[quote=SK in CV][quote=CA renter]
I would argue that they are taking out a mortgage in order to preserve cash because they think they can earn more on that money than what they are paying in interest.
Contrary to the realtor rhetoric about the “benefits” of MID, it never makes sense to spend a dollar in order to save 30-40 cents (and that’s if you’re earning a pretty significant income) on taxes.[/quote]
I agree entirely. The argument that an interest deduction is “needed” for taxes is stupid. It was stupid back when the top tax rate was 70%. Using the leverage to increase overall return might make sense for some people.[/quote]
I also agree, SK, but when retirees are just starting out and haven’t yet signed up for MC, they’re not yet sure exactly how much it will cost them to live every month. Many feel is better to have more cash cushion until they figure out the lay of the land, including how much their monthly health premium is going to cost going forward and how many hours they may still need to work.
After the dust settles (MC, SS and possibly other pensions kick in) and the retiree knows if they are going to move to or stay in a particular locale, it is easier to make decisions regarding refinancing or mortgage payoff.
IOW, taking out or keeping a small mortgage keeps the retiree’s options open.
Your “friend” is already 65 or older and is a bit more “well-heeled” than the average retiree (asset-wise). In addition, those behind him won’t get to collect their full SS until age 66-67.
