, so we saved relatively quickly and paid cash, as I shared above.
Yes, the benefits are very good where I worked, which combined with having to support a family, made it very hard to leave for many rough years. For what it's worth, I will be encouraging my daughter to take some business classes and to seriously consider self-employment.
I grew up in a multi generational business family, including all relatives. Very old school. It's a tough road but the autonomy and opportunity for substantial wealth is incredible and gratifying, and exhausting. Similar to the book, "Millionaire Next Door".
However, I tell my nephews and nieces and grandkids to go to graduate school, get a profession, get a solid pension, or go to military academy and go the career military officer as a professional route. Get a pension. Get a 401k and a Roth. Get educated. Be a "Boglehead" :D . Times have changed. There are so many career path options now that it is bewildering. :shock:
You are one of the success stories that younger "Bogles" should subscribe to. :D

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Re: Should I pay off mortgage? Has this ever been asked before?

Post by Teague » Mon Oct 30, 2017 10:55 am

DrGoogle2017 wrote:
Mon Oct 30, 2017 10:51 am
I wouldn’t use your Roth IRA to pay off your mortgage, you get many years of tax free earnings. However since this is a small mortgage, I would pay it off when you get your inheritance. I lean toward paying off small loans because it’s not worth the hassle to keep it. If this were a larger amount, I would say keep the mortgage because you aren’t getting any benefits with the interest deductions.
Thanks much!
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by Teague » Mon Oct 30, 2017 11:01 am

Watty wrote:
Mon Oct 30, 2017 10:53 am
I don't see a real clear choice on paying off the mortage. As someone mentioned you could invest the money in muni funds and do OK but they risk since interest rates could rise and the muni fund could lose value.

I would probably just defer the decision for a year and reevaluate your choice a year from now.

That email you mentioned was totally inappropriate while you were out on medical leave even if everything was true and you were even worse than he said(not that I am saying that you were). If you Google "FMLA Hostile" you will find lots of information. You should really talk to a lawyer about that even it is just to help your co-workers after you leave.

One potential problem is that even if you don't plan on working again you might change your mind and want to work again and he could trash you. There may also be some problems that would affect your retirement benefits if you are fired for cause.
Thanks much. I will give a lawyer a call and get their take on this. I might even become a union rep. since our group has none here, we're kind of geographically removed from any direct representation. That's how a lot of reps for our union come to be, they get treated with hostility, retire, and decide to pursue justice for those left behind. Plenty of time for all those decisions.

It's a union job, and a government job, and I have done nothing close to a firing offense, so I don't think I have to worry about that. Also, I'm pretty sure there is nothing that would negatively affect my benefits no matter how I leave. Though I will not be doing anything foolish on the way out anyway.
Semper Augustus

Teague
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by Teague » Mon Oct 30, 2017 11:03 am

Sandtrap wrote:
Mon Oct 30, 2017 10:55 am
Teague wrote:
Mon Oct 30, 2017 10:42 am
Sandtrap wrote:
Mon Oct 30, 2017 10:33 am
randomguy wrote:
Mon Oct 30, 2017 12:00 am
Sandtrap wrote:
Sun Oct 29, 2017 8:23 pm
I'll let the experts here juggle the numbers.
But I do know that DW and I went into retirement with zero debts of any kind and it "felt great", less stress. House owned free and clear.
There's something to be said for that too. "Sleep factor".
Congratulations on moving forward after that big decision.
:sharebeer

Funny I always found having a big pile of money makes me sleep better at night:)

The OP has an income stream that pretty much pays for retirement. It really doesn't matter what is done. Trying to figure out if you will have 5k more if you pay off your mortgage or if you hold some bonds, seems like a waste of retirement time to me:) I would figure out my plan for draining the IRA (i.e. say 19-22 years depending on if you do SS at 67 or 70) a bit before RMDs kicks in. If there is excess money after partying, sure through it at the mortgage. Paying more in taxes or depleting tax-free and taxable seems like a poor choice to me.
Absolutely correct. I wish I had "Teague's" solid setup when I was younger :D . It make for a lot of options. DW and I only had our business and no alternative income streams or pensions, so we saved relatively quickly and paid cash, as I shared above.
Yes, the benefits are very good where I worked, which combined with having to support a family, made it very hard to leave for many rough years. For what it's worth, I will be encouraging my daughter to take some business classes and to seriously consider self-employment.
I grew up in a multi generational business family, including all relatives. Very old school. It's a tough road but the autonomy and opportunity for substantial wealth is incredible and gratifying, and exhausting. Similar to the book, "Millionaire Next Door".
However, I tell my nephews and nieces and grandkids to go to graduate school, get a profession, get a solid pension, or go to military academy and go the career military officer as a professional route. Get a pension. Get a 401k and a Roth. Get educated. Be a "Boglehead" :D . Times have changed. There are so many career path options now that it is bewildering. :shock:
You are one of the success stories that younger "Bogles" should subscribe to. :D
Thank you! I appreciate your input! :D

Though I'm not sure I'm so much a success story as a "survivor." One who just voted himself off the island. :D
Semper Augustus

chevca
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by chevca » Mon Oct 30, 2017 11:48 am

grabiner wrote:
Sun Oct 29, 2017 10:54 pm
See Paying down loans versus investing on the wiki.

