Seems like humble bragging to me. Go talk to a financial advisor if you want to know what to do with your money. Not a bunch of people on a message board that you have no clue if they know what they’re talking about or not.
OT: Paying off mortgage, next step..
- Thread starter CrookedLetta4Eva
- Start date
Seems like humble bragging to me. Go talk to a financial advisor if you want to know what to do with your money. Not a bunch of people on a message board that you have no clue if they know what they’re talking about or not.
No argument from me. The wife and I both have great paying jobs but they eat away way more time than average.
We are maxing out both our ROTHs each year. I'm also contributing about $18k to the TSP (govt ROTH) each year which has been averaging 10%+/year. ~9 more years and I get a pension, so retirement at 42.
Of course, my job is pretty risky. I have a good life insurance policy for that. Really hoping the wife doesn't decide to try to figure out how to cash that one in.Whenever we do get around to kids, I'm leaning towards 1 and done.
I've been thinking about a new car, but ours are paid off and I don't want to interfere with paying the mortgage off. Priorities I guess.
(1) if it is, need more humble bragging like this. We have a huge keeping up with the jones mentality. I'd rather people be keeping up to get their modest house paid off than to take out a loan on an expensive car.
(2) maybe I'm getting suckered by a lot of humble brags, but it seems like there are a surprising number of people who don't know anything except that they don't like debt and are scared of investing. When these people also have moderately good jobs, they end up with paid off houses early on. Even though that's not financially optimal, it's still a better approach than probably 85% of the population I'd guess?
I am about to retire on December 21, at 66. I have an IRA and a 401K with Fidelity, both of which are invested in 2020 target date funds (which have sucked in 2018). What I would like to do is transfer all of that money to some find of tax deferred investment which will provide some steady income with either zero risk in stocks or very little risk in stocks. I am not in the least concerned about growth, just preservation of the principal and some steady income (maybe about only 2% per year).
Any good ideas?
Eta- Don't know why the 8 in 2018 is X'ed out.
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Buy a SPIA and get 7% income the rest of your life with no risk.
I'm half kidding about the SPIA. You should just buy CDs. 13 mo CDs are paying 2.75%. No risk b
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I'll let you sponsor my kids for a while if you like? ROI is not so good, but you would know if you want to get your on set one day or not...
These responses are the worst..
1) I’m not going to comment on your fishing statement about humble bragging.
2) There are some VERY knowledgeable people on this board, some who I would think are bankers and financial advisors. Others who have lived things in life and can provide some very good insight.
I have never understood why people, like yourself, want to try and down others every chance they get.
Thanks for all the advice and responses so far. Keep em comin!
My thoughts, exactly. $200,000 is worth so much more in an array of different vessels than on a low rate mortgage.
How much is peace of mind worth?
I understand the mathematical advice, but if you can get debt free with your home paid for, you can live comfortably working at McDonald’s. You don’t have to sweat lay-offs or dealing with being stuck in a terrible job.
Go to cefconnect.com, educate yourself. They are risky but you can be smart
about it and these funds allow you to diversify across asset classes beyond your wildest dreams and provide excellent income. You just have to have a strong stomach and be a hold em don't fold em attitude when times get tough. Pimco CEF' are excellent PDI, PCI, PKO, PFN, PCM to name a few. Put 50% of your portfolio earning 8%+ and 50% in CD's. If you get a major buying opportuning in CEF's liquidate the CD's and purchase CEF's ride them back up sell and go back to 50% CD's, rinse and repeat.
about it and these funds allow you to diversify across asset classes beyond your wildest dreams and provide excellent income. You just have to have a strong stomach and be a hold em don't fold em attitude when times get tough. Pimco CEF' are excellent PDI, PCI, PKO, PFN, PCM to name a few. Put 50% of your portfolio earning 8%+ and 50% in CD's. If you get a major buying opportuning in CEF's liquidate the CD's and purchase CEF's ride them back up sell and go back to 50% CD's, rinse and repeat.
