BG, I think the house being paid off is crucial for a secure retirement. If it’s not paid off, or at least on the last legs of a very modest loan, retirement is simply tenuous if even at all possible.
I doubt many retirees are carrying payments on a $400K loan in retirement. By sunk cost, I meant it’s money, an asset you have, that you can’t really afford to leverage. Leveraging it, by taking money out essentially introduces more expenses.
It’s an asset that keeps giving. You’re still living there, but you’re not making a $2000 or $3000/month rent payment. That’s $30,000 or so of after tax income you don’t have to generate.
If your house is paid off, if you’ve got $30,000 from investments to spend each year, it’s actually like have $60,000 or more of ‘income’ since you’re not making house payments.
Outside of a good secure pension, you need a very large nest egg to generate the cash flow north of $50K/year. A few rental properties that are paid off or cash flowing strongly and a sizable portfolio. As individual, the sustainable withdrawal rate is surprisingly low over a long term. You can buy annuity today, if you’re 55, it’ll cost you an up front $500K for a $25,000/yr annuity, and that’s not index to inflation.
