sreynard,sreynard wrote: ↑Thu Aug 09, 2018 9:38 am1) I am at risk for the next 4 years. Just like anyone else that looses their job and has large fixed expenses. It will be a race to see if I can get a new high paying job before my savings runs out.KlangFool wrote: ↑Wed Aug 08, 2018 10:14 pmsreynard,sreynard wrote: ↑Wed Aug 08, 2018 9:57 pmExcept that when I pay off my mortgage in 4 or 5 years, my need for liquidity will immediately drop in half. It is generally really easy to find at least a temporary job paying half as much.
I wouldn't consider money I have invested in the stock market as liquid.
1) What if the recession hit and laid off happened before you pay off the mortgage in 4 to 5 years?
<<I wouldn't consider money I have invested in the stock market as liquid. >>
2) Unless your AA is 100/0, your money would not be 100% invested in the stock market.
3) I have 500K (100% stock) in my taxable account and I have a 300K mortgage. My PITI is about 20K per year. My AA is 61/39. Even if the stock drop 80%, I can last longer if I do not pay off the mortgage.
But after those 4 years, I will be financially independent. I will no longer be dependent on any employer. I could retire and never work again. I could be free. Then "At Will" employment will be at both my will and my employers will. Not just one way.
2) So? What does total allocation have to do with it? As you perhaps recall, I am one of those that look at a mortgage as a negative bond. So paying an extra $1000 a month the same, to me, as buying $1000 a month in bonds. I don't look at it as mortgage vs. investing. I look at both as investing. Both have the same effect on my net worth. The difference is in risk and expected return. Only the mortgage option is known.
Let's see, my current asset allocation would be about 110/-10.
3) Your $500K in stocks are close to an all time high, probably with a lot of capital gains. Using them to pay off a mortgage now would be to pay with cheap money. If the market really did drop 80%, and especially if you lost your job and were forced to live off your brokerage account, that $20K a year would be with very expensive money.
You are correct, not paying off your mortgage, your savings will last longer. Clearly. But then what? What's the next step? You need to generate an extra $20K per year, over and above your other living expenses. Where is that going to come from once your savings are gone? What's Plan B?
I'm sorry Klang. I just can't comprehend your thinking and you can't comprehend mine. We'll just have to agree to disagree on this.
1) My taxable account is 500K. It generates 10K of dividend every year. Even it drops 80%, it would generate at least 5K per year.
2) My PITI is 20K per year. The TI portion is 5K per year. Even if I pay off the mortgage, I still have to pay 5K per year.
If I do not pay off my mortgage, I only need to generate 10K per year to pay the mortgage.
If I pay off the mortgage, I still need to pay 5K per year.
<<2) So? What does total allocation have to do with it? As you perhaps recall, I am one of those that look at a mortgage as a negative bond. >>
Which does not work when you look at the cash flow.
<<1) I am at risk for the next 4 years. Just like anyone else that looses their job and has large fixed expenses. It will be a race to see if I can get a new high paying job before my savings runs out.
But after those 4 years, I will be financially independent. >>
No, after 4 years, you could work part-time. It is not financially independent. Meanwhile, you may not survive if a recession hit over the next 4 years.
You need to survive in order to succeed.