Thinking about retirement?

[Berwhale]

We have long fixed rate mortgages, so sometimes it makes sense. My current mortgage is 3% for the remaining 25 years. It wouldn’t make sense to pay it off, although I could. I know in the UK locked rates tend to be for shorter periods with a prepayment penalty. In the US you can refinance without penalty, so many people have locked in rates like mine through the long low-rate period we exited in 2022 (mine was locked in 2020).

Yeah 5 years would be the longest fixed rate that most people would consider in the UK. Longer terms are available, but they are not very popular. There's a big shock happening now for folks who locked in rates which averaged 1.88% in 2020 and are now getting rates of 5% when they re-mortgage in 2025...

‘Shock’ in store for 350,000 UK households on low-interest fixed-rate mortgages

Those on typical £200,000 mortgages taken out between October 2020 and February 2023 may see costs jump by £3,996 a year this winter

www.theguardian.com

 

[mlsstl]

Is it common for people to retire with a mortgage in the US? I paid my mortgage off 3 years ago and that has really opened up the possibility of retiring within the next couple of years (10 years before I reach the state pension age). I would not be able to contemplate retirement if I still had a mortgage.

Paying off one's mortgage is a common "canned" recommendation for retirement, but the reality is that it depends on each individual's situation. In my case, we moved to the current house five years ago and have a 2.75% mortgage while our retirement savings are earning about double that. It would actually be foolish to reduce our accounts to pay off a mortgage. It's important to work with an independent financial advisor (one who is not making their income by pushing only certain investments) and develop the plan that works best for you.

 

[rdenney]

Is it common for people to retire with a mortgage in the US? I paid my mortgage off 3 years ago and that has really opened up the possibility of retiring within the next couple of years (10 years before I reach the state pension age). I would not be able to contemplate retirement if I still had a mortgage.

I don't know. It's a requirement for me, just for peace of mind, given that I have no intention of moving again. I suspect some refinance some of the equity in their homes to pull a bunch of cash out of it, and let the length of a new 30-year note on the smaller principle reduce their payments sufficiently to make them tolerable in retirement. I won't need that cash and will just want it paid off.

Rick "but who knows?" Denney

 

[Sal1950]

Yeah 5 years would be the longest fixed rate that most people would consider in the UK. Longer terms are available, but they are not very popular. There's a big shock happening now for folks who locked in rates which averaged 1.88% in 2020 and are now getting rates of 5% when they re-mortgage in 2025...

Don't understand that, my interest rate was 8.25 for 30 year fixed and never remortaged

Paying off one's mortgage is a common "canned" recommendation for retirement, but the reality is that it depends on each individual's situation.

IMO it's still the best plan, you never know what tomorrow will bring, financial advisor or not.
Stay put, throw in a bit extra any month you have an extra $50 and don't blink cause life will pass you by.

 

[Berwhale]

I didn't think so ? I paid off a 30 year mortgage when I was 55 (about 3 years early) and retired at 60.
Never could have done it if I still that that note hanging over my head. Then to actually retire I had to move away from the ridiculous property tax
levels of Chicago IL I sold it all and moved to suburban FL. NO MORE FRICKIN SNOW YEA

We don't have property tax like that in the UK. We have something called 'council tax' which is based on property prices in 1991. It's archaic and the top band of tax is set too low - someone living in a £50m mansion pays the same tax as someone in a £1m house (which might buy you a fairly modest, 4 bedroom family home in the London suburbs)

 

[Sal1950]

We don't have property tax like that in the UK. We have something called 'council tax' which is based on property prices in 1991. It's archaic and the top band of tax is set too low - someone living in a £50m mansion pays the same tax as someone in a £1m house (which might buy you a fairly modest, 4 bedroom family home in the London suburbs)

LOL, Call it what you will tax is tax.

