We’ve been very upfront with our only child that, of course, he gets whatever’s left but not to expect it to be much as it is not our goal to leave an inheritance. We feel that the investment we made in his high school education and the investment he made in his college education are the gifts he will have for the rest of his life to build his own wealth and security. We did not work hard all our lives to make him rich; he has to do that for himself.
My father and DH’s parents will probably end up leaving us something, but we encourage them to spend it all. They worked for it and should enjoy every penny. They certainly don’t owe us anything.
No one can exactly plan perfectly for that last check to bounce, but that is the idea with retirement plans that are not based on leaving an inheritance. How this plan affects our day-to-day lifestyle is that it determines how much we can comfortably withdraw annually, and we will spend it.
How important do you think it is to pay off your mortgage before retirement? We just did a refinance to a new 30yr fixed because interest rates are so damn cheap. The new monthly payments are reasonable and I figure that I will likely payoff the balance sometime before the 30 years are up but certainly won’t pay it off before I retire (which I’m hoping is early 60s, 10 years from now)
I wonder if it wasn’t to escape estate taxes. It was a common practice before they changed the law on GST in the 80s. My D has a GST. It was set up long before she was in the picture.
My thinking on this is my D should get what we inherited from her grandparents. It is not my money. When we were young and busy, we didn’t pay much attention and our FA did a pretty good job at decimating it. He got hit pretty good on downturns and on upturns, he managed to miss a ride every time. I took it over and brought it up to where it should be had we managed properly. Anything beyond that, I don’t feel bad spending.
Not having a mortgage (not just in retirement) was important to us. We felt comfortable with making a total of 30 years worth of house payments regardless of the number of houses we purchased. So, we signed a 30-year note on our first home that we lived in for five years, a 25-year note on the house we lived in for ten years, and a 15-year note on the house we raise our son in, and paid that off just before he graduated from high school. We do not have a mortgage on our current home, and we are now retired.
We did not want to retire with any debt obligations (house, car, or credit). We used part of the proceeds of my ESPP to pay cash for a new-ish car before we retired, and our retirement plan includes a new one every ten years, though we usually drive them until they die. We are not comfortable with any form of debt in retirement. It’s just a security thing with me, not based on rational financial planning. My in-laws are in their 80’s and still have a mortgage on their place in LA that, most likely, will not be discharged before they die, but they can comfortably handle the payment, and the sale of the house will easily cover anything that’s left, so that works for them.
I don’t think there is a right or wrong decision on whether or not to have a mortgage in retirement. If you can easily handle the payments, and a mortgage enables you to have your dream house, go for it.
We don’t have that as a goal, but we don’t want to run out of money and don’t know when we’ll die so there will probably be some left over.
I still have to manage the anger from seeing MIL suffer because FIL preferred sitting on his account balance to paying help to come in and tend to the house and to MIL’s needs. A lot of good it did him, the son he wanted to help has already blown through the inheritance and will likely lose the house he bought with it in the next year or two.
My mom started with more money than MIL/FIL and ended with much less. Along the way she lived a fuller life and built many memories with the grandkids. Not much money left, but oh, the stories!
We’ve been dual early retirees for a decade. We still have a now small mortgage. With our mortgage rate only 2.625%, I feel totally comfortable with that. A mortgage is the only debt we’ve had for several decades.
I think it depends on the person. And what they will do with any difference in terms of paying mortgage off before retirement versus having a mortgage into retirement. With low mortgage interest rates you should be able to make more investing the difference in equities (you could use the returns to repay the remaining balance at retirement).
I would prefer to take the “invest the difference” approach but my wife is very debt adverse. So we compromised and are paying mortgage off on accelerated basis (less than 18 months to go at this point) and will have 10+ years before retirement to boost savings even further. We could have more if we took the invest the difference approach but the certainly provides comfort to my wife. Not arguing. Some people take the invest the difference approach but end up spending the difference. That doesn’t work.
We also do not live in an area with high (or really any) real estate appreiciation. If our house was appreciating significantly each year, I would be more comfortable having a mortgage on it in retirement.
Retirement or no, it comes down to whether you want to have more money in non-home-equity assets at the cost of rent* payments, versus having less money in non-home-equity assets but without rent* payments.
Nope. No state estate tax in the state in which they and fil lived, and the federal exemption amount was $600,000 at the time they set it up, and they never had that much, even including their home value. It was absolutely to make sure mil (or mil and a future spouse) didn’t get the money. They wanted it to go the grandkids. Nothing wrong with that, but saving estate taxes was not their motivation. Mil knew it existed, but the amount was unknown to her. Everything was unknown to her - that’s just how their marriage worked. Some of that is generational, I think. The irony was that over her working career she earned more money than fil.
No mortgage here, but I am extremely debt averse. It is likely not the best financial decision, but I sleep well at night.
