<p>Just to take a contrary point if view,paying off your house may not be the right thing for everyone…if housing continues to decline,which there is a good possibility,or even flattens out,that money you’ve worked so hard for is gone…with interest rates historically low, one might be better served keeping their cash,and paying a low monthly mortgage…this way cash flow thru retirement is steady…think of the many people who paid off/down their mortgage just prior to the downturn, 30% average losses,gone forever…having a mortgage enabled you to keep that money,hopefully in safe investment,and while your house is still down 30%, you still have your cash…just a thought to ponder</p>
<p>BC- yes I work out. Usually 5 days a week. My wife is an exercise physiologist and personal trainer.
gdogpa- I have a 30 year at 4.5%. I may go to a twenty if I can look in 3.5 or less for a reasonable amount. I have 27 years left on my current mortgage. I will be 54 in January so most likely I will have a mortgage for most of my retirement.</p>
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“The trouble with retirement is that you never get a day off.” - Abe Lemons</p>
<p>We have a three-pronged retirement plan:</p>
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<li><p>Social Security. Even at 70% of current benefits (which current revenue levels would pay) it is a decent amount of money.</p></li>
<li><p>Retirement savings in 401k’s and IRA’s.</p></li>
<li><p>Income from our rental properties.</p></li>
</ul>
<p>I’m more worried about deflation. If deflation or other economic issues push the rents down so that we have negative cash flow before the mortgages are paid off, things could get interesting.</p>
<p>I am assuming that rents will tend to go up as inflation increases the price of everything, this may not be a good assumption.</p>
<p>The last twenty years have shown a combination of inflation and deflation. Inflation in the things that we need and deflation for many of the things that we want.</p>
<p>I rented a car recently. I got a $32,000 car for a week for the same rental price as what I paid for a $20,000 car ten years ago. Gasoline, food, medical services, college is far more expensive than ten years ago. But I can get twenty times the compute power for one-half the cost today compared to 2000. So my view is that we get inflation in some places and deflation in others. Housing prices are based on salaries, employment levels and consumer sentiment. Those things might not improve for a long time.</p>
<p>^ Oh no BCEagle, housing prices are based on inherent value. That million dollar 2-bedroom condo in San Francisco is INHERENTLY worth ten times what that 4-bedroom home in Wichita is worth! Really! I mean there’s no question about it. Higher incomes in the Bay Area have NOTHING to do with it. Really.</p>
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They are also based on population levels. If an area sees significant outflow of population, housing prices can get killed, even if employment levels are high.</p>
<p>I don’t worry about the prices of things like computers being deflationary, they were never all that expensive compared to necessities like housing and food. And they are very occasional purchases for most people, anyway.
This may not be deflationary, but rather due to greater efficiencies in this market. It may be, for example, that better fleet management has led to greater utilization of cars, which allows companies to rent a car for less and still make as much money as before.</p>
<p>“I don’t worry about the prices of things like computers being deflationary, they were never all that expensive compared to necessities like housing and food. And they are very occasional purchases for most people, anyway.”</p>
<p>Yes. I ask to my kids to calculate the structural cost-of-living. In our area it’s out of hand. High cost of housing, high cost of utilities, high cost of transportation, etc. “Twenty grand? Yeah, that might cover my taxes … if I was unemployed.”</p>
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<p>Yes, good catch. Part of the supply/demand equation.</p>
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<p>Perhaps you’re not as old as I am but having your own computer in
the 1970s meant a considerable outlay.</p>
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<p>I don’t think that car prices have gone up as fast as a lot of other
things and you get far more in today’s cars than you did from ten
years ago. InfoTech has certainly improved the management of a lot of
things but there were still a couple of rental cars in the lot when I
picked up and returned mine. I rented at a very convenient Kiosk about
1/2 mile from our home - very convenient. There’s actually another one
right next door. Ten years ago, we didn’t have any rental car places
in our town. So we have better service, better cars at the same price
as ten years ago.</p>
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<p>Thus the popularity of owning streams of income for necessities. Oil,
natural gas, utilities, water, food. Housing if it makes sense - I’m
not into holding illiquid investment and income assets.</p>
<p>Rising property taxes are my concern in retirement. Real estate values have held up better than most places. Unemployment in my county is 6.5% but there has always been a lot of underemployment here because it’s a college town. There are jokes here about how many PHD’s lost jobs when Borders closed. As far as paying off a mortgage, sometimes it’s just a matter of peace of mind, or what ever helps you sleep at night.
