Financial Independence Do you consider paying down your mortgage as part of your FIRE savings? |
- Do you consider paying down your mortgage as part of your FIRE savings?
- Sometimes retirement isn't on your schedule (and research seems to point towards it pulling towards around age 61)
- Daily FI discussion thread - December 04, 2018
- How you share information with SO
- How to rephrase "pay off mortgage" vs "keep it in retirement"
- Just Hit $400/Mo in Passive dividend Income! ...But how risky is my portfolio?
- Protecting asset against health care costs later in life
- Conservative/Bond Portfolio Strategies in 2019
- Is there any way to begin FI/ER on minimum wage?
- Gift Giving and FIRE
- Post-FIRE home purchase: Asset-based mortgage, buy in cash, or neither?
- Is our FIRE number this straight forward or am I missing something? (CAN)
- How can you prepare yourself in your mid 20 to 50 to be financially independent so that you won't depend in your children and your children won't depend on you ?
- Anyone in Canada retire early and take advantage of government benefits?
| Do you consider paying down your mortgage as part of your FIRE savings? Posted: 04 Dec 2018 09:02 AM PST For those of you that own homes or maybe started down the FIRE path later in life, do you consider paying down your mortgage to be part of your saving/investing plan? [link] [comments]  |
| Posted: 04 Dec 2018 09:56 AM PST I read some recent research that essentially boils down to this: people often plan to retire earlier or later than they actually wind up retiring, because, at least to some degree, retirement is something that happens to you instead of according to plan. Further, it trends towards around 61. People planning to retire earlier tend to be pulled a bit later than their plan (but not all the way to 61) and people planning to work longer tend to have life happen to them and find themselves out of the game a bit early, possibly before they are financially secure. I think this general idea resonates pretty strongly with what drives many of us to FI. We don't want to be in that second group who is caught with their pants down at 63. I don't have a life-altering point here, but I thought the data was interesting and might be worth a read for anyone who is going to bump right up against that "deadline" or are currently grinding with the hopes of being RE in two years. The article is here. Blog post summarizing at a high level here. I'm not affiliated with that blog or the authors at all. Feel free to take with a giant grain of salt because it is affiliated with Morningstar. [link] [comments]  |
| Daily FI discussion thread - December 04, 2018 Posted: 04 Dec 2018 03:07 AM PST Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked. Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. [link] [comments]  |
| How you share information with SO Posted: 04 Dec 2018 01:49 PM PST Hello. From time to time, I see posts about someone losing a spouse and they may not be informed with all of the accounts and the details of the financial plan. My SO and I are on the FI train, but I am more as I am working and she is staying at home. How do you communicate this to SO? Do you store account information and something like a table of contents for them? I suppose my fear is, I want the best for her if something happens to me and she would continue on this path of FI. [link] [comments]  |
| How to rephrase "pay off mortgage" vs "keep it in retirement" Posted: 04 Dec 2018 03:27 PM PST We regularly have posts asking if they should pay off their mortgage during the FI process. I feel we most often reply with hand wavy "I think I can make more than 4%" and "I feel better if I pay it off". Not very data driven. I'd like to hear people's opinions if the below resonates to mathematically explain the tradeoffs. If so, considering this is a common question, I could consider adding something similar to the FAQ. -=-=-=-=- Assume you have expenses of $80k. You have savings of $2.5 million. You have a home worth $500k, and to keep it simple, a $500k mortgage. A calculator shows at a 4% rate, a $2387 monthly mortgage payment. Scenario 1: $108,644 expenses, $2.5 million in savings. You're keeping the mortgage. Scenario 2: $80k expenses, $2 million in savings. You've paid off the mortgage. FireCalc (https://www.firecalc.com/firecalcresults.php) says (for 30 years): Scenario 1: 89% success rate. " The lowest and highest portfolio balance at the end of your retirement was $-2,262,401 to $13,415,907, with an average at the end of $3,944,811." Scenario 2: 94.9% success rate. " The lowest and highest portfolio balance at the end of your retirement was $-801,972 to $11,358,949, with an average at the end of $3,721,201. " Seems