Keep in mind that while MMFs are designed to compete with deposit accounts and they look like deposit accounts, they are not FDIC insured and are therefore susceptible to runs. Although I’m pretty sure they got bailed out in 2018.
So it sounds like you have established a 401k. Roth's are optional, I personally lean towards maxing out the 401k before touching a Roth because you get much greater growth on pretax money and most people are at a lower tax rate in retirement. Roth's make a lot of sense if you think your taxes will increase in retirement for some reason.... So anywho, at your age, if you are putting $10k or so a year or more in a 401k you should be fine in 35 years. If you want to retire early or be a big spender after retirement, max it out.
Outside of that, it sounds like you are looking for a place to invest for pre retirement money. Rental property can be lucrative, but it's work. You have a lot of competition now and there is not going to be a big income generating opportunity for most people, but you can get someone to pay off your mortgages for you and in the long run you can cash out for a big payday. Once you buy one home, you have an asset you can potentially use to buy a second home, this is the way to build wealth with rentals in my opinion. It's leverage that makes it worth while. With leverage comes risk though.
You will hear others talk about passive income, owning rental property is not passive.. It's work.
Final thought on rental property... Homes do not appreciate in value, they depreciate over the long run... They get out dated, worn down, need new AC's, dishwashers, roofs, fences, paint, floors, etc... Land is what appreciates. So if you buy rentals, look for newer homes in high growth areas. Think about the sprawl of whatever town or city you are buying in... Where is it going in 10-15 years? Again, it's a bit of a crap shoot sometimes, but if you do the research you can make a wise decision.
Full disclosure, I owned 3 rentals I was able to pickup in the downturn and sold them all in 2015 to another investor. I was too small and too cash strapped to hire out management/maintenance. I hated owning those things. I loved selling them because of the equity. I am glad I did it, but will never do it again. I caught the big wave and doubt it will be possible to do it again anytime soon.
Now, to get away from the rental property. You can open a brokerage account like others suggest. Buy some kind of index ETF or mutual fund and get rich slowly. The S&P averages 9.8% a year... (Some years is -10% or + 20%, but the average will work itself out.) If you drop $1500 a month into a low cost S&P Fund, in just under 20 years you will be a millionaire if future returns mirror the 90 year average of the market. It's not sexy or exciting, but it's a hell of a lot less stress.
If you are looking for something in between, I think T-Town's emu idea fits... I know I would prefer owning emus over rentals again.
Outside of that, it sounds like you are looking for a place to invest for pre retirement money. Rental property can be lucrative, but it's work. You have a lot of competition now and there is not going to be a big income generating opportunity for most people, but you can get someone to pay off your mortgages for you and in the long run you can cash out for a big payday. Once you buy one home, you have an asset you can potentially use to buy a second home, this is the way to build wealth with rentals in my opinion. It's leverage that makes it worth while. With leverage comes risk though.
You will hear others talk about passive income, owning rental property is not passive.. It's work.
Final thought on rental property... Homes do not appreciate in value, they depreciate over the long run... They get out dated, worn down, need new AC's, dishwashers, roofs, fences, paint, floors, etc... Land is what appreciates. So if you buy rentals, look for newer homes in high growth areas. Think about the sprawl of whatever town or city you are buying in... Where is it going in 10-15 years? Again, it's a bit of a crap shoot sometimes, but if you do the research you can make a wise decision.
Full disclosure, I owned 3 rentals I was able to pickup in the downturn and sold them all in 2015 to another investor. I was too small and too cash strapped to hire out management/maintenance. I hated owning those things. I loved selling them because of the equity. I am glad I did it, but will never do it again. I caught the big wave and doubt it will be possible to do it again anytime soon.
Now, to get away from the rental property. You can open a brokerage account like others suggest. Buy some kind of index ETF or mutual fund and get rich slowly. The S&P averages 9.8% a year... (Some years is -10% or + 20%, but the average will work itself out.) If you drop $1500 a month into a low cost S&P Fund, in just under 20 years you will be a millionaire if future returns mirror the 90 year average of the market. It's not sexy or exciting, but it's a hell of a lot less stress.