Our town council is in the process of creating a twenty year vision plan and I’m hoping some of the town council members are defeated in the next election. A few of them are absolutely clueless about the pressures homeowners are under.</p>
<p>In a world where the price of houses is likely to be flat at best for the next several years, it is not clear that paying off the mortgage and continuing to live in the house is the best financial plan. You still have property taxes, insurance and maintenance (which for an old house like mine is a killer). If the value of your house under current market conditions substantially exceeds the amount of your mortgage, I think the best financial move is to sell the house and rent.</p>
<p>I think that property taxes will continue to rise in our town to pay for retiree pensions and to deal with inflation. School expenses are rising much more slowly now with declining enrollment, at least until a few years after the next baby boom.</p>
<p>If the dollar declines sharply, then food, energy, consumer staples, etc. can rise sharply and I’m hedged for that.</p>
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<p>It may depend on the value of your house relative to your assets. The value of our home is about 6% of our total assets.</p>
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<p>If you paid off your home in your 30s or 40s, then cash flow shouldn’t be much of a problem.</p>
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<p>Well, there are headaches and limitations involved in renting too.</p>
<p>“Well, there are headaches and limitations involved in renting too.”</p>
<p>No question about that. But from a purely financial perspective, I would think that continuing to live in a house in which you could make a substantial profit from selling makes sense only if you think that the house will appreciate substantially in the short to intermediate term.</p>
<p>So EMM1, are you selling your place, and renting?</p>
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I’m talking about the PC era. Prior to that, there was little if any reason for an average person to have a computer in their house.</p>
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To rent a house comparable to what I have in the town I live in would cost as much if not more than what I am paying to stay in my house (if I could even find something comparable - house rentals are pretty rare around here). And there are significant transaction costs to selling. </p>
<p>I try not to look at my home as just another investment.</p>
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<p>I don’t consider our home a financial asset.</p>
<p>I consider it a place to live.</p>
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<p>That’s a very odd statement since they are now ubiquitous.</p>
<p>“from a purely financial perspective …”</p>
<p>From a purely financial perspective you should probably be moving to Morocco, living out your days in relative luxury on what you’ll get from Social Security.</p>
<p>I think OP is prudent to be looking at some options, should inflation become pronounced. But very few CCers are facing financial oblivion in retirement. Other issues will be much more important than optimizing cash flow.</p>
<p>“So EMM1, are you selling your place, and renting?”</p>
<p>Been trying to convince my wife. She’s coming around, but we have to update some stuff even to sell (no one wants to buy a fixer up these days). So that’s what we are doing right now. </p>
<p>“To rent a house comparable to what I have in the town I live in would cost as much if not more than what I am paying to stay in my house (if I could even find something comparable - house rentals are pretty rare around here). And there are significant transaction costs to selling.”</p>
<p>If your house is worth more than the face value of your mortgage, have you considered the opportunity cost of having a substantial amount of money tied up in an illiquid, nonappreciating asset?</p>
<p>“I don’t consider our home a financial asset.
I consider it a place to live.”</p>
<p>An entirely sensible view (as I would expect from BCEagle), but not one that is relevant to the financial calculations.</p>
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<p>It is relevant but I wouldn’t care to enumerate the details.</p>
<p>I imagine that most people don’t sweat the pocket change.</p>
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Of course, but what am I going to put it in? A CD paying 1%? </p>
<p>Property values in my town seem to have stabilized for now. And I’d rather have my mortgage payment go to reducing my balance rather than paying my landlord’s mortgage.</p>
<p>There are other factors - I want my D to stay in her current school system until she is out of high school. Transaction costs would eat up in excess of 10% of the equity. We’ve spent a tremendous amount of time, energy, and money renovating this house to be how we want it, which we no longer have if we move. And probably most important - DW doesn’t want to move. 
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