Posted on 06/26/2023 6:25:25 PM PDT by ChicagoConservative27
It's journalism and you expect clarity and honest data? :)
Yep, debt is a moving target. It can be good and it can be bad, all dependent upon economic circumstances.
There are several things I have learned independent of DR or anyone else that has a published opinion. One thing is there is no such thing as good debt and bad debt, rather what we have is degrees of bad. Another, even DR will allow a home mortgage as long as you put 20% down of a 15 year fixed, the cost is no more than 25% of household income and you strive to pay it off as quickly as possible. This is an important part of living below not above our means.
I have spent much of my adult life thinking that being debt free was impossible, but it is possible because I’m debt free. Like you I don’t care what anyone else does with their money, their mistakes are not my worry. Having said that I personally think it is a huge mistake to retire with any debt, mortgage, HELOC because things can go sideways on a moment’s notice and without advance warning. Secured debt means you co-own your stuff with a bank and that bank can take possession of your stuff if you are $1 in default. That $1 gives the bank controlling interest.
Respectfully, would you say that even with my statement: "So if anyone is going to be like me instead of you and have a mortgage debt, that's fine, they just can't count themselves as wealthy enough to retire unless the investment balance is also enough to pay off the mortgage at any point they have the need to be debt free (i.e. if I one day get tired of the bank's rules of my house and want to separate myself from the bank by paying off the mortgage that day)." ? Basically, I'm with you on the need to be debt free (at least at a moment's notice if the need arises), but I'm not ready to be all in on the debt-free-is-the-only-wise-way-to-retire mantra.
Likewise, what about inflation? Isn't it wise to keep a healthy portion of your net worth invested so that it gains enough to offset inflation? Of course, real estate usually gains, so there's that. But that real estate wealth you live in can't be utilized to help pay for food and such (fight inflation) unless the real estate is sold (or mortgaged). One of the real problems that "goes south" is the cost of living (inflation) going sky high. That's not a hypothetical or an every now and then problem (like a market downturn). That's an every year reality. I see that with my 82-year-old mother who's been retired for 20 years with little increase in her SS check and state pension, but much increase in her cost of living (groceries, home energy costs, gas for her car, even "cheap" entertainment, and of course medical costs). Plus, even if real estate is used to help fight inflation (i.e. sell your home as part of down-sizing anyway frees up some money from your home wealth), I'm uncomfortable with too much of my wealth being in one bucket (real estate). I'm not dissing real estate, I'm just saying don't be too dependent on it (expecting mainly asset increase in home value being how you fight inflation in later years when you downsize and sell your home).
By not using one's wealth to pay down the mortgage (particularly if we're talking about people with 3% fixed interest rate mortgages before the recent rate hikes) and instead using that wealth to build a diversified investment portfolio, your portfolio can be something you withdraw from annually for cost of living. But it grows most years (thus your withdrawals grow). And by being heavily diversified it can handle market downturns (as you put it "head south") while giving you a steady income stream (even with housing prices dropped bigly from Oct 2007 to Mar 2009) two favorite asset classes of mine (long-term US treasury funds and mid-term treasury funds) were up 14% each (if I had been retired I could have done my annual withdrawals from them). Likewise I could have pulled form the two money market funds. By the end of 2009, even a couple of equity funds I like were up (a global real estate fund and a large-cap core fund I like) were up 20% from Oct 2007 (having more than recovered their 2008 losses). So those funds can be where you did your 4% annual withdrawal from even though much of the rest of the portfolio was still "south". So this is an example of how even when things head south, they don't all head south at the same time if the portfolio is diversified enough.
Thus IMHO, a diversified portfolio reduces the fear of going into retirement with a mortgage, but frees me to have more of my wealth invested (vs paying off the mortgage) so that my investment gains in the good years can try to outpace inflation. That keeps me from being like my mother, who is debt free, but has to live on a tighter budget than she'd like because inflation is eating up her income.
Please don't take this as a diatribe against those who insist on being debt free going into retirement. I get that, and I think that the people who do that are better off than most people. I just typed up this explanation of fearing inflation more than debt since you used the phrase "huge mistake to retire with any debt". Well, maybe if the debt was to fund a lavish lifestyle. But not IMHO if the debt was used to fight the very real problem of inflation.
DEBT is DEBT.
OWNING your home with a small mortgage is still better than paying ever-increasing rents.
I Bought my current property free & clear with profits from prior property.
Had a pretty high C Card balance at 1-1-2022. Was getting pretty mad at all the interest they were charging with Biden’s policies.
Doubled down (ON SOC SEC) on my payments. Have paid off over $13,000 in 18 months-—and was still using the card all the time. I do NOT like to carry cash-—female & 83—feel more vulnerable. Current C Card balance==under $200..,but going shopping tomorrow.
DEBT is DEBT.
OWNING your home with a small mortgage is still better than paying ever-increasing rents.