@socaldad2002, it depends on your risk tolerance, how you emotionally feel about debt, the state of your portfolio and how expensive of a house you want to live in. So the way I am going to break it down financially for us.
Choose a house that we want to live in/stay in and which has some financial upside.
See what is the most favorable mortgage we can get based upon the amount we put down and tax effect the cost.
Compare that against the lost return on the money that we would have to spend to have no mortgage, i.e. the opportunity cost of having no mortgage. We'll probably be more conservative when setting the opportunity cost post retirement vs pre-retirement (we can pay off our current mortgage tomorrow, but I think I/my FA can do better than the after tax rate of my current 30Y mortgage).
If you want to be super conservative you can take the cash you otherwise would have put into the house and set that aside in super safe cash/cash equivalents and laddered fixed income instruments. That will be the fund that you use to make your monthly mortgage payments. The return may be less than the cost of the mortgage interest, but there is value in being more liquid and not having a bunch of money tied up in something as illiquid as real estate. I guess you can get a line of credit or refinance in the future, but you won't know their costs and availability in the future whereas you can fix your mortgage cost and payments today.
We have a mortgage, will have 5 years left on it after retirement. Could pay it off but with a mortgage rate at 3%, any extra money we’ve invested has done better than that. Same way we feel about car loans. Unfortunately for the first time, we have 2 car payments as deer took care of the cars we planned to drive into the ground.
The plan will be to have money left over but it’s not what we are planning to give to the kids. They both got a first rate education and they are doing very well.
My husband works for a company that has a pension and retiree health benefits. It’s actually very rare for employees to work until full retirement age. Husband has a fellow worker who was planning on retiring on the same date, I think they actually started on the same date also. His wife told him that she wasn’t sure he could retire, she didn’t know if the kids would still need his help. Wow! I was shocked, my husband’s retirement date has been, will be and has always been his choice. We will have plenty to retire with.
Within months of each other, we made our last college payment, paid off our mortgage, and paid off our car (only took that loan b/c interest rate was so low). This was 6.5 years before we retired. That allowed us to take those extra funds and invest them before we’d need them in retirement.
We have about seven years left on our last refi. We could pay it off now, but the interest rate is sub-3%, so it doesn’t seem worth it. The payment isn’t big, anyway. If it weren’t for my medical stuff, we would have been mortgage-free three years ago.
We’ve been discussing will, but H wants to leave different percentages to our sons. I’m horrified.
Yep, for mortgage payoff (if possible) …, the best choice varies a lot by family preferences
Our story: After the kids were thru college, we procrastinated on the decision about paying off the mortgage. We had money to do so, but we were at the tail end of mortgage paying mostly principle (not much interest). Then last year DH retired, and I kept working another year waiting from him to get to 65/Medicare (I am 7 years younger). At that point, he had more time for paperwork (with mortgage company, insurance company and county/taxes), and we both had more of a yearn to be debt free before both retire. So we paid it off, but only 1.5 years early. Gotta say, if felt GREAT.
It’s an emotional/psychological answer. Whatever makes you (and your spouse?) sleep better at night.
Yes, with rates so low, the hard finance no-brainer answer is to keep the mortgage, and keep $$ invested. But there is another side that says, ‘once you’ve won the game, i.e., you have enough retirement assets, why continue to play equities?’ Personally, I don’t want to deal the payments much into retirement, and expect will pay off our mortgage balance once SS kicks in at age 70. In the meantime, making extra principal payments each month.
We have a tiny mortgage and really just keep it to have something to write off.
We don’t consider the house to be an investment though it is. That’s mainly because we recognize that we need to live somewhere and we’ve already downsized a bit.
We could retire early in our 50s but like our jobs and frankly don’t think it’s time.
Plus our kids aren’t launched so we want them to see a healthy work ethic.
We don’t plan to leave money to the kids though it will end up working out that way. We don’t spend money on frivolous things. But we do spend money on travel.
It’s likely that as we age, we’ll plan how to spend/gift our money. We’ll likely set up a trust for education( future grandkids )and also directly to colleges/schools of our choice. Definitely not planning on making house deposits/ gifting large sums to our kids. Philosophically, we both feel as parents that the gift of a great education is important. We also feel like kids need to make their own way. We might make an exception life can go offline. But if our kids are healthy we want them to live their lives and learn how to manage their own money.
Might change our minds as we go, but we’ve raised the kids to be self motivated.
Naturally, having an emergency funds is important too ( for health, etc). Given that one never truly knows what the future will bring, we’d veer toward having a big enough nest egg that we’ll never be a burden and can treat our kids/grandkids.
Bought my house in 1996, paid it off in 2011 which allowed us to give our kids a college education with no debt owed. It’s helped them be able to start building their own wealth while in their 20’s. Having no mortgage is peace of mind, especially knowing that in my career, every time I leave for work, I may not make it home.