 

[ahofer]

We don't have property tax like that in the UK. We have something called 'council tax' which is based on property prices in 1991. It's archaic and the top band of tax is set too low - someone living in a £50m mansion pays the same tax as someone in a £1m house (which might buy you a fairly modest, 4 bedroom family home in the London suburbs)

California’s system has some similar kinks. Property tax, and what it finances, varies a lot from state to state (and county to county/town to town).

 

[Berwhale]

Paying off one's mortgage is a common "canned" recommendation for retirement, but the reality is that it depends on each individual's situation. In my case, we moved to the current house five years ago and have a 2.75% mortgage while our retirement savings are earning about double that. It would actually be foolish to reduce our accounts to pay off a mortgage. It's important to work with an independent financial advisor (one who is not making their income by pushing only certain investments) and develop the plan that works best for you.

Yes, absolutely, you should only pay the mortgage off if you can't do something better with the money or paying it off opens up other options...

Paying off my mortgage freed up a big chunk of income that could be redirected to my company pension via salary sacrifice. This avoids income tax on the sacrificed amount and reduces my taxable income so I avoid a 'tax trap' we have in the UK. As a result of this, and the markets rebounding after the pandemic, my total pension pot value has increased by 55% in 2.75 years since I paid off the mortgage.

Looking at it another way, the increase in pension pot value is currently over 7x the settlement value of the mortgage and my net income over this period is slightly higher than when I was paying the mortgage.

I can only play this game for 1, maybe 2 more years before I hit other thresholds that will start to erode the tax efficiency of this setup; this may trigger my retirement (all else being well).

 

[Ralph_Cramden]

Lots of good info on bogleheads.org:

https://www.bogleheads.org/wiki/Bogleheads%C2%AE_retirement_planning_start-up_kit

Another great resource is Rob Berger:

Rob Berger

This channel is dedicated to helping you achieve financial freedom. Videos cover everything from getting out of debt to investing for the very first time. TOPICS: --Getting out of debt --Creating a budget that works --Investing for retirement in a 401(k) or IRA --Buying a home --Improving your...

www.youtube.com

...and finally, a book that helped put me in the right mindset for my first million, years ago:

https://www.amazon.com/Millionaire-Next-Door-Surprising-Americas/dp/1589795474

 

[PristineSound]

Anyone here implemented the FIRE retirement at a young age?

 

[respice finem]

We don't have property tax like that in the UK. We have something called 'council tax' which is based on property prices in 1991. It's archaic and the top band of tax is set too low - someone living in a £50m mansion pays the same tax as someone in a £1m house (which might buy you a fairly modest, 4 bedroom family home in the London suburbs)

That's because the 50 million mansion people made this tax, probably

 

[Mart68]

Anyone here implemented the FIRE retirement at a young age?

I never heard of it but looking it up, it's essentially what I did.

 

[Berwhale]

That's because the 50 million mansion people made this tax, probably

To be fair, it's slightly fairer than the 'poll tax' that it replaced.

 

[Timcognito]

Anyone here implemented the FIRE retirement at a young age?

I could have but liked working in medical device startups. The first few did pretty well. The rest ran out of money, with two very promising ones killed by the 2009 financial crisis (scared investors ) and later by COVID (halted clinical trials on 3 continents). Looking back I could be pretty close to where I am now but retired from about year 2000 in my late forties. I have not had a mortgage since 1997 and in fact did a remodel with cash, doing much interior work myself, on my modest dwelling to something much bigger and nicer, not sorry about that. Currently I'm finishing up a greenhouse, as I love architectural design, carpentry and woodworking. I feel regret that could have retired and done much more of that for decades. But as they say "hindsight is 20/20".

 

[Salt]

I could have but liked working in medical device startups. The first few did pretty well. The rest ran out of money, with two very promising ones killed by the 2009 financial crisis (scared investors ) and later by COVID (halted clinical trials on 3 continents). Looking back I could be pretty close to where I am now but retired from about year 2000 in my late forties. I have not had a mortgage since 1997 and in fact did a remodel with cash, doing much interior work myself, on my modest dwelling to something much bigger and nicer, not sorry about that. Currently I'm finishing up a greenhouse, as I love architectural design, carpentry and woodworking. I feel regret that could have retired and done much more of that for decades. But as they say "hindsight is 20/20".

