“...About others posting to pay off mortgage before retiring, I can see someone choosing not to do that if the interest rate is low and that person instead puts that money into Roth IRA’s and Roth 401K’s. But the trick is to do it with the same intensity as you would if you were instead paying off the mortgage. Just treat that portion of your Roth investments as your mortgage payoff amount.....”
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You nailed it, The Trick is correct my friend.
I think but cannot offer proof but my gut tells me that the individual that pays off his/hers mortgage early to lower retirement costs is much more likely to more than make up for the lost savings in tax advantaged retirement accounts after clearing the debt and prior to retirement compared to the mortgage hanger-oner that uses sheer genius to demonstrate investing savvy for all the world to see.
Question: why do you think the lovers of debt make it sound like 95% of today’s mortgage holders are in at <2% APR and have no other consumer debt eating up potential investing dollars and are actually maxing out their Roth 401K? I think we know the answer.
According to the data, 63% of working age people are actually earning W-2 wages, out of that 63%, 85% of them participate in their company 401K (or eq) and out of that only 4-10% are maxing out annual contributions. So even if the stupid argument that holding on to a mortgage forever leads to more investing time in the market is mathematically correct, the data argues that very few actually do it. Hence The Trick.
I think the average age 65-70 in the USA has about $200K in retirement savings so for many the future is not looking too good for some.
But that works only if you have enough in investments to keep up with inflation during the decades of retirement. Using a 4% annual withdrawal strategy, that means your investment balance needs to be at least 25 times your cost of living (for the year). And since inflation is high, your investment portfolio needs to be heavy in equities (I say 70%) instead of heavy in bonds. The common strategy of 50% or more in bonds doesn't keep up with inflation IMHO. But being at least 70% in equities means being able to handle huge market downturns. Thus being very diversified. I suggest spreading out in over 30 asset classes in equities alone (and over 10 asset classes in bonds).
I'm currently not in equity mutual funds. I got out of them after the 12 years of low interest rates (Obama years) and 4 years of Trump made my equities grow a lot. But when I get back into them I'll spread it out equally again and not try to pick the winners and losers.
Respectfully, I think you're expecting too much for many people to max out his 401K, especially in much of flyover country where the cost of living is lower (as are wages). For the under 50 workers, the max for 401K/Roth 401K is $22,500 and the max for IRA/Roth IRA is $7,000 ($6,500 for year 2023 since that's still do-able until mid-April).
So if a worker is putting enough in his 401K to get whatever the employee match is, if he's wise he'll put the next portion of his investing budget into a Roth IRA (or IRA if exceeding the income max for Roth IRA's). Only if he's got even more of his budget after that does he invest more into his 401K. For the under 50 crowd that would mean having $29,500 in his budget for investing to max out his 401K (if doing Roths and, therefore, getting no immediate tax breaks). That's a huge portion of a lot of people's income in flyover country, especially for someone who's not "seasoned" and at the height of his career.
Should more people be investing for their retirement? Yes. I agree with that wholeheartedly. But should we expect more than 10% of them to be maxing out their 401Ks? Well, I beg to differ on that.