Reply to I said we can’t retire yet. Am I wrong?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Why does everyone keep insisting that the mortgage needs to be paid off before retiring? I’ve been early retired for 10 years, I’m still not 65, and we still have a mortgage. I could pay it off tomorrow, but it makes no sense to do that financially. It all depends on the interest rate, the tax deductions, and how diverse your overall portfolio is. You are all retirement planning amateurs for focusing so much on mortgages.
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You almost always need more money to retire if you have a mortgage because your 3-4% withdrawals have to cover the mortgage payment, which is comprised of principal and interest. I don’t feel like drawing up an example, but do the math and you’ll see that I’m right.

At a certain point, it’s about retiring and enjoying your life, not maximizing net worth. Otherwise, people age 60 would use their entire nest egg to buy 10 rental properties, which would not generate any cash flow because they would be highly leveraged.  They would have an extremely high return but   could never retire.  Glad I could help you understand this.[/quote]

2.75% mortgage rate on a $500K <  4% growth on $5million.

You would be net positive by keeping the $500K in a 4% growth.   Sure, you net out only 1.25%  on $500k,  but it's still a positive.

And then there's the possibility of a down market.  They would have $500K less to be able to live on.[/quote]

Your reading comprehension is terrible. Since this makes me question your ability to do basic math, I will provide an example with numbers.

As I mentioned, it’s not just about the interest rate.  The reason one needs more money to keep a mortgage in retirement is that mortgage payments include principal and interest.  When retiring early, as the OP suggested, they can only withdraw something like 3% of their portfolio annually.  So even if they have one of those 2.75% mortgages that makes DCUM’s nipples erect for some reason, they need less money to retire if they just pay off the mortgage.

$500,000 mortgage at 2.75% for 30 years = $2,041/month = $24,492 per year.

This means they need $24,492 × 33.3 = $815,584 in assets to cover the mortgage payments, whereas they would only need $500,000 if they paid off the mortgage.

As I mentioned, you can always boost your returns with leverage if you want.  But, at a certain point, retirement and enjoying life is more important than squeezing every tenth of a percent possible out of your investments or working an additional year.[/quote]

DP. You are not as smart as you think you are. That 815k in your example returns 48k at 6%. So that covers the 24k withdrawn to pay the mortgage plus adds 24k to the account. [/quote]

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