Maybe Your knowlwdge might be helpful (and if it was to purely to check AI output)?

 

[Robbo99999]

People are different, their situation and priorities are different, etc. There can be no "one size fits all" solution.
In my case, middle class, no "career" to speak of, and in my German job 16 years without vacation, 60-70 hours a week.
Before it, similar in Poland, only for less. Not too healthy, really, but the money, intelligently invested, allows for earlier retirement.

There is no such thing as a free lunch.

Gees, 16yrs without vacation whilst doing 60-70hr weeks, that's crazy, at least you got through it! (I'm assuming when you say without vacation meaning you had no time off apart from weekends.)

 

[Mart68]

Gees, 16yrs without vacation whilst doing 60-70hr weeks, that's crazy, at least you got through it! (I'm assuming when you say without vacation meaning you had no time off apart from weekends.)

When I was in my twenties I took a job where I could work as many hours as I wanted, as long as the building was open. So 0700 to 2200 weekdays and 0800 - 1800 on Saturdays. I only did that for about 4 months though, they stopped it once the backlog we were dealing with was cleared.

You can do it easy when you're young. Plus you have no time to spend the money you're earning.

I used the money I accumulated for deposit on a house.

 

[Robbo99999]

When I was in my twenties I took a job where I could work as many hours as I wanted, as long as the building was open. So 0700 to 2200 weekdays and 0800 - 1800 on Saturdays. I only did that for about 4 months though, they stopped it once the backlog we were dealing with was cleared.

You can do it easy when you're young. Plus you have no time to spend the money you're earning.

I used the money I accumulated for deposit on a house.

That's still tough, but I still can't imagine how @respice finem did it for 16yrs in Germany without a vacation (time off) along with 60-70hr weeks (which is 12-14hr days for a 5 day week). Albeit you were doing 85hr week for 4 months so yeah you can probably see where he's coming from. I suppose it depends who you are and what you're doing in your job and how enjoyable and how stressful you find your job. I'm thinking if you didn't enjoy it and it was stressful it would be exceedingly difficult or impossible to do those hours, and even if you were neutral about it then it would be difficult, and probably not easy even if you enjoyed it!

 

[LTig]

That's still tough, but I still can't imagine how @respice finem did it for 16yrs in Germany without a vacation (time off) along with 60-70hr weeks (which is 12-14hr days for a 5 day week).

That would be illegal for an employee (German law limits are maximum 10 hours work time per day and minimum 11 hours break in between, but with a limit of 48 hours per week; and minimum 20 days vacation per year with minimum 10 days in a row, to keep people healthy), not though if you run your own business.

 

[Mart68]

That's still tough, but I still can't imagine how @respice finem did it for 16yrs in Germany without a vacation (time off) along with 60-70hr weeks (which is 12-14hr days for a 5 day week). Albeit you were doing 85hr week for 4 months so yeah you can probably see where he's coming from. I suppose it depends who you are and what you're doing in your job and how enjoyable and how stressful you find your job. I'm thinking if you didn't enjoy it and it was stressful it would be exceedingly difficult or impossible to do those hours, and even if you were neutral about it then it would be difficult, and probably not easy even if you enjoyed it!

In my case it was quite tedious (document scanning) but still better than the work I'd been doing prior (manual labour in underground cold storage warehouse). So doing a sit-down job in a warm office was easy money by comparison.

My last job before retiring I did 60 hour weeks with no holidays for about 8 months due to workload and staff shortage. But still had weekends off. That wasn't so bad either since the work was interesting and challenging, and I was 'involved' with it.

The trick really is not to spend the money you earn. I hate shopping, the only non-essential thing I ever bought was CDs and Hi-fi equipment. If I buy an item of clothing I expect to get 20 years out of it. All furniture and white goods were bought second-hand. Rarely went on a vacation (last one was 2017). On average I would save 50 percent of salary each month.