Your mortgage rate is 2.41% after tax. You can earn 2.24% on Admiral shares of CA Long-Term Tax-Exempt, but 2.61% on Intermediate-Term Bond Index in an IRA. Therefore, it is probably not worth depleting your retirement accounts to pay off the mortgage. If you could pay off the mortgage all at once with taxable money, that would be a good deal, but it isn't clear that you want to make a small additional payment; that would have a duration of 11 years, while the 2.24% yield on munis is for a fund with a 7-year duration.
How do you figure? OP said they only itemize every other year when they bundle property taxes.

On a low balance, low interest rate mortgage, the interest deduction is about useless. SatuMedia seem to automatically think everyone gets the full deduction. Not the case for many out there.

What do you see out there closer to the 3.5% OP is paying on the mortgage?
Last edited by chevca on Mon Oct 30, 2017 11:56 am, edited 1 time in total.

chevca
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by chevca » Mon Oct 30, 2017 11:54 am

OP, I see it as it matters little if you pay it off. You're in a good spot!

Your income from pension and future SS covers your expenses for the most part. On the one hand, why cash out the Roth to pay it down when your income covers the mortgage? On the other hand, what do you really need a Roth left sitting there when your income covers your expenses... especially when the mortgage is gone?

I'd do what makes you feel good.

Also, how much is in the EF and give some thought about how much needs to be in there. You have a pension/guaranteed income and plenty of assets to draw from if needed. How necessary is an EF for you? Just something to think about, as that could be some more cash to throw at the mortgage if you choose to pay it down.

rgs92
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by rgs92 » Mon Oct 30, 2017 11:55 am

For that small amount of money, it really doesn't matter whether you do or not.
I would probably just pay it off to avoid the annoyance. Good luck to you.

Teague
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by Teague » Mon Oct 30, 2017 12:07 pm

chevca wrote:
Mon Oct 30, 2017 11:54 am
OP, I see it as it matters little if you pay it off. You're in a good spot!

Your income from pension and future SS covers your expenses for the most part. On the one hand, why cash out the Roth to pay it down when your income covers the mortgage? On the other hand, what do you really need a Roth left sitting there when your income covers your expenses... especially when the mortgage is gone?

I'd do what makes you feel good.

Also, how much is in the EF and give some thought about how much needs to be in there. You have a pension/guaranteed income and plenty of assets to draw from if needed. How necessary is an EF for you? Just something to think about, as that could be some more cash to throw at the mortgage if you choose to pay it down.
Thanks much! I agree about the EF, currently in an online savings account 1.30% APR. It's just nice to look at right now, and I may put it toward a new car. Or not.
Semper Augustus

Teague
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by Teague » Mon Oct 30, 2017 12:07 pm

rgs92 wrote:
Mon Oct 30, 2017 11:55 am
For that small amount of money, it really doesn't matter whether you do or not.
I would probably just pay it off to avoid the annoyance. Good luck to you.
Thanks much!
Semper Augustus

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grabiner
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by grabiner » Mon Oct 30, 2017 5:39 pm

chevca wrote:
Mon Oct 30, 2017 11:48 am
grabiner wrote:
Sun Oct 29, 2017 10:54 pm
See Paying down loans versus investing on the wiki.

Your mortgage rate is 2.41% after tax. You can earn 2.24% on Admiral shares of CA Long-Term Tax-Exempt, but 2.61% on Intermediate-Term Bond Index in an IRA. Therefore, it is probably not worth depleting your retirement accounts to pay off the mortgage. If you could pay off the mortgage all at once with taxable money, that would be a good deal, but it isn't clear that you want to make a small additional payment; that would have a duration of 11 years, while the 2.24% yield on munis is for a fund with a 7-year duration.
How do you figure? OP said they only itemize every other year when they bundle property taxes.

On a low balance, low interest rate mortgage, the interest deduction is about useless. SatuMedia seem to automatically think everyone gets the full deduction. Not the case for many out there.
If you itemize, the interest deduction is of its full value, regardless of the amount. If you pay $1000 of interest and I pay $10,000, then you save $250 from the interest deduction and I save $2500. But if you pay off your mortgage, and I pay an equal amount on mine, we will each gain $250 in tax savings, and we will each lose the same amount of future returns on money we could have invested, so we will have the same benefit (except for term issues; you get an immediate benefit, while I don't unless I pay the whole thing off).

