wbogen[at]sbcglobal.net wrote:
- quote -

I looked for this data but could not find it.

What I do suspect is there has been a marked shift in preference.

The pre 1950 or so generation paid off their mortgages as soon as
possible, a reaction to high real interest rates and unemployment in
the 30s (inflation was negative, so your real interest rate was higher
than your mortgage rate). Given where housing prices were relative to
incomes, this was (relatively) easy.

Since then, housing prices have risen *and* houses have proven to be a
valuable financial asset (the largest slug of most people's financial
assets is probably the equity in their house) which has led to a
preference for larger houses and delayed paying off of mortgages.

Real interest rates (after inflation) have been at historic lows and so
the burden of paying a mortgage has been relatively low. See for
example the fall in TIPS yields, as a measure of the real interest
rate.

My own suspicion is that things are going to turn full circle.
Housing prices are not going to go up at the same rate, and houses will
be less of an investment good and more of a pure consumption good.

anoop wrote:
- quote -

The one thing I find my parents have difficulty understanding is the
degree to which jobs and careers are much shorter term. My mother
finds it really hard to understand that one can be loyal to the
company, work hard, and lose one's job on Monday morning because of a
corporate reshuffle, relocation to the Far East, etc.

This I think is a major change from their generation.

One can scrimp and save and get
- quote -

Agreed.

Put it another way, your human capital is your most important asset. I
grew up in a street full of Jewish refugees from the Nazis, and eastern
European refugees from the communists. Not all were that well off, but
they found ways to get out and jobs to go to when they got to our
country. They were survivors (often quite troubled by their
experiences, though).

Also savings behaviour *does* matter. Because after 55, it is the case
that someone who has a good pension is probably much better off than
someone who does not.

The best strategy anyone ever gave me (my brother in fact) was to pay
your pension first, ie make sure that your deduction went out of your
paycheque and straight into the retirement account.

If that money is invested into a low cost equity fund, widely
diversified (ie an index fund) there is a good chance it will produce a
decent return over the long haul. Not riches, but a decent return.

I find those who don't have good retirement savings are often the most
impatient: shifting funds around, or trying to time the market.

I don't know if you saw the film 'smartest guys in the room' but they
interview a lineman from one of the electric utilities Enron
controlled. His entire life savings were in the company stock (a
decent yielding, boring utility). Of course it got swapped for Enron
stock in the takeover, and he lost everything (I think something over
$300k).
So there is a point about diversification there as well.

The other important point is 'neither debtor nor lender be'. I have
always regretted lending money to individuals (no matter how small,
even if repaid) because it frequently is not repaid, and even if it is
it puts a distance between us.

And debt, other than the necessary debt to buy your first car (to get
to your first job) or to pay for college, and the secured debt on your
house, always seems to me to be a bad idea. To be more specific,
personal consumer debt always strikes me as a bad idea-- I can never
consume more than I earn, if I borrow it my total consumption is even
lower. In the case of the OP, the question is whether owning a second
house is a good investment-- a little different.

<darkness39[at]yahoo.com> wrote in message
news:1169464728.252965.253520[at]38g2000cwa.googlegroups.com...

- quote -

Another good idea might be to marry late, to have children even later, and
to start saving and investing early, long before marriage. I would bet that
decisions of this nature have a lot more impact on one's eventual financial
success than decisions about which mutual fund to buy. And deciding to stop
smoking or not to smoke in the first place probably is more important than a
trip to the financial planner.

On Mon, 22 Jan 2007 10:49:31 -0600, Alan Ballow
<alanballow[at]comcast.net> wrote:

- quote -

Financially how would you handle that risk?


-HW "Skip" Weldon
Columbia, SC

"Alan Ballow" <alanballow[at]comcast.net> wrote in message
news:_72dnb0xtv09eSnYnZ2dnUVZ_sWdnZ2d[at]comcast.com...
- quote -

Well, we must all evaluate our risks. I think the big risk I need to cover,
however, is that I DON'T get hit by that truck.

Elizabeth Richardson

Alan Ballow wrote:
- quote -

Getting a bit off-topic for this group...

That would be karma. :-)

Anoop

But suppose you get hit by that truck and SOMEBODY ELSE gets to spend
your money foolishly?

anoop wrote:
- quote -

darkness39[at]yahoo.com wrote:

- quote -

Wow. This is one of the best posts I've seen that articulates the
risks
that a young person is exposed to. All of the financial planning that
one does can go down the tubes when hit with a major unexpected
event that one has no control over. One can scrimp and save and get
hit by one of these events and find one's self no better off than one
that has had the attitude of "living for the day." That gets us to the
psychology of regret:
http://finance.yahoo.com/expert/arti...neyhappy/18862

My personal opinion is that a balanced approach works best.
Enjoy life while you can but save a reasonable amount for a
rainy day with the understanding that the rain may be so much
that it might wipe you out.

