Optimal Finance Daily - Financial Independence and Money Advice 3177: Mortgages, Home Equity, and Retirement Spending by Jeremy Jacobson on Financial Independence
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Jun 14, 2025 Explore the unconventional approach to home equity in retirement budgeting. Discover how overlooking home equity can lead to dangerous pitfalls during market downturns. Learn the concept of imputed rent and how it benefits retirees. Unpack the complexities of managing mortgages while ensuring liquidity for investments. Understand the significance of consumer debt as a leverage tool, which can amplify both returns and risks.
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Exclude Home Equity from Spending
- Including home equity in retirement budgeting can create dangerous blind spots, especially during market downturns.
- Excluding home equity allows for a more conservative spending plan based solely on the investable portfolio.
Plan Spending Conservatively
- Spend less than 4% of your portfolio excluding home equity to ensure sustainability.
- Treat the value of your home as imputed rent to reduce spending needs.
Mortgage as a Strategic Hedge
- Jeremy chose to keep a mortgage at a low 2.75% interest rate and invest the proceeds.
- He finds that dividends easily cover the mortgage payments and increase his overall returns.