Interesting to read perspectives on these topics and read what is "right" and what is "wrong."
The math and the calculations are easy to get "right." Most of the comments here have the calculations "right."
After the math, everything else is an application of those calculations to the person's; 1) risk tolerance, which will drive investment returns, 2) desires for the freedom to being mortgage-free, their health situation that influences their views on longevity, and 3) many other things that a person dreams of, has as personal goals, or possibly loses sleep over.
I remember having a life goal of being debt-free by age 50. Given my parent's financial situation I had been in debt for college, first vehicle, first house, first business, and so on. To be debt-free carried a huge sense of accomplishment and motivation for me. So, the week of my age 48th birthday Mrs. Fin and I mailed a huge check to our mortgage company and never looked back. I had run the numbers and we knew the end difference between paying off a 4.5% (interest deductible) mortgage rather than investing that money in some index fund. We did what meant the most to us and paid off the mortgage, even though the numbers said otherwise (assuming we made a reasonable return during the remaining mortgage period and did not get caught in a market decline like we had just experienced in 2008/09).
I've never slept better. Other than raising a child, it was the accomplishment that added more smiles and comfort than anything we'd ever done. Debt-free goal accomplished. Other with different life experiences that formed different priorities might think we were nuts.
I've helped other clients who had mortality issues in their family. We ran similar numbers. They decided to keep the mortgage and not rathole the extra money. They wanted to do some living in the event their family health history was hereditary. The numbers said otherwise, but if you have experienced short mortality you don't buy into the common assumption in these models that every male lives to age 77 and every female lives to age 81. That's good for modeling and calcs, but that's not life.
I have lost track of how many "Social Security break-even" analysis I've done with people. Simplistically, most of the calculators assume the person is not working and not subject to the earned income limits until age 65. The calculators also fail to account for whether or not the person plans to invest the money or if they need it for living expenses. I have run it for me, for Mrs. Fin, and the numbers are the same as when I've run the calculations for many clients. How we apply that to our personal situation is where the difference comes in. What we will do based on her age and situation is different than what we plan on doing for my situation. And our decisions are different than what most my clients decided to do, mostly because we do not intend to touch it and we will investing every penny of it rather than spend it for living expenses.
Point of those examples are to illustrate that the calculations can be "right", or "wrong," or incomplete. Yet, once you get them "right," the best answer is fully dependent upon each individual's goals, desires, and situation they find themselves in at that age.
The math and the calculations are easy to get "right." Most of the comments here have the calculations "right."
After the math, everything else is an application of those calculations to the person's; 1) risk tolerance, which will drive investment returns, 2) desires for the freedom to being mortgage-free, their health situation that influences their views on longevity, and 3) many other things that a person dreams of, has as personal goals, or possibly loses sleep over.
I remember having a life goal of being debt-free by age 50. Given my parent's financial situation I had been in debt for college, first vehicle, first house, first business, and so on. To be debt-free carried a huge sense of accomplishment and motivation for me. So, the week of my age 48th birthday Mrs. Fin and I mailed a huge check to our mortgage company and never looked back. I had run the numbers and we knew the end difference between paying off a 4.5% (interest deductible) mortgage rather than investing that money in some index fund. We did what meant the most to us and paid off the mortgage, even though the numbers said otherwise (assuming we made a reasonable return during the remaining mortgage period and did not get caught in a market decline like we had just experienced in 2008/09).
I've never slept better. Other than raising a child, it was the accomplishment that added more smiles and comfort than anything we'd ever done. Debt-free goal accomplished. Other with different life experiences that formed different priorities might think we were nuts.
I've helped other clients who had mortality issues in their family. We ran similar numbers. They decided to keep the mortgage and not rathole the extra money. They wanted to do some living in the event their family health history was hereditary. The numbers said otherwise, but if you have experienced short mortality you don't buy into the common assumption in these models that every male lives to age 77 and every female lives to age 81. That's good for modeling and calcs, but that's not life.
I have lost track of how many "Social Security break-even" analysis I've done with people. Simplistically, most of the calculators assume the person is not working and not subject to the earned income limits until age 65. The calculators also fail to account for whether or not the person plans to invest the money or if they need it for living expenses. I have run it for me, for Mrs. Fin, and the numbers are the same as when I've run the calculations for many clients. How we apply that to our personal situation is where the difference comes in. What we will do based on her age and situation is different than what we plan on doing for my situation. And our decisions are different than what most my clients decided to do, mostly because we do not intend to touch it and we will investing every penny of it rather than spend it for living expenses.
Point of those examples are to illustrate that the calculations can be "right", or "wrong," or incomplete. Yet, once you get them "right," the best answer is fully dependent upon each individual's goals, desires, and situation they find themselves in at that age.