clear (and what people regularly say). Paying off your mortgage reduces risk. Keeping your mortgage will on average make you more wealthy. -=-=-=-=- Potential complaint: This doesn't take into account the portion of principal your mortgage would be paying off. True - My assumption is that you live in your home for the next 30 years, and you don't move. Therefore, principal payments vs mortgage balance don't make a difference, since your home value could be $10 or $10 million, it only matters if you're planning to sell. YMMV. Potential complaint: This doesn't take into account the tax benefits of mortgage payments. True - Due to standard deduction, I'm going to assume *most* people won't benefit much, and it wasn't worth the complexity. [link] [comments]  |
| Just Hit $400/Mo in Passive dividend Income! ...But how risky is my portfolio? Posted: 04 Dec 2018 02:56 PM PST Hello everyone, I just hit $400/mo in dividend income today!, This is a huge milestone for me. I am currently reinvesting it, but if i did choose to use this money each month it would cover healthy chunk of my expenses. Its also a very empowering feeling knowing that if i for some reason were to lose my job and forced to work minimum wage for an extended period of time, I wouldn't be as close to the poverty line than if i didn't have this income stream ( i worked low wage jobs for a few years and the struggle i faced each month is what motivated me to start building a passive income). I am fairly new to this sub and i was wondering if i could get some critiques on my investment strategy, how risky it is, and perhaps ways to improve it. I am currently 31, in Canada, making 28/hr, with a very high savings rate (80%+) due to work covering a lot of my expenses. My investment strategy thus far has been investing in blue chip, Canadian stocks with good dividend histories. I am diversified in the Canadian market, but from a global perspective i am not. I am also thinking about purchasing an investment condo, which i might live in temporarily (1-2 years). However i may not be in my city 5+ years from now so i would have to likely hire someone to manage it if i ever moved. The plan would be to hold this investment condo long term and collect rent as an alternative source of passive income. Would this be a good way to further diversify, or am i digging my self further into the Canadian market? Any comments, questions and opinions are welcome please. Thanks. [link] [comments]  |
| Protecting asset against health care costs later in life Posted: 04 Dec 2018 01:38 PM PST If this is not an appropriate sub for this question, my apologies. Any pointers in the right direction would be appreciated. I've appreciated the intelligence and willingness to help of the community here however, and am hoping I can pick your collective brains. Situation: Dad died about two years ago. I helped my mom sell their country home and find a nice condo close to where I live. She owns it and her car outright with no other debts. She's 87, in reasonably good health, but has started talking to me and working with me to set things up for when she passes. Based on a couple horror stories friends told me, I talked to her about her selling me her condo so I was the official owner. The stories I was told were around folks going into nursing homes, then having them go after your home as an asset to pay for whatever medicare didn't cover. And I know about the five year waiting period - that's why I was talking to her now. Anyway, we went jointly to see her lawyer about his opinion and making a couple changes to the will. We talked to him about the house, her income and what we were trying to accomplish. Before anyone asks - this isn't about me or my two siblings trying to protect an inheritance. Mom wants to pass along anything that can help us and she has asked me to help her do that. Anyway, the lawyer basically said those "horror stories" are more around people that don't have much money so the nursing homes have to go after their homes to pay expenses. Tallying up all my mom's accounts (four, two of which have been annuitized), she's got around 800K and receives around 4000/month in annuity income. The condo is paid for and worth around 200k. The lawyer's opinion is we didn't need to do anything and with that amount of money in reserve, she'd be able to afford "really good" in-home care for multiple years. He did write up a TOD on the condo so that wouldn't go through probate and would go directly to us kids. Mom has worked with this lawyer for years and trusts him, but I don't have a history with him. With the cost of health care these days, let alone if it was something catastrophic or debilitating, 800K can get eaten up pretty quickly. So I'm just looking for the community's thoughts on whether his comments make sense, or if I should be counseling her on more protective measures. I'm particularly interested in hearing from those of you in similar situations or have gone through something similar. Thanks! [link] [comments]  |