Anoop

joetaxpayer wrote:
- quote -

See below.

My observation is that in
- quote -

My own observation is that many of those who did that, did so because
they had other pressures.
- quote -

My empirical experience is that 4 (or 5) major life events have a huge
impact on your financial position at 55:

- did you ever get divorced? Modern divorce law (depending on
jurisdiction) requires splitting of assets 50/50. In any case there is
a significant bias in most cases in favour of the child rearing partner
(usually a woman). A substantial fraction of middle aged men who are
divorced have remarried, starting a second family (and a renewed drain
on personal finance).

- did you ever experience a long period of unemployment? In the course
of a 30-35 year career, there can be big changes in the nature of work
and your profession. I know of engineers in particular whose employer
industries (eg automotive) are gone, they needed to retread and
retrench completely.

- (related to above). Did you buy your first (or subsequent) home in
an area where housing prices generally rose over the last 30 year?/ ie
Buffalo or Syracuse would be bad news, San Diego would have been a very
smart move.

- did you ever go through a long period of ill health? Did any close
family member (eg a child or spouse) undergo a long period of ill
health or special needs?

- did you have a support network (parents etc.) who, for example, were
able to help you provide the downpayment for your first house, or
significantly defer the cost of college? Or did you enter into your
mid 20s with significant college-related debt?

People who can answer 'no' to these questions, of middle class
professional background, are often doing well. One or more 'yeses' and
there is a significant problem.

Yes there are differences in savings or investing behaviour eg do you
own a 2 year old car, or a 6 year old one (my gut is that once cars are
7 years old plus, the cost of repairs begins to offset the gain from
low depreciation). But at 55, that has less impact than one might
think (because pension savings is about *future* income)-- a lot of the
accumulation of financial assets takes place after you are 50 or 55.

If I have advice to my children, it is to avoid divorce, to try to
select a career where there is always demand for your services
(medicine or law or accounting, perhaps rather than architects), and to
try to stay healthy. And to not have too many children, because if one
of them has special needs or disabilities, it is going to cost.

Just about the *worst* professionals for personal financial management,
in my experience, are financial planners (of the commission driven
sort).-- an industry full of the multi-divorced and 'fast live-ers'.
Go figure ;-).

This the first time I grasped that logic. It makes sense. Unfortunately I
don't have the cash on hand to pay off my mortgage, so it's only
hypothetical to me.

"Elizabeth Richardson" <erichktn[at]worldnet.att.net> wrote in message
news:eIMsh.435751$Fi1.196962[at]bgtnsc05-news.ops.worldnet.att.net...
- quote -

"Reed" <reedh[at]rmi.net> wrote in message
news:HLysh.13594$yx6.12401[at]newsread2.news.pas.earthlink.net...
- quote -

That's exactly why they might want to - because the money available is
earning more than the mortgage costs. In your case, it was not.

"Reed" <reedh[at]rmi.net> wrote in message
news:HLysh.13594$yx6.12401[at]newsread2.news.pas.earthlink.net...

- quote -

Getting rid of a mortgage is a good idea for many of us, if for no other
reason than the psychological boost that comes owning your home "free and
clear."
Indeed there are circumstances in which alternative investments, together
with tax assumptions, and so on, would produce a superior return, but these
do not apply to the majority of homeowners, and, if implemented, would
demand close attention to many details and would mean that present
assumptions about interest rates and such would have to continue to be true
in the future. For many people that would involve too much stress to make
the small savings worthwhile. Owing nothing on the house would mean peace
and relaxation for many! It is not something to be given up lightly!

"joetaxpayer" <joetaxpayer[at]nospam.com> wrote in message
news:hp-dnZ60W4v7OC7YnZ2dnUVZ_v6tnZ2d[at]comcast.com...
- quote -

Sorry, Joe. I was really responding to those who calculate that all mortgage
interest is deductible. After I pressed "Send" I realized I should have
added a comment about your "1 in 20" and that I know you, JoeTaxpayer, don't
necessarily advocate having a mortgage in retirement.

Elizabeth Richardson

wbogen[at]sbcglobal.net wrote:
- quote -

Leaving aside the passive aggressive tone of your wife's statement,
these days people treat their houses and mortgages differently from our
parents' generation. I don't think my parents ever refinance their
house. We moved at least 5 times already, refinanced our mortgage
three times. Within the past three years lots of people refinanced
their houses and use the proceeds in lots of different ways. There is
no basis to say that "most" people your age have already paid off their
mortgage.

