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Should You Retire With a Mortgage?
With mortgage rates still skirting historic lows, the "pay-it-off-before-retirement" argument is less compelling. It may even make more sense to keep that mortgage as long as you possibly can.
Click to enlarge.
The mainstream media, claiming to be business experts, explain their business plan:
1. Keep the 3.95% mortgage. Safely invest the difference in 0.5% certificates of deposit.
2. ?
3. Profit
Gnomes (South Park)
The Gnomes, claiming to be business experts, explain their business plan:
1. Collect Underpants
2. ?
3. Profit
Source Data:
St. Louis Fed: Custom Chart
6 comments:
From the article...
Over decades, stocks tend to return roughly 10 percent annually, according to Ibbotson Associates data. Why pull money from the market to pay off a fixed-rate mortgage charging less than half that in interest?
What would Yoda say?
Over decade, been many exponential trend failures, there have. Yes, hmmm.
yeah, the back-end failure here is that you need a buyer to exit an equity position.
The baby boom is a wonder in its fearful symmetry -- the median boomer was born in 1955, but there are 40 million of them within the 9 years on each side.
Generation Y is their replacement, but they are only now beginning to arrive in their 30s, and have their savings picture has had a good time of it from 2000 on, to put it mildly.
So Generation Y has to buy the boomer's equity while also paying their Medicare, Social Security, and the $20T national debt the baby boom has run up.
A normal person would just set their hair afire and run to the coast, shrieking, looking for the quickest escape from this crazy place.
CAPTCHA = "paystai"
my thoughts exactly
yeah, the back-end failure here is that you need a buyer to exit an equity position.
The baby boom is a wonder in its fearful symmetry -- the median boomer was born in 1955, but there are 40 million of them within the 9 years on each side.
Generation Y is their replacement, but they are only now beginning to arrive in their 30s, and their personal savings picture has not had a good time of it from 2000 on, to put it mildly.
So Generation Y has to buy the boomer's equity while also paying their Medicare, Social Security, and the $20T national debt the baby boom has run up.
A normal person would just set their hair afire and run to the coast, shrieking, looking for the quickest escape from this crazy place.
CAPTCHA = "paystai"
my thoughts exactly
Comment on Delong's:
The baby boom needs to retire -- that's OK.
The median boomer was born in 1955 and is thus pushing 60 already. The leading edge born in 1946 is now on Medicare and the tail-enders from 1964 are turning 50 soon.
When the boomers shuffle off they'll leave jobs for their progeny, the echo boomers of Generation Y, born in 1990 +/- 10 years. Generation Y began trickling into the workforce in 2000, only to get slaughtered in the dotcom bust, the housing bust, and now the Great Recession.
They need a break.
Now, how they're going to pay for their parents' social security, medicare, and/or government pensions, plus rising energy costs thanks to peak oil (the challenge of which the baby boom has done precious little to address, Iraq intervention aside), and the interest burden on our future $20T national debt is an interesting puzzle.
"Baby boomers are starting to retire en masse, which means that there are fewer eligible American workers."
I really hate the lump of labor fallacy claim.
We've got too many people in this country and not enough jobs for everyone. If we could keep some velocity within the paycheck economy we'd get more employment, but no analysis seems to really incorporate that dynamic.
AFAICT, the $700B/yr trade deficit is just gutting the workers here. $450B of that is with China, Japan, Mexico, and Germany.
One thing about demographics though, is that I'd rather have Japan's demographic challenge than ours.
Japan may have less future workers, but that also eliminates the need to expand their national infrastructure -- with a declining population, you can just make do with what you already have built, plus maintenance and replacement where necessary.
Here, however, our 0-18 population is going to increase from 76M now to 82M by 2030 and 87M by 2050.
We're going to have more mouths to feed on the same resource base. And if we're going to ever reverse our trade deficit we're going to have to weaken the dollar, which will result in more food exports for the same level of income, increasing domestic food costs.
This country is barreling towards making a very impressive crater not too far in the future.
And nobody I've seen really has the first clue how to turn things around. The economics discipline has become that corrupted and/or irrelevant.
Troy,
So Generation Y has to buy the boomer's equity while also paying their Medicare, Social Security, and the $20T national debt the baby boom has run up.
And then there is the rising tuition expense and the debt that goes with that. Sigh.
Troy,
This country is barreling towards making a very impressive crater not too far in the future.
This would be in addition to the dotcom bubble crater and the housing bubble crater of course.
You know what they say. 3rd crater's the charm!
(At some point we'll look like habitual offenders.)
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