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Kevin,

"But I am hoping to get some responses to see how others out there have actually handled it."

We retired in 2005. We had a land mortgage on this place at 5.8%. In late 2006, we wrote an offer on another farm close-by and it took 18 months to close. We could have paid cash but we took as large a mortgage as we could get. I did not want to take investments off the table. In 2006 when we wrote the contract, the markets we fine. Over the next 18 months, it took a turn but I still had a long view. I wanted that growth in our investments and paid 4.6% interest to do it. (4.6% to get 20%)


"that is our biggest, really only expense and our monthly budget would be drastically reduced and could realistically FIRE or at least cut way back on working without the mortgage."

I believe you might be looking at this like you will have a job after you retire. Don't!

With a larger portfolio, you can produce a higher level of distributions to service higher expenses. Take a hard, honest look at your portfolio performance over at least a 10 year period. If that honest performance is 3% above your mortgage rate, I would stay with it.

Example: I will use a number, $100,000, to pay off your mortgage and 10% growth for that $100K in your portfolio. Using these numbers, you could reasonable plan for $10,000 growth. Let's say your P&I is $600/month or $7,200/year. You end up with $2,800 more in the bank. (Don't include property taxes since those will need to be paid either way)

Work that using your figures. Understand that your performance will vary but you need to plan with a long-term view.


"I am working on building up more of a cash position in investment acct (currently at about 4% or so)."

Keep this "separate" from your living/emergency funds.


"Outside of investment account, we have about 6 months expenses in savings."

I recommend building this to at least 3 years for retirement. Our 3 years of expense cash lasted from July 2007 to Oct 2010 just fine. We supplemented it with dividends from our taxable account (pre-59.5 and did not want to mess with 72t payment plans).

This should be sized to cover expenses that are not covered by income like SS or a pension. This will prevent you from being required to sell securities during a market downturn. It also reduces the need for a larger bond portion in your portfolio.

Does that help you?

Gene
All holdings and some statistics on my profile page
http://my.fool.com/profile/gdett2/info.aspx
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