tag:blogger.com,1999:blog-5621914599310831423.post7128579459600584408..comments2024-03-28T09:15:32.976-07:00Comments on The Retirement Café: Pay Off the Mortgage, Right?Dirk Cottonhttp://www.blogger.com/profile/05616143752082768155noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-5621914599310831423.post-24851323104236532442018-10-27T04:25:50.993-07:002018-10-27T04:25:50.993-07:00This comment has been removed by a blog administrator.sups shelarhttps://www.blogger.com/profile/06522447907004974988noreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-76820150473746971622018-10-24T22:28:18.186-07:002018-10-24T22:28:18.186-07:00This comment has been removed by a blog administrator.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-32511712614219610012014-07-18T06:54:34.960-07:002014-07-18T06:54:34.960-07:00I wonder how many households significantly depende...I wonder how many households significantly dependent on fixed income have the wherewithal to pay off their mortgage, but there are several good reasons for a retiree to hold onto a mortgage, maintaining liquidity being more important than inflation protection. Using your home solely as a margin account is not a good reason.<br /><br />And, yes, a fixed rate mortgage protects the principal and interest component from inflation. However, you can also protect yourself from inflation with stocks, TIPs bonds and inflation-protected life annuities without exposing your home to foreclosure risk, and you can protect more than just your mortgage payment.<br /><br />A close friend lost his million-dollar home to foreclosure in 2008. He and his family moved away. We have gotten together several times since then and not once has a said, "Throughout our crisis, I took great comfort from not having to worry about inflation."Dirk Cottonhttps://www.blogger.com/profile/05616143752082768155noreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-36383533097502971992014-07-17T22:24:26.633-07:002014-07-17T22:24:26.633-07:00I get your point, which is to say that borrowing m...I get your point, which is to say that borrowing money to buy stocks makes an already risky investment more risky. But there can be a different and valid reason, I think, for a retiree to maintain a mortgage even when he or she could afford to pay it off. That would be someone highly dependent on income from a fixed pension or fixed annuity that provides no inflation adjustment. In that case a historically cheap 30 yr mortgage might make sense as an inflation hedge. In my case, I consider my 4% mortgage payments to be a kind of inflation insurance premium paid for out of my bond portfolio. Yes, this is a net loser today in our low interest and low inflation circumstance. But if high inflation comes roaring in, with fixed pensions and fixed annuities losing real purchasing power, then a low fixed rate mortgage will be a wonderfully uncorrelated star in an otherwise dreary sky. William Bernstein mentions this idea in passing when he discusses the perils of high inflation and how to mitigate that risk. Perhaps someone fully invested in TIPs and stocks might not need to pay this kind of premium. But with the cost of inflation adjusted flooring so expensive now, might this not be a reasonable if only partial alternative for those significantly dependent on fixed rate income?Barry Wassermannoreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-85139980762619266122014-05-16T08:06:05.672-07:002014-05-16T08:06:05.672-07:00It IS a cheap loan. But the strategy has the same ...It IS a cheap loan. But the strategy has the same risk as the stock market with a lower expected return and that isn't "cheap money."<br /><br />Glad I helped with your thought process. That's my goal. Not to tell you whether or not to make the bet, just to make sure you understand it.<br /><br />Thanks for writing!Dirk Cottonhttps://www.blogger.com/profile/05616143752082768155noreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-1784043091852327082014-05-16T08:05:42.857-07:002014-05-16T08:05:42.857-07:00This comment has been removed by the author.Dirk Cottonhttps://www.blogger.com/profile/05616143752082768155noreply@blogger.comtag:blogger.com,1999:blog-5621914599310831423.post-19853361381194013812014-05-12T21:49:09.867-07:002014-05-12T21:49:09.867-07:00Dirk,
This is a very nice series of posts. Thank y...Dirk,<br />This is a very nice series of posts. Thank you for making me reconsider this issue. I just got a 30 year mortgage and was initially thinking of it as cheap money since it is at 3.5 %. But now I realize the inherent riskiness of the strategy. rprrhttps://www.blogger.com/profile/03531792671686703615noreply@blogger.com