If you are looking for something in between, I think T-Town's emu idea fits... I know I would prefer owning emus over rentals again.
I think McDonald's is a really bad comparison for what you're trying to say. Unless you're in management at McD's, your max income is below the poverty line. And even with a paid off mortgage, I would hardly call that living comfortably. If you're management in fast food, you're working 60 hours a week for 55k. I wouldn't call that living comfortably.
There's an inherent risk that anyone can get laid off at any time, but your paid off house could also get destroyed by a flood with no flood insurance, too. Both more unlikely than likely.
My philosophy with low interest rates would be to let the bank carry the risk on the home and I'll pay them their measly 3-5% (where rates have been the last decade). I'll take my excess cash and use it in so many other ways that can either make me greater than 3-5% or that the reward of spending would outweigh the measly 3-5%. For some people that vice may be having kids at a younger age. For others it may be investing. For some it may be seeing the world. Just saying that if the bank is willing to hold a risk for me at such a low opportunity cost, let 'em have it.
ETA: His vice may be that paying off the mortgage and relief of being debt free was worth sacrificing the other things I listed. Good for him. I just believe that was an incredible waste of what that money could have been used for and very short-sighted. Everyone's situation and lifestyle is different though. It seems that long-term financial health was his priority. He can get there this way, but most CFPs would have advised differently.
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If you only need 2% per year, that's just a little above the s&p dividend yield. Granted dividends can be cut, but you'd be incredibly safe just sticking it in an index fund and withdrawing 2% a year.
Your best bet is to keep it in the 2020 retirement funds. Vanguard is hard to beat. Even though you're retiring this year, you've still got a long way to go (hopefully). If you're out of the stock market completely, you're going to miss out on a lot of gains.
Follow that Ramsey plan:
BS2: Pay off car
BS3: Then save up 3-6 months of expenses
BS4: Put 15% of income into retirement
BS5 (if applicable): fund kid's college
BS6: Pay off house
BS7: Max out retirement, become outrageously wealthy & be generous
BS2: Pay off car
BS3: Then save up 3-6 months of expenses
BS4: Put 15% of income into retirement
BS5 (if applicable): fund kid's college
BS6: Pay off house
BS7: Max out retirement, become outrageously wealthy & be generous
Agreed, I was excited to see your post and see what some of the folks on this forum are doing. We have State grads all over the country with exposure to different ideas, backgrounds, investment opportunities and more. I have already seen a few that make me want to reach out to some folks for guidance.
I'm in a similar boat at 31. Just paid off my mortgage for the second time. Bought one house in Texas, paid it off, sold it, made a nice chunk and put it all back into a larger home which is better for my family. I paid off this new house about two weeks ago and I am looking for the next move. I also don't always agree with the ol financial advisor theory of invest your money somewhere else other than your home as you can out earn the interest rate on your house.
If you have a 30 year mortgage, you are paying 4-5% interest over that 30 years but the interest is extremely front loaded in the mortgage. 2/3 or more of your month payment for a long time is going straight to interest, so on the front end, it is way over that rate but ends up averaging out to that rate in the end, after you have paid as much interest or more than the original purchase price of the home to start.
In my personal example, another thing the financial guys don't understand as they are not in my seat, is that I own two businesses tied to the oil & gas industry and in 2014, I lost 60% of my business in a single month when gas prices fell off, and it got worse from there. I now have a paid for roof over my head and have 30 years to figure out a lot of other ways to generate lasting income. I have realized I can invest my money into my own businesses and out earn most other traditional options but want to diversify into some other less risky areas also.
My businesses do have debt however and like someone said before, borrowing has helped me created a good income, profitable businesses, jobs and independence. Those businesses would not exist without a bank fronting the money and letting me make reasonable payments, covered by the income generated by the businesses which those loans in turn created.
I also put a lot of money into my home for another reason. In Texas, if anything serious every happened and someone was to come after me financially, money in my home, retirement accountants, and one car are protected, not sure if that's the same in Mississippi or where you live.
