Speaking of debt free, advice wanted
 

I retired early. Have enough in the bank that I'm covering living expenses without invading pricipal, for now. We've not had a mtg. in 10 years, have a small farm in Pa. Keeping up with the work here and the winters have become a chore, so last year we bought a single floor retirement home in Va. Financing was too good to pass up, low 3%'s and Wells basically paid the bulk of our closing costs.

Our current home is under contract and should settle in August. Our initial plan was to use the majority of the proceeds to pay off the Va. house mtg and bank the remainder. A back of a napkin calculation, however, seems to indicate that at 3-4% return the revenue on my settlement proceeds would cover about 85% of my annual mtg payment (assuming that the interest deduction would offset any income tax on the investment if I put it in something other than a tax free bond fund).This would appear to be a financial no brainer, right?

But...I get tremendous peace of mind from not having debt. Really no debt. Older cars, no cc balance, nada.

Am I being foolish?

If it matters, I'm 59. 3 kids, but they all have some cash from inheritance, no student debt etc.

Tough call. I went with paying off my home over better ROI about two years ago. Sometimes I regret it because I could have made considerably more with the money than I was paying in interest, but I ultimately decided being debt free was the best thing to do for me.

I can’t recommend one way or another but in cases where it made sense to both invest and carry debt, I found that creating a balance sheet gave me a better number to look at than just the debt staring me in the face

If net worth is positive that feels good

Peace of mind is the best investment.

My first entree into real world investing was Andrew Tobias. He could not be more my opposite politically: https://en.wikipedia.org/wiki/Andrew_Tobias

His financial advice, otoh, shaped my life.

Thanks Paul.
It's pretty much the way I'm leaning. It hard to leave close to 400k on the table, so to speak, but I'm fortunate enough not to need it now, and peace of mind is precious. I just worry that it's illusory.
Then, I remember 2008. And 2000. And my parents, in '29. I'd be more conservative, but still.

But part of me says, wake up, you pussy.

If you guys sell your farm, are you staying on the Bay? Assume its in your blood

Ok. If you can pass on the peace of mind, think about this.

In the big picture, we all really are just renting our home and then we will move on in one form or another.

If you can turn a positive margin I would advocate for it. You do need to calculate any risk that could clobber you however.

My Grandfather was an absolutely brilliant person and founded a very successful bank. He told me early on "any time you can borrow money for X and make X + % on it, do it." Controlling for risk of course.

I have done this formula a number of times in my life and have greatly benefited from it.

Peace of mind is pretty valuable however.

As you point out, this is a difficult equation!

And as soon as you move into a riskier position, part of you will say, "what have I done!" You will, I guarantee, obsess about it.

Your investment philosophy, as Tobias hammers in, must match your comfort level. I have left a lot of money on the table with my investments but have made a butt load as well.

I grew up in California..while I love it here, the humidity is a deal breaker in the summer: some place west in the summer, near here the other 7 months!

JOIN THE CLUB GO INTO DEBT UP TO YOUR EYEBALLS....EVERYBODY IS DOING IT...The US, EU, JAPAN, CHINA, CORPORATIONS (cheap money) and CITIZENS....

The last time I checked world wide debt is 225T not counting the US 100T Accounts Payable.

I dont get the debt free thing, at least at this point in my life. Not interested in debt up to my eyeballs but debt is a tool, use it wisely to get ahead. My personal choice but I'd rather have the $$ at my disposal than invested in my house. Much simpler to sell a stock, fund, cd, whatever to get some cash if/when I need it. I locked in a good rate a few years ago, only makes sense to invest and/or live on the spoils. Maybe if I'm ever on a fixed income I might rethink this, until then I'll take the gains.

^^^well said. Debt is a tool. Everything in moderation.

A wealthy guy told me once "You don't increase net worth by paying interest. Pay off all debt and make your money work for you."
Don't get me wrong, my business is not debt free... yet... I'm working toward self funding my inventory. Once I get to that point life is going to be a complete joyride.

Don't think I can agree. For the debt tabs is talking about (stupid debt) then yes, that's true. Otherwise it's like telling Ruth Chris "you don't increase net worth by buying steaks" except they turn around and sell that steak to some guy for 3x the price.

If someone wants to loan you money at 3% and you can make 4% with acceptable risk, why not???

Think maybe you answered your own question right there...

I think the above is true, except it depends. Where are you in life, retired or nearly retired or 10 or 20 or 30 years out? There are probably some dependencies around how much do you have in debt and how much in liquid assets too. If you've got a healthy savings/investments/retirement funding, that's probably different than if you don't have enough.

I prefer the debt free route....it just suits "me" better. Nuthin' is free....but it's closer to freedom ;)

Everyone here understands numbers btw....

The more I think about this, my age makes this less of an issue. If I was 40, I'd pay off a 30 year by the time I was 70, and would end up with the equity and the cash, assuming no disaster. But at 59, I'd be 89. Maybe. Or in the ground. Since mtg's amortize much more quickly in the end years, it may not be the deal that it seems.

Plus, if I were younger and working, I could make up for investment shortfall with more work/income. Retired? I'd either have to return to some form of work or eat into my cash for living, or reserves.

So I'm thinking I agree with Vince in part-its a younger man's bargain. And I can afford the peace of mind, even if its a luxury.

Fundamentally the problem is that nothing is guaranteed in investing. Are there low risk investment options, of course! But nothing is guaranteed, and we have several events in the last century that have illustrated that. But you know what is guaranteed? Paying off your debt is guaranteed to save you whatever interest you were paying on that principal. Saving on a 4% loan is exactly the same thing as investing at 4%.

Seems like you've already made your decision, and I think it's the right one. At 59, debt free, no risk, money in the bank......you're in a pretty good spot in life and can just kick back and enjoy retirement.

Which is why I wrote "don't get me wrong, my business is not debt free... yet"

Why would I pay someone interest when I have enough to self fund and I can make the entire 10-20% rather than 7-17%? I have a small business and my goal is to be self funded because then I'm making even more. Seems to make sense.

That's my thought too. At 59, it seems like it's better to have a bird in the hand vs 2 in the bush. If you've got $10mill stashed in the bank and you're living comfortably off of the interest from that, then it still may not be a big deal. If you've still got money in equities, then a crash could be a pain for a few years until the market bounces back. I think it would be nice to have more paid off and fewer/lower bills.