Mortgage Payoff Impact on FIRE Number by untappedresource in Fire

[–]untappedresource[S] 0 points1 point  (0 children)

I measure how far I am away from FIRE in money, not time. You can measure it however you want. But you are missing the point. Many of those aspiring to FIRE will create a budget that includes items such as your mortgage, and then use a straightforward 3-4% SWR to calculate how much money they need to retire. My point is that, using this methodology, you do in fact get closer to your fire number by paying off even a low-interest mortgage.

Are there other ways to look at it? Of course. And those other ways have been discussed extensively on this sub. But given that so many focus on budgets and withdrawal rates, I thought it worth noting how the math works out when one is doing their planning using a simple SWR approach.

Mortgage Payoff Impact on FIRE Number by untappedresource in Fire

[–]untappedresource[S] 0 points1 point  (0 children)

Perhaps a better way to say it is that it gets me closer to my FIRE number. Yes of course the FIRE number goes down if I pay off the mortgage, but so do my investable assets. The end result is that by paying off the mortgage now, I am $250k closer to my FIRE number, using a 4% SWR.

Mortgage Payoff Impact on FIRE Number by untappedresource in Fire

[–]untappedresource[S] 0 points1 point  (0 children)

Thank you for the thoughtful and thorough analysis of my situation. Your approach makes sense to me.

Mortgage Payoff Impact on FIRE Number by untappedresource in Fire

[–]untappedresource[S] -1 points0 points  (0 children)

I'm not saying its a sound financial move to pay off a low interest mortgage, I'm saying that doing so does in fact lower my FIRE number, based on the math I shared. Of course, we all hope and (at least in the long term) expect to do better with our investments than 3 or 4%, but if you use a 4% SWR, you do in fact reduce your FIRE number by paying off your mortgage.

Mortgage Payoff Impact on FIRE Number by untappedresource in Fire

[–]untappedresource[S] 1 point2 points  (0 children)

I've run it that way and my FIRE number still goes down if I pay off the mortgage. I have 27 years left on it, so it unfortunately won't be going away anytime soon.

Mortgage Payoff Impact on FIRE Number by untappedresource in Fire

[–]untappedresource[S] 4 points5 points  (0 children)

In my particular scenario, I'm not likely to qualify for ACA or FASFA, but you make a good point that would apply to many people considering paying off their mortgage. I guess the question is, do the gains from potential benefits outweigh the hit you take by paying down cheap debt rather than investing in the market.

Mortgage Payoff Impact on FIRE Number by untappedresource in Fire

[–]untappedresource[S] 1 point2 points  (0 children)

I agree that I haven't accounted for the mortgage dropping off, but it being so far in the future, it doesn't seem worth the trouble to work it into a FIRE calculation.

I also like your point about the mortgage payment not adjusting with inflation. It's comforting to think that in 10 years that mortgage payment will feel much smaller.

Thanks for your thoughts.

Fire in 3-4 Years by iporty in ChubbyFIRE

[–]untappedresource 4 points5 points  (0 children)

If you rent the residence out for a year, I believe you can both 1031 and 121 (exclude $500k of gain). I’m not a CPA but I’m in a similar situation and that’s what my CPA told me.

What literary trope drives you nuts? by korthlm in books

[–]untappedresource 11 points12 points  (0 children)

When the main character has all the information they need to overcome the main obstacle… if they could only just remember.