Money in the bank vs paying down/off the mortgage (vacation, grandmother)
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But during those, say 30 years, do people who are retired and not working have the ability to withstand fluctuations in the market that could make a huge difference in how much their investments are worth?
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If you are retired and funding all or part of your retirement expenses with a 4% SWR from an invested portfolio, it is all but necessary to invest in the markets. The minimum allocation is about 30-40%. Anything less and the risk of running out of money and not being able to keep up with inflation becomes too high.
But during those, say 30 years, do people who are retired and not working have the ability to withstand fluctuations in the market that could make a huge difference in how much their investments are worth?
They can and do have the ability to withstand fluctuations. Having an appropriate allocation into equities, bonds, etc, plus at least 1 year in something safe for current spending up to 12 months, greatly eases the down cycles in the market.
Investments generate dividends, cap gains, and ROI over time. Divs and cap gains are income. Income generated by the portfolio can equal what a paycheck used to be, especially when adding in social security benefits, a pension if one has that.
Tools like firecalc.com or any portfolio analyzer show how well an individual will fare in every market cycle that's occurred in the history of the stock market.
They can and do have the ability to withstand fluctuations. Having an appropriate allocation into equities, bonds, etc, plus at least 1 year in something safe for current spending up to 12 months, greatly eases the down cycles in the market.
Investments generate dividends, cap gains, and ROI over time. Divs and cap gains are income. Income generated by the portfolio can equal what a paycheck used to be, especially when adding in social security benefits, a pension if one has that.
Tools like firecalc.com or any portfolio analyzer show how well an individual will fare in every market cycle that's occurred in the history of the stock market.
If ya'll really thought you were living to 90-100 you would have worked until 70-75. People that retire early are worried they are not going to live that long.
If ya'll really thought you were living to 90-100 you would have worked until 70-75. People that retire early are worried they are not going to live that long.
What a strange notion. I was in good health when I retired at age 64. I would have retired earlier if we had the assets to do so. I enjoyed some aspects of my job, but I worked for money.
If ya'll really thought you were living to 90-100 you would have worked until 70-75. People that retire early are worried they are not going to live that long.
If ya'll really thought you were living to 90-100 you would have worked until 70-75. People that retire early are worried they are not going to live that long.
While working, we tried very hard to not having any debts: We paid cash for our cars, paid off mortgage on the 1st home in 2 years and the last pre-retirement home in 6 years.
In retirement, we could have paid cash for our current car and home but chose to get a car loan (0% interest for 5 years) and a mortgage (3.25% interest, 15 years then refinanced at 2.5% also 15 years).
When we sold our paid-for home in NY, we could have used the proceed to pay off about 60% of the ID mortgage but decided to invest it in RE. After the developer who bought the 300 acres farm next to our house refused our cash offer for the 2A riverfront lot next to our house, we turned around and invested in 2 hangars (one to keep our plane and one to rent out). The hangars have increased in value at least 25% in one year which is much higher than our 2.5% mortgage interest rate.
RE values have gone up tremendously in our area, we now have at least 60% equity in the house (appreciated ~67% in 3 years). This means that if we have to sell the house for whatever reasons, we would have no problems paying off the mortgage with the proceeds.
Bottom line is that we prefer having money in the bank instead of paying off our 'debts'. Our total current debt is roughly about the same as our cash reserve (which is now at ~ 6% of our total asset). We also don't have to worry about how to meet our payments if there are financial disasters such as losing our jobs (during our working years).
For us, we can cover our current living expenses (including our mortgage/car payments) with our income (SSs, pensions and parts of our dividends). We have been using my husband's RMDs to pay our income taxes. His RMD is <1% of our investable asset. In effect, we are drawing < 1% of our saving which is way below the 4% safe withdrawal rate. I will be collecting my own SS when I turn 70. The increase amount will cover ~ 60% of our income taxes further reducing our withdrawal rate.
There have been quite a few discussions in this thread regarding the pros and cons of having a mortgage, how to invest the money (use other people's money) etc. IMO, the decision to have a mortgage or not is based not only on just the numbers but also one's emotion.
There is no one best way, financial analysis or number which fits everybody. There are many factors in an individual financial situation: single/married, age, w or w/o heirs, amount & sources of 'fixed' income, healthcare insurance coverage/need, wealth level etc. Financial experts can offer all kinds of analysis or advices but one still needs to be investment knowledgeable to either figure out how to follow the advices or to hire a a good money manager.
Emotionally, we are quite conservative but have no problems of being in 'debt' in retirement. We are not incurring any risks in having a house and car payment and can sleep very well at night.
Bottom line is that each person just have to do their own analysis/research and decide what financial decision is best for their own financial and emotion well-being.
What a strange notion. I was in good health when I retired at age 64. I would have retired earlier if we had the assets to do so. I enjoyed some aspects of my job, but I worked for money.
I sometimes play devil's advocate to illicit a response.
Yes, what I have done wrong is not work for money and instead worked on getting into something that suits me well. When I had jobs I absolutely hated I saved more money. My BIL is still working at 76. Though I would like to make it to 68-70 I am unsure my health and luck will hold out that long.
If ya'll really thought you were living to 90-100 you would have worked until 70-75. People that retire early are worried they are not going to live that long.
I plan to retire and be paid a pension from my employer for just as long as I worked for them. My family on both sides have been blessed with long lives. 3 out of 4 grand parents lived to early/mid 90s and had all their faculties. They were all up and about until the last 2 years of their lives.
My dad's side of family (10 siblings) only lost one who was a heavy smoker. Everyone else is still going well.
I plan to live AT LEAST 35 years after I retire. I am retiring at 50!
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