I Bought my current property free & clear with profits from prior property.
Had a pretty high C Card balance at 1-1-2022. Was getting pretty mad at all the interest they were charging with Biden’s policies.
Doubled down (ON SOC SEC) on my payments. Have paid off over $13,000 in 18 months-—and was still using the card all the time. I do NOT like to carry cash-—female & 83—feel more vulnerable. Current C Card balance==under $200..,but going shopping tomorrow.
ALSO-—NO CELL PHONE/Pay TV/ Hairdressers/ Manicures/ entertainment/no new vehicles/ nothing frivolous.
There are families here in USA that are paying more in monthly CELL phone bills than a mortgage payment. BUT-—the phone company doesn’t exactly “qualify “ you like a mortgage company.
I have owned a number of vehicles in past 66 years.
Pretty sure all told, they didn’t add up to $50,000.
ONLY NEW car cost $3434 out the door in 1965 & I put OVER 444,000 miles on it-—Sold it to a guy in Sweden who restored the exterior-—ran fine. Sometimes wish I hadn’t sold it.
Paid $4000 for 1976 1 ton Chevy dually in 1986—it now has over 348,000 miles on it-mostly towing horse trailers....
Paid $3500 for 1979 Buick wagon in 1981 & it now has over 222,000 miles.
IF you have a mortgage-—they IMPOUND the Property Taxes & Insurance-—to protect their investment.
WHEN YOU OWN YOUR HOUSE FREE & CLEAR-—The county then sends the tax bill directly to YOU & you pay it directly. Most counties allow 2 payments-—some allow 4 payments.
I have owned this property for 18 +++ years. The assessment info come in about January-—the actual bill comes in July. First payment is due in August—then October—Jan—March (IIRC). I can pay it in one payment-—sometimes 2. Current tax on 5+++ acres/house/garage/well/septic/power/fenced, etc is $805. Annual increases are held to 3%-—expecting new bill around $830 or so.
This county also has “HOMESTEAD” allowed on your property-—Paid for or not. Cheapest insurance you find against someone trying to sue you out of your home.
IF anyone tries to sue me—bogus or not-—and they force a sale-—I get the first $500,000 + out of the sale.
Not a large amount when Mortgages are included.
Many people do NOT think Mortgages are “Debt”.
Again, you do with our money what you want.
You seem to imply that you with your HELOC and any other misc. debt you might have in your portfolio is the only one in this discussion that envisions inflation in the future.
You also seem to imply that those of us that make it a priority to achieve a debt free existence and resist the urge to borrow against our home are not saving and investing. Do you think that the hard work and sacrifice that leads one to pay off everything prior to retirement leads to a sudden mismanagement of income once debt free?
I bought a new ‘76 Monte Carlo for $5300, a new ‘01 Monte Carlo for $27,400. Friend of mine just bought a nice RAM pick up, $81,000!! Fortunately, my $33,000 2019 Tacoma will be included in my will.
And to be honest, I probably made too much of your phrase "huge mistake to retire with any debt" (which I took as a slam against my strategy) because you did preface it with "I personally think...". Which should have been enough to inform me that you're having an open and respectful discussion as I am. For that I apologize.
Apology accepted.
When you get some free time, make a study of 1st Thessalonians 5:21 and make application to Proverbs 22:7 and then ask yourself this question: “Is there a mortgage or HELOC exception to the passage”? Let me know what you come up with because I like to think that I’m teachable. Thanks.
For me, I hate to put too much into doctrine from the Old Testament. I'm not saying zero teachings in the Old Testament should apply to our lives. But I'm saying as far as putting doctrinal teachings from the Old Testament under a microscope (testing) (particular teachings or prophecy, since that's the context of 1st Thessalonians 5:21), do we really want to do that with doctrine from the Old Testament? I mean, if we do that, where would it end? For example, would we "test" the teachings of Leviticus 15:19-30 to apply them today? (If your wife is in her time of month she can't so much as shake hands with anybody for 7 days, and if you touch her or even touch something she touched, you're also unclean the rest of the day.) I can't think of any Christian denomination or teaching supporting that.
Or put another way, would you call up Ramsey and tell him he's wrong for telling people that debt for a house is okay (before retirement) because it violates Proverbs 22:7, which he quoted on every radio show?
No debt for us but we do use credit cards.
You don’t have to agree with me that the Bible teaches that the borrower is slave to the lender, nor is there any requirement that you believe any or all of the words of the Scriptures or do you have an obligation to me to get your personal finances under control. All of this is your call not mine.
Regardless of any of that I personally got carried away with out of control spending and it was at the urging of the words of the Bible that we changed course and I believe that it was the Lord that placed in my heart the desire to get out from the bondage of debt. I would say that we had been in that bondage for so long that we got used to it although we knew it wasn’t God’s best or ideal for us and you probably know this also.
Have a nice day!
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