But I didn't know that OP only itemizes every other year when I posted; I assumed that he itemized, since state taxes alone in CA are a large deduction, and most homeowners also pay large property taxes, donate to charity, etc. Alternating deductions halves the value, and he doesn't even get the full benefit when he does itemize (and with the balance declining, he will get even less benefit in the future). That makes the effective rate close to 3.5%, and at that rate, the mortgage should be paid off if he can do it with no tax penalty.
David Grabiner

radiowave
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by radiowave » Mon Oct 30, 2017 5:51 pm

Teague, one other thing to consider, if you want to downsize in the future and sell your current home, it may be easier to have a mortgage to get another one, rather than pay off your current home and then try to get a mortgage for a future home. We're going through that calculus now even though we're still a few years out from retirement.
SatuMedia Wiki: /wiki/Main_Page

frugalecon
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by frugalecon » Mon Oct 30, 2017 6:05 pm

radiowave wrote:
Mon Oct 30, 2017 5:51 pm
Teague, one other thing to consider, if you want to downsize in the future and sell your current home, it may be easier to have a mortgage to get another one, rather than pay off your current home and then try to get a mortgage for a future home. We're going through that calculus now even though we're still a few years out from retirement.
I don’t understand this comment. Are you saying that a mortgage underwriter is more likely to approve a mortgage application if you are currently paying on another mortgage than if you were debt free?

cherijoh
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by cherijoh » Sun Nov 05, 2017 9:25 am

Tal- wrote:
Mon Oct 30, 2017 8:42 am
Teague wrote:
Sun Oct 29, 2017 8:09 pm

The money would probably come from liquidating the $70K Roth IRA and another $30K I've got stashed for "emergencies." I'd still have emergency funds of $10K + credit cards if needed. That gets me $100K of the way there, the rest would probably be the occasional double payment when I could.
Teague - I've really enjoyed following your threads. Congrats on a job well done. And, how did your boss take the news (or does that happen today?)?

With that said, no. No - I would not liquidate/exhaust a Roth IRA to pay off a house. Your asset allocation is conservative enough to make a payoff a valid question, but even with a 35/65, I would not liquidate a Roth to pay down a loan - especially one at such a good rate.
+1
I certainly wouldn't decimate my Roth IRA to pay down a mortgage.
frugalecon wrote:
Mon Oct 30, 2017 6:05 pm
radiowave wrote:
Mon Oct 30, 2017 5:51 pm
Teague, one other thing to consider, if you want to downsize in the future and sell your current home, it may be easier to have a mortgage to get another one, rather than pay off your current home and then try to get a mortgage for a future home. We're going through that calculus now even though we're still a few years out from retirement.
I don’t understand this comment. Are you saying that a mortgage underwriter is more likely to approve a mortgage application if you are currently paying on another mortgage than if you were debt free?
Here are a couple of factors to consider:
  • Having a current record of timely payments on a mortgage will have a positive impact on your credit score.
  • Someone who doesn't have a mortgage or car payments and who doesn't use credit cards can get their credit score dinged for lack of recent data. This is known as having a "thin file". The older the information the less weight it has towards your credit score. This is a positive if you have had derogatory information in the past, but can be a negative if a good payment history becomes stale.
  • Lenders may be reluctant to underwrite a loan to a retiree without a regular income stream - this shouldn't be an issue for the OP who has a Cadillac pension plan. But someone who might be delaying SS and doesn't have a pension could find it difficult - especially if they don't have any recent activity reported to the credit bureau.

cmeretire
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by cmeretire » Sun Nov 05, 2017 11:30 am

Lots of good ideas given already -

Here is the way I would look at it, break down the Principal, interest, taxes & insurance to see what exactly you really save each month by paying it off. You probably have done this but of course if you pay it off, you still have to pay your Property tax and insurance ...

Lets see it broken down:

Principal:
Interest:
Taxes:
Insurance:

I wouldn't pay it off, at the very least I would invest the money you intended to use to pay it off in save investments and use the gains on it to pay extra principal payments each year. However, if you're in the I just can't stand having this mortgage loan, then you know what to do ;).

The main thing of course is that you have to do what makes you feel good in the end, While I hate to carry any debt, my mortgage is one that I won't pay off simply because while it would feel good not to have the payment, I would lose to much in gains on that money. BTW, my mortgage balance is less than yours, only 79K currently. My payment is 900 a month right now and I could easily pay this off and forget it but it would only really save me about 440.00 monthly in P&I, the other 559.00 monthly is property tax and insurance which of course i would have to pay anyway.

EnjoyIt
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Re: Should I pay off mortgage? Has this ever been asked before?

Post by EnjoyIt » Sun Nov 05, 2017 12:12 pm

Mathematically and historically you are better off holding onto the mortgage. But, if you have a few extra bucks lying around every month there is nothing wrong with throwing it at the mortgage to buy yourself the luxury of being debt free sooner.

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