I have two Roth IRAs maxed out, 1 car payment with 0% APR, so it isn't hurting me to make that payment, and I changed from super expensive traditional heath insurance this year to Christian Care Ministries Medishare and saved myself $10k in premium cost. Even though my wife's vehicle is 0% APR, I am almost tempted to pay that off as well, as that would free up about $700 a month more I could put into other businesses, ideas, etc.
I am considering business #3 or buying land, improving it with water, senderos, etc and then flipping them more or less, while hunting the properties in the mean time.
The oil & gas industry has been a home run for me but I would say I'm in the rare group that work it the right way by being extremely conservative with my money. Great thread and some great ideas are being shared. Hopefully some more will be shared as well.
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You definitely don't need money advice from me, but the rate is the rate. Yes, the dollar amount of the interest is higher early on, because you are getting the benefit of more capital loaned to you.
Also, your reasons make perfect sense as to why you want a paid off house, but with a typical worker, it is risky to skip out on investing early.
The shorter somebody is invested in the stock market, the more variable their return will be compared to the average return. If you start investing at 25 and continue until 60, you are more likely to get to the long term average than if you invest from 35 to 60. And you are more likely to get the average investing from 35-60 than you are if you invest from 45-60. There is still some pretty good variability over 15 and 20 year cycles. So if you start investing in a bad cycle, it can make a big difference in how long it takes to get to retirement and ensure that you end up having to work longer or live on less. Granted it can work in your favor also, but the harm from falling short is so much greater than the benefit from catching the good results, that I think most people would prefer the more predictable returns.
As I said, I don't care about growth, just need steady income and preservation of the principal amount of my savings. I am just tired of worrying about the stock market. Too much of an emotional roller coaster for me.
Eta- Just look at Tuesday and today's market performance. That is what I mean. Just too stressful for me at this stage of my life.
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Congratulations on paying off your mortgage at age 30! I just recently retired at age 63 and I paid off my house and hobby farm early as well, just not at age 30. A couple of suggestions, (1) don’t put all of your eggs in one basket, spread your investment types out over different types and be sure that some are long term ( retirement / tax deferred ) and some are short term in the form of stocks, bonds, cash, and perhaps hard investments, like land for example. (2) as you see on this board and by probably talking to others, there all sorts of investment ideas. Because of things like risk tolerance and patience, what may be right for one person may be wrong for someone else. The key is to develop a plan that is right for you and stick too it. As the years go on your needs and goals will change and you should adjust your strategy accordingly. I can tell you for certain that being financially independent from the risk of financial market corrections and the risk of the possible loss of a job has a huge impact on any job stree level you may have. Very late in my career the owner was exploring the possibility of selling his Compay to to someone that would certainly move the operation and probably move it offshore. While other employees were freaking out, I slept fine knowing that no matter what happened I was totally fine. Thankfully the sale never happened and all of those jobs were saved but you get the point. Again, congratulations and just remember that you probably have another 50 or 60 years ahead to plan for so keep it up!
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Just to clarify, are you saying you only need the little bit of income? Or are you planning on just steadily drawing down principle for spending.
Because if you are talking about drawing down principle for spending each year, you really are at risk of inflation over thirty years, and if you have enough money that you only need the ~2% of interest, then it's extremely low risk for you to keep it in a balanced portfolio. The balance may go up and down, but your ability to draw 2% of the original amount adjusted for inflation each year, would never be threatened unless we have something worse than the great depression.
Just to put it in perspective, a $1M today will be worth $467,884 in 30 years with 2.5% inflation. Being able to draw down money for thirty years if all you do is match 2.5% inflation in a MM or bond fund or whatever means you need to be able to have about 30 times your annual spend already.
I am hoping to not have to draw down any of the principal. I would just like an investment which would earn a safe 2 to 3 percent per year, and I would only draw down that 2 or 3 percent. Of course I realize that if this money stays in an IRA type account, I will be subject to required minimum distributions when I reach 70 years old. I might have to adjust my strategy at that point.
As to your statement which ended with "we have something worse than the great depression", that is why I want to get out of the stock market.
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