Hi graywings, I started reading this thread without noting the dates the posts were written. Dave, I don't want to put you on the spot, but I am wondering how the accounts you spoke of in 2007, the 72c Guaranteed Savings accounts (equity-indexed fixed life contract, or annuity contract) have weathered over the last three years. Heh... you can "put me on the spot" in this regard *ANY* time ;~) Both the equity indexed life & annuity products have *VERY* strongly outperformed the unprotected stock index markets over the same periods of time (since 2007. In fact, going back from today to almost as far as you'd like.) Their design is that they capture & credit any annual upside (to a maximum gain,) and lock that amount permanently to your credit. On any years with a downside, your account sits tight with no losses at all (guaranteed by the insured backings of the company reserves and the state's guarantee association (each state's equivalent of a regional "FDIC" in essence.) If you put $100,000 in the S&P 500 for the last decade, you'd actually be holding a bit LESS than $100,000 today (not deducting the tax or management fees that may also be applied.) The same $100,000 in an insured indexing account would be approximately $211,768, net of everything (taxes & fees,) *OR* about an average annual tax-free rate of return of 7.06% Alternatively, those folks who decided to take their working capital OUT of growth, and put it into their real estate equity, have been double-stung; Not only have they gained nothing toward retirement, their equity values have decayed from 10-30% (depending on the area.) The clients who've been with us the last 3-5 years have been rather relieved, ecstatic, and pleasantly bored, all at the same time. Its a very nice financial reality to provide. Cheers, Dave Donhoff Leverage Planner (PS. to re-paraphrase celticmoon; When everyone else's retirement nest-egg is drowning deep underwater... its kinda nice to be riding on the back of a "duck" ;~)

Hi stinkbone, When I first read your message, I thought, "Oh, no ... running a mortgage for 10 years without agreeing formally to pay off a penny of the principal?"! Dave doesn't mind people running a fairly substantial mortgage without their getting their shirt-tails tied into knots to pay them off ... if one uses the freed-up money to invest into worth-while assets. But ... when one considers that a mortgage is an agreement to pay off a (usually large) loan making level rates of payment from the first month to the last, one knows that in the early years, when the loan is large, the amount of interest payable annually is large ... meaning that one pays peanuts on the basic principal during the whole of that first year. In the later years, a very large component of the regular payment goes to pay off principal, as the amount of interest payable on that residual amount owing is quite small - but the borrower has been paying the same amount each time. We've often been told that if one can make one extra payment annually (specifying that it's to be used totally to pay down principal) it'll probably make a larger payment of the principal that the total amount paid off on principal through all the rest of the year (or close to it). That will result in the loan being paid off much earlier than according to the original plan. If you make that official plan, I hope that you'll make a deal with yourself to make that extra payment annually, or more if possible, even if it's not required. If you get someone to run down the effect that'll make in the date that your mortgage'll be paid off, you'll be surprised, I'm sure ... and substantially motivated to carry it out, if at all possible. The people who pay bi-weekly are actually making that 13th month payment in each year, contractually. What plans do you have in place to deal with an emergency? Unexpected illness, if not covered by medical insurance (and few offer coverage of the entire amount, and certainly not up-front ... but medical people like to get paid now, not in half a year ... with you recovering the amount from your insurance company, later). Blowing the engine or tranny of your car? Replacing a furnace ... it may make you sweat (sorry ... "perspire") to do without an air conditioner for a while until you can afford a repair or a replacement ... but you'd get more uncomfortable than that, doing without a furnace (without regard to tearing holes in walls to replace split parts of water pipes after freezing). Will you be able to get a HELOC from your financial institution? For sure? I'll bet not ... if you've been put on lay-off (especially if permanent). And at what rate? I suggest that, even if it means cutting expenses to just the bare essentials for a couple of years (or more), that you make a strong effort to set aside the value of a fourteenth month of mortgage payment each year, to invest as a safety net for use in emergency. I've recommended to many that they try to have 3 - 6 mos. worth of income in case theirs stops, for whatever reason, so that they'd still be able to manage financially. I've told a number of people, as they became more familiar with the ins and outs of capable financial management, that often I don't have such myself. But I have a fairly guaranteed income, being as I'm on three pensions plus required annual withdrawal from a tax-deferred retirement plan, and live on less than that income ... automatic, until I depart this earth. Even if I didn't, I have some equity and mutual fund assets and have had certificates issued ($35 - 50. per asset in stocks, usually fee-free for mutual funds) that I have lodged as collateral backing a Letter of Credit at my bank (which sits unused, most of the time, with no inactivity fee levied) which I can draw on in case of an emergency. So I use credit card to pay for the emergency needs, then draw on the LOC in time to pay off the total owing on the credit card ... as I dislike paying their high interest rates ... I'd rather pay at a lower rate on the amount borrowed on the Line of Credit. Then, as I have surplus income (and I cut expenses to the bone, in such cases) to pay that loan off in full, as quickly as possible, partly due to interest not being deductible. After that, to put the amount that I was paying interest into my pocket. Where I'd keep it for a short while, then use it to buy more assets. I agree with Dave somewhat, however ... in that I will, however use a different Letter of Credit (due to the interest being deductible) to use to buy assets, sometimes agreeing to pay interest only, and some principal if and when it suits me. As I believed, back when I would have to pay 6.25% interest, that I could borrow to invest at nearly nil net cost ... ... so it should be true in spades, now that I can borrow for 4.75%. What's better than putting your money into the bank? Long term ... it's buying a piece of the bank! For reasons that I've outlined elsewhere in these fora. Good wishes for making a deal that you'll be happy with in 10 and 20 years. Learn how money works ... an interesting hobby ... **that pays well**!! ole joyful

devorah, yeah you have a point. That is always a possibility, but that's why we also have the emergency fund- it's a road I hope we don't have to take. At present he's in a job he doesn't love, but it is relatively secure. At our current payoff rate it will be just a few more years with a mortgage and then he will be free to take chances with other jobs that may not be as secure. I should also mention that in addition to prepaying the mortgage, we are continuing to save for retirement as well as for short term goals (new appliances, unforseen repairs, etc.) When the house is paid off, it will mean a substancial chunk of expendable income coming our way each month- even taking into consideration taxes, insurance, and additional monies that will be earmarked for retirement accounts. The way we looked at it was to struggle very hard for a few short years, and have the stress of a house payment removed rather than having larger demands of both mortgage and retirement hanging over our heads for 30 years. I should probably also mention that we are beyond the point where we are able to deduct the interest- so no tax break for us there to offset the amount of interest needed to break even. I don't expect others to fully understand the method to our madness- there are so many more facets to it beyond just that. It's a personal decision based on current circumstances, hopefully the right one for us. Now that I think about it, I've never heard someone say they were sorry they paid their house off early... Sorry to get so wordy- I've been sitting on hold with an insurance company for 30 minutes....

None of that (described above) is exactly rocket science. Most of us have to make the decisions ourselves anyway and the square footage and overage calculations are not difficult. We bought and delivered our tile to the site. Our GC didn't care-- I think he even told us how to get the discount on it, maybe just by dropping his name when we ordered it. (He did care about things being on site when needed and we always came through on that.) But he was a guy who helped us figure out when we could do things to save a few dollars, and in return we trusted him, and we never got in the way of the critical path on the project. I would say just talk to him, don't surprise him. I also consulted with the tile installer regarding details of the layout so I got the right amount of bullnose, etc. I had a lot of respect for the stuff he had to figure out and he came up with elegant solutions. We had a little more left over than I would have thought, but not enough to worry about.