On the other hand, your wife thinks that your household finance is not
as good as she thinks is something you two have to deal with on your
own.

Elizabeth Richardson wrote:

- quote -

You snipped "In the end, the high bracket low rate person may be a rare
1 in 20 and the advice to pay it off is the correct advice for the
majority of people."
For those with a home valued at $1M, property tax easily fills that STD
deduction. The owner has no choice on that, of course. So in trying to
council the soon to be retired person, I first ask, "are your property
taxes and state income tax enough to put you over the standard
deduction?" And I think that my estimate of 1 in 20, the top 5th
percentile lets me make such an assumption. Aren't the top 10% of homes
all valued at over $1M? And aren't the top 10% of the retirees enjoying
an income into the 33% bracket?
Elizabeth - the person to whom I responded 'couldn't understand' a
circumstance where the mortgage made sense. I didn't suggest that it was
commonplace, but that there are those in such a situation, no different
than that last go around on this topic. I thought we were in agreement
so long as I provided that caveat, that it's a slim percentage for whom
it makes financial sense. Maybe not.
JOE

"joetaxpayer" <joetaxpayer[at]nospam.com> wrote in message
news:a7WdnZkEM_Z0DS7YnZ2dnUVZ_tijnZ2d[at]comcast.com...

- quote -

Re: all money is deductible. This is rarely the case. Only the money over
the standard deduction is really getting any benefit. So, after factoring in
property taxes and any other deductions, that amount needed to reach the
standard deduction is just money down the drain.

Elizabeth Richardson

Reed wrote:


- quote -

You were 100% correct to make the choice you did.
Given you didn't even meet STS deduction, the mortgage cost you 7%.
Had you caught the bottom of the rates, you might have been as low as 5%
on a 15 or 20 yr mortgage, and in the 33% bracket, (assume all money is
deductible), the money costs 3.35%. Those in this position may choose to
keep their money invested if they are comfortable with the risks.

Let me make one point here, which will be tough to disprove. At less
than 4% borrowing cost, you could put the money in a T-bill (risk free)
and get more return than the mortgage costs you. So, there is a point at
which it does make sense. At the higher end, where the post tax cost
starts to pass 6% there is a more than trivial chance the invested money
will not exceed the cost of the mortgage. (that's where you were in
'04). For the rest in that huge gray area, we need to know the rest of
their situation to provide sound advice.

In the end, the high bracket low rate person may be a rare 1 in 20 and
the advice to pay it off is the correct advice for the majority of people.

See Scott Burns' story on this topic through http://tinyurl.com/yctt85
He has more space and carries a bit clout than I do.
JOE
JoeTaxpayer.com

Logan Shaw wrote:
- quote -

For the life of me, I cannot understand why anyone would want to make
mortgage payments, IF they don't have to. When I paid off mine, the only
issue was " Is the money that is available to make the payoff earning
more than mortgage is costing me?"

My case in 2004:
60 y/o, $72000 mort, 7% fixed int (refi'd down twice since '86),
$6000/yr in mort int., 23 years into 30 yr refi.
I had $72k available that was not earning 7% fixed, and wasn't about to
for next 23 years !
Other consideration was income tax deduct, but I was now at point where
the 6K plus other itemized deduc was LESS that standard deduc, so did
not need it. Besides, why pay out $6000 to get back $600 (10% bracket)
if you don't HAVE to.

I look at it sort of like the $72K bought me a $6000 annuity (Granted
the principal vs interest mix would change over the years, but too long
for me to care.)

As always, YMMV.

--reed

wbogen[at]sbcglobal.net wrote:
- quote -

It seems to me that there are two issues here:

(1) Whether it is the smart thing to do to pay off the mortgage
or keep paying on it.
(2) Your wife's comfort level with having a mortgage. Or with
having a rental property.

Maybe it would help to understand why your wife feels it's important
to have paid off the mortgage. Maybe debt makes her uncomfortable,
like it does me. (It took me a long time to admit that there is such
a thing as good debt.) Or it could be a lot of other things along
those lines.

- Logan

I don't think there is any magical time to pay off a mortgage as long
as the mortgage is affordable and does not impede being able to do
other thing that the mortgage payments would allow. I had a goal to pay
off my mortage when I turned 58 and was ready to retire. I did that and
it was my fourth home. I am now 72 years of age and own two homes
mortgage free, one in New Zealand and the other in California. We spend
six months of the year at each home and have been doing so for 15
years. I was fortunate to be able to sell one large home for a nice
profit at age 58 and buy two smaller homes paying cash.

On Jan 20, 8:26 am, "wbo...[at]sbcglobal.net" <wbo...[at]sbcglobal.netwrote:
- quote -