oldguy
Senior Member
Cash: $ 751.85
Posts: 3656
Joined: 21 May 2006
Location: arizona
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quote:
Leveraging my mortgage per your normal advice would not work, as the impetus for this line of inquiry is the prerequisite that I would lose my job and have no income to make the payment on the $400K mortgage, which is probably in the neighborhood of $3000 per month. Even with a 30 year mortgage, the payment would be close to $2000 per month, and equally unattainable if I'm unemployed.
I know we disagree - but I would be doing a refi on the house. Right now your status is "super credit and fully employed". You can get a $400k mortgage, guaranteed <4.5% fixed rate for 30 years ($2000/m). And add that $400,000 cash to your existing ~$950,000 portfolio (equities, bonds, CDs, cash, etc). Then, sell off $24,000 of your $1,350,000 each year and put it into your checking account to offset the $2000/m mortgage payment. (That is less than 2% of your portfolio, so it is likely that your $1350k portfolio would continue to grow during your period of unemployment).
And if turns out that you have to retire in a couple years, this option postures you to put your $1.35M to good use (as opposed to locking it into house equity that you can never access after retirement.) If you invest it well, that $1.35M may double every 7 years - $2.7M, $5.4M, and $10.8M when you are my age (75). 
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Sun Feb 15, 2015 4:36 pm |
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Wino
Senior Member
Cash: $ 113.80
Posts: 560
Joined: 03 Aug 2012
Location: Dubai
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quote:
Originally posted by oldguy
I know we disagree - but I would be doing a refi on the house. Right now your status is "super credit and fully employed". You can get a $400k mortgage, guaranteed <4.5% fixed rate for 30 years ($2000/m). And add that $400,000 cash to your existing ~$950,000 portfolio (equities, bonds, CDs, cash, etc). Then, sell off $24,000 of your $1,350,000 each year and put it into your checking account to offset the $2000/m mortgage payment. (That is less than 2% of your portfolio, so it is likely that your $1350k portfolio would continue to grow during your period of unemployment).
And if turns out that you have to retire in a couple years, this option postures you to put your $1.35M to good use (as opposed to locking it into house equity that you can never access after retirement.) If you invest it well, that $1.35M may double every 7 years - $2.7M, $5.4M, and $10.8M when you are my age (75).
I looked at the rates. I can get 3.25% for 15 years, which leaves me with $3000 per month or $36K per year. This includes Houston taxes as well as principle and interest, but not insurance.
Now, instead, I will have zero payments and keep my job (which is the other likelihood). I can then contribute an additional $36K per year over and above my current contributions, and my assets grow commensurately with that increase. Again, this is in addition to my current deposits. I am currently on pace to have well over $2M at the age of 60, as well as a paid-for house, and no debt. I have to play "both sides" of the coin of being a possible layoff target, as well as possibly riding through the current unpleasantries.
I'm also making quite a bit more than the 11% you quote. In fact, I'm up over 20% in the last two months, on my "play" accounts. My "safe" accounts follow the market quite well, as I have the majority in the S&P index, with quite a bit in several other funds.
You know I can do the math, and I agree that your method works, as long as their is no severe downturn. If we have another 2008/2009 immediately after I purchase the index with the $400K, I lose 50% or so within a year. I just saw this happen to oil from July to January. What is to prevent this from happening to the market as a whole? You know the answer: Nothing. There are no guarantees. Therefore, I play the "safer" route and eliminate most debt while beefing up my not-presently-needed investments.
I'm not arguing, and I agree that your route is most likely to have the best dollar figure return. My problem is living with DW if the market turns down. It's one thing to see a large portfolio go to half its value. It's quite another to see the same downturn and also have your house mortgage included in the decline. I don't know how you weathered Mrs. Oldguy's inquiries.
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Sun Feb 15, 2015 4:54 pm |
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oldguy
Senior Member
Cash: $ 751.85
Posts: 3656
Joined: 21 May 2006
Location: arizona
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quote:
It's one thing to see a large portfolio go to half its value. It's quite another to see the same downturn and also have your house mortgage included in the decline. I don't know how you weathered Mrs. Oldguy's inquiries.
You make a good point, lol. Her inquiries can be pointed - but after 46 years of marriage I think she is getting used to me.
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Sun Feb 15, 2015 5:17 pm |
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littleroc02us
Moderator
Cash: $ 384.35
Posts: 1891
Joined: 09 Feb 2009
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quote:
Originally posted by Wino
quote:
Originally posted by littleroc02us
EF funds aren't investment funds, they are there when you need them the most. If you invest your EF fund and the market tanks you have less money and that's not a very good idea.
Straight out of the Dave Ramsey playbook.
I'll be beefing the EF up to $25K, which is more than sufficient for Dave's "3 to 6 months of expenses." My only real decision is to send more money to investments or to send more toward the house payment.
I could conceivably have the house paid off this year. Had DW not "needed" a new car, the house would already be paid off, and I wouldn't be fretting the current oil patch predicament. As it is, I think I'll continue with my plans to put more into the taxable funds and less into the Roth and house. Things are not going well in the energy sector right now. Every day tends to bring more bad news. Luckily, the bad news has not yet personally affected me.
You got that right. Dave has some great ideas that I stick too.
Do you want to know what has allowed me to build such a high networth for my age. My wife. She doesn't buy anything, she doesn't need a new car, she makes mature and wise decisons and she saves like crazy. I always listen to her when it comes to making financial moves. Yes, I do the math and make all of the calculations, but the final decision usually comes from her wisdom. Why change what works.
Risk comes from not knowing what you're doing. (Warren Buffet)
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Mon Feb 16, 2015 3:58 pm |
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Wino
Senior Member
Cash: $ 113.80
Posts: 560
Joined: 03 Aug 2012
Location: Dubai
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quote:
Originally posted by littleroc02us
Do you want to know what has allowed me to build such a high networth for my age? My wife.
She's worth far more than rubies, I would guess.
DW on my part has/had only the new car as her requirement. Well, that, and the loan to DD and SIL which is being repaid at 0% interest (as agreed). She also bought a new handgun for herself, but as we're from Texas, that's only to be expected. I think she is getting me a gun I've wanted for a long time for my birthday, too. That's why I work; to make money to buy stuff that I want.
DW and I are well along on our plans for retirement. I don't plan to retire until much closer to 65, so in the next ten years, we should be able to attain all of our goals.
... Unless she decides she wants a nicer house. 
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Tue Feb 17, 2015 7:31 am |
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