| Conservative/Bond Portfolio Strategies in 2019 Posted: 04 Dec 2018 03:40 PM PST I may cross post this to personal finance, but I find you guys to give more reliable advice on investment allocation strategies. :) So, right now I put about $500 a month into a mutual fund through SEI. While riding the bull market, I've got it in a market growth fund that's about 50/50 stocks and bonds. As an FYI, I am relatively new to figuring out investing strategies. This $500/mo is in addition to maxing out all of our retirement accounts, among other monthly savings including healthy emergency funds. That said it's cash that I could potentially need within the next 3-6 months and don't want to take a ton of risk with, especially now that the stock market is getting hinky. My first thought was to move the money into a more conservative fund, that is 80% bonds and 20% stock. However, my research is telling me that bonds will NOT necessarily be a good or safe investment going forward because the Fed is going to continue to raise interest rates, which tends to correlate with lower bond returns. I guess what I'm asking is, is this generally true and if so, is there a good place to put this money that is relatively low risk but better than a savings account? Thanks! [link] [comments]  |
| Is there any way to begin FI/ER on minimum wage? Posted: 04 Dec 2018 10:24 AM PST I have read the FAQ, if this is still not an acceptable question I am sorry & please remove my post! I am really just not sure where to start. I am a [20F]. I have been watching this sub for a while, I see so many of you are on track for FIRE, and I want to start... I just don't know how? I almost feel like 20 is too late to begin... It seems really overwhelming. My current situation is I am in college, I have about $15,000 worth of student debt and about a year and a half left of school. I am going for a leadership degree and am thinking about continuing my education to a masters degree after graduation. I am waiting tables and working a retail job... I only make about $15-17,000 a year. My parents are still paying for my car insurance and phone bill. My biggest expense are my utilities and my $425 of rent a month. How do I start? I appreciate any of you giving me advice on how to become financially independent, and if my information isn't detailed enough I would be happy to fill in any gaps. [link] [comments]  |
| Posted: 04 Dec 2018 02:04 PM PST I've seen a few different comments/threads pop up about gifts, and thought it was worth creating a separate post for discussion. So, how do you approach the norm of gift giving over the holidays? - If you exchange gifts, do you have a set budget or does it change year to year? - Do you exchange gifts with your SO? Family? Extended family? - What are your ideas for frugal and/or practical gifts? - If you've sworn off gift giving and don't want to receive gifts, how have those conversations gone? - For parents, what's your approach for Christmas gifts with your kids? [link] [comments]  |
| Post-FIRE home purchase: Asset-based mortgage, buy in cash, or neither? Posted: 04 Dec 2018 11:42 AM PST Hey team! I'm looking for personal opinions here, since I know home purchasing is a very personal matter. What would you recommend / what would you do? Stats 30, single / "FIREd" for nearly 2 years - left high income job but currently focusing on personal business which I want to grow in 2019 so maybe not really RE anymore $750k saved ($550k taxable / $200k retirement) ~$5k side hustle income, higher projected in 2019 House price range: $175k-275k. Realistic for what I want (2+br/1.5+ba with some kind of basement or outbuilding for workshop space), $225k-250k I've tried to use conservative estimates for everything - costs could be lower, and income could be higher. Dilemma I want to buy a home in a MCOL area that is rapidly growing. Extremely popular tourist destination. Bad job economy so home prices are still relatively reasonable but not trivial and increasing always. I want to buy a home there for two reasons:
Additional detail: I plan on AirBnBing 1-2 rooms in the house for as long as I want/need (depending on how my side hustle(s) develop). This could earn $450-1000/mo realistically depending on what kind of house I buy and how much I'm willing to work and give up personal space/freedom. I plan on flexing this ability for as long as I need to financially. If I can find a house with a private entrance room that can be basically separate, I could do this indefinitely - if the guests would be in my personal space, I would want to wean off this option over time. If I were to choose to leave the area, I would rent the house out ($1200-1500/mo) and already have a reliable and reasonable local property manager available to me. Asset Based Mortgage I spoke with Charles Schwab about their Asset-Based Mortgages. Based on the criteria I provided, they seemed confident they could provide me a mortgage if I was willing to put down a higher-than average down payment (20% would not be sufficient). Let's say 40% down payment minimum. They provided me these rates: 5-year ARM 4.25% 7-year ARM 4.375% 10-year ARM 4.75% For a $250,000 house, with a 40% DP ($100,000), that's a $150,000 mortgage. If I were to pursue this, I would likely cash out or move to conservative investments a 6+ month fund to cover expenses (maybe more like 9-12mos), in addition to the down payment amount, to make sure I have an adequate timeline to get my income up enough to cover mortgage payments without having to touch more principal. Taxes + home insurance would be around $240/mo. I'm still trying to estimate utilities but let's say $200/mo (homeowners, does that sound right to you?) The benefit here to defray my risk by not cashing out an excessive amount of my portfolio at once, at the cost of a interest and hassle. Alternatively, I could just buy the house in cash. $250k would be 1/3 of my portfolio. I would be left with $500k invested, leaving me ~$1666 income/mo (@4% SWR) plus my business income (hopefully $400+/mo in 2019). The downside here is that I'd have to cash out a significant portion of my portfolio to pay for this and miss out on the opportunity of market gains. Lastly, maybe you think I'm crazy and this is a terrible idea. Do tell! Side question: Whether I go with the Mortgage or Cash option, when would I want to cash out investments in order to pay for the down payment or the house? Obviously I don't want to sit on a bunch of cash for a long time, and it could be a long time given the market is hot and other people are buying in cash in this area... if the market were to crash, there's no way I would cash out a ton of investments in order to pay for a home at a big loss. Maybe I should just take that as a sign? The worst would be a middle area - buying at a dip but not a "crash". Any and all opinions welcome, please ask if any more detail is needed. Thanks so much for reading. [link] [comments]  |
| Is our FIRE number this straight forward or am I missing something? (CAN) Posted: 04 Dec 2018 07:37 AM PST Hey guys, starting out the FIRE journey with my fiancé (marrying in a few months). Been together 7 years. We are in Canada and she is a teacher so she will have a good stable pension when she retires. We've run the math and determined that, roughly she will be earning about $48k/year in today's dollars when she retires. Based on our monthly savings rate, averaged for 6% returns, we should be grossing about 60k/year from our investments when we retire. During our working years and before FIRE, our goal is to pay off our house as well, so we would be mortgage free when we retire. We plan to have kids as well, but we think we will still be able to hit our monthly savings goals for FIRE. Therefore, our future goal is: 60k from our investments (4% withdrawal rate) + 48k from her pension = 108k/year gross in today's dollars, with no mortgage payments. We would be 55 at that time (we're 26 now). Am I missing something? This seems a little too straight forward and too good to be true. When we're retired, without mortgage payments and no money going into savings anymore, I can't even see us even needing 108k in today's dollars, not even close. Does this mean we can FIRE even earlier if we cut back on that 108k/year? Is my math off? I'm excited by these calculation but also skeptical that I'm missing something. Thank you for any feedback. [link] [comments]  |
| Posted: 04 Dec 2018 07:00 AM PST I'm talking the context of being Asian, as well. [link] [comments]  |
| Anyone in Canada retire early and take advantage of government benefits? Posted: 03 Dec 2018 10:55 PM PST Wondering if anyone has any experience with government benefits in Canada with low (early retirement) income. I'm thinking of taking some time off in a few years and being back in Canada, but I'm not sure (1) if I should be thinking about utilizing government assistance, (2) how much I need to make for that to happen, and (3) how much I would be able to expect if I did take that route. Would love to hear some feedback of anyone who is doing this. [link] [comments]  |
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