Roughly 46% of all Americans expect to retire in debt | Hacker News Reader

Roughly 46% of all Americans expect to retire in debt

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24 pointsdonsupreme21 comments

Whenever I'm driving around my suburban neighborhood, I'm always amazed at how many people have boats/RVs, and cars that appear to cost over $60K. Then I realize that I could have that if I wasn't contributing to my 401k. I worry that a lot of the country is in the same boat.

In my last family visit I was seriously wondering how seemingly everyone has a large house, two new cars and a few other nice toys. Everyone seems to have so much money, but based on the incomes I hear, something just doesn't add up.

I always wonder whose pockets are being lined with the loan payments. The bank just loans other peoples’ money to you and charges you for it. The way it’s set up there’s almost no risk for the bank and they do almost no work to get all that money.

I just entirely paid off my home mortgage as I believe that is never worth the risk of going underwater.

I like the peace of mind of knowing that I owe nothing to anyone.

It is good to not be beholden to a loan, however, it can be very much in your financial benefit to do so. Money is being inflated away -- anything you borrow is cheaper to pay back in the future. The next best thing you can do is to not save in cash, save in assets.

I agree that most likely inflation will reduce the real cost of debt. However, this is a decision that will be made by political policymakers and they are sometimes unpredictable. The downside of going underwater is much worse to me personally than the upside of having some debt disappear.

This is only true if your income rises with time. Wage growth has been stagnant for decades for most Americans.

I hope you will excuse the naivety of youth but could you elaborate on this? Clearly you are worried about something. I just don't understand what the issue with going underwater is IF AND ONLY IF you have the assets to pay off the loan in its entirety.

I don't understand why having 100K house + 120K mortgage + 120K assets is worse than having a 100K house.

I'm not the parent commenter, but here's my reasons for wanting to pay my mortgage off early:

1. Not having to be reminded to pay the payment every month, or making sure the automatic payments keep going. No more mortgage payments safely frees income for other purposes.

2. The satisfaction of fully owning my house and land.

3. Most millionaires pay off their houses early.[0] Who doesn't want to be one of those?

> Clearly you are worried about something.

Didn't you notice the millions of people who lost their jobs last year? Haven't you noticed that the economy isn't in the best of shape lately?

> I don't understand why having 100K house + 120K mortgage + 120K assets is worse than having a 100K house.

The reason is: if you had a fully paid off house, would you borrow 120K against it?

[0] https://www.businessinsider.com/everyday-millionaires-pay-of...

> 1...2

These make a lot of sense to me. I can certainly see many non financial reasons to do it. Decisions often have a variety of components (financial aspect, social aspect, how stressed it makes you, ...). These are great reasons to make the decision. I still have trouble understanding the financial aspect though.

> Didn't you notice the millions of people who lost their jobs last year? Haven't you noticed that the economy isn't in the best of shape lately?

I'm not sure what that has to do with this. 120K in assets provides a whole lot of security in case one loses their job.

It is certainly better from a financial standpoint to put extra money into your mortgage than it is to spend it. But I still don't understand why you are viewing a low interest rate mortgage as the best investment.

> The reason is: if you had a fully paid off house, would you borrow 120K against it?

My impression is that one could have a mortgage rate as low as 2.7%. I bonds currently return 7.12%. Taking money out at 2.7% and putting it in very safe investments that return >2.7% seems like a great deal to me.

Maybe this boils to me not getting burned by the market yet.

Try Vancouver! The average detached 3 bedroom 2 bathroom house from the 80's is $1.4 million

The 100K was just for example purposes.

The same example with different numbers: Is 1.4MM house + 1.6MM 30-year mortgage + 1.6MM in assets worse than 1.4MM house?

Read the book The Great Crash of 1929, written in 1955. Our current market is similarly speculative as that one. If the federal reserve reacts by tightening up monetary policy, a lot of existing assets can go to zero and you will still be holding that debt.

Basically, you are saying:

100K house + 120K mortgage + 120K assets could become 100K house + 120K mortgage if the market you invest in craters?

I get where you are coming from. I don't share your conclusions, but I understand the reasoning.

You are looking at this though the lens of what is the most stable possible asset in case of a crash. I get investing in something physical that provides value to you.

Thank you for the insight.

Right, the owned house is somewhere you can live even while the numbers on paper go haywire for a while. Related to this, the same market crashes that can dip the asset values and put someone underwater can also affect other income streams, making it difficult to continue to make payments.

If people feel at risk in such circumstances, they might liquidate those other assets in an attempt to protect the house, and in the worst case still fail later and have to surrender the house too. The more rational behavior migth be to walk away from the house and possibly see the other assets recover, but that depends on being able to secure other living arrangements in a difficult time.

> Otherwise, you may need to work longer or find a supplemental source of income from a part-time job, Eweka suggested.

Dying with the most amount of debt is the ultimate fuck you to austerity. Reap the earthly rewards and avoid consequences. Why should I grind myself to dust to support a system I reap no rewards from? If the answer to this relies on a categorical imperative, that system doesn't deserve to exist.

'in debt' is not the same as 'negative net assets'

Awesome. What category would encompass both of those?

One could still have a mortgage. Depending on the interest rate, it might not make sense to pay it off faster than the term length.

My brother died with a $60K tax liability and little in the way of assets. No one could be bothered to be an executor for his estate -- taxes owed always have top priority, and there would be nothing left after that -- not even the people he was renting a house from that he had seriously damaged (they tried some silly legal posturing to try to get us to take responsibility for that; haha no thanks.)

I think his car just disappeared at some point.

The latter is a subset of the former. So 'in debt' is the union, and 'negative net assets' is the intersection.

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