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I still believe that my scenario is "safer" for someone in the intermediate stage of still working and not having accumulated the full amount necessary for a "safe" withdrawal of 4% during retirement. But, for someone already retired, a paid off mortgage makes more sense since it reduces the amount needed for a safe 4% withdrawal"

This is where you really come down to whether you believe the advise and calculations of those who advise putting the extra money into the market rather than paying down your mortgage. Clearly, someone who was 100% convinced of the superiority of paying into investments vs paying down a mortgage wouldn't have any qualms about having a mortgage at any point in their life! makes no difference!

If you take their advice as gospel, ie, you can put your extra money into investments returning 12%, and after 13 years you are ahead of someone who is paying off their mortgage, and after 30 years, be way ahead. If you truly believed that, you wouldn't even consider putting more than six months emergency fund aside, and plowing everything into the market. It is essentially a test of faith. Do you really really believe the market is going up 12% a year?(annualized) - for the next five, ten, 20 years?

If you start putting that money into a MMF, then you are really getting the worst of both worlds. First, you are actually falling behind year after year....not even breaking even likely....and inflation is eroding your MMF value at the rate of inflation, say, it's value is disappearing at 3.5% per year (or put another way, the cost of living is going up 3.5% per year). If you are getting 4.5% interest, that is effectively a 1% growth rate in your money.

You aren't getting the benefit of 12% return.

If you believed this scenario, truly, you would have put your money in the market, and after 30 years, been 'way ahead', and have your mortgage paid off, and still have more money that otherwise.

Also, if we take this scenario, rather than having paid down your mortgage (let's say just as you retired), you still had a balance, but follow this argument your extra payments would have clearly grown much faster than the equivalent reduction in mortgage, then even if retired, you would be ahead. You don't need a 4% withdrawal rate on money to fund your mortgage...if it is going to be paid up in another 10 years, you only need 10 years worth, and it is term certain, ie, no ifs ands or you need the equivalent of 10 years mortgage payments in investments, well, actually less since you are probably still planning 12% returns, so you would only need like six years worth of payments since your money would be growing all the time.

That said, one can sleep a lot better with some assets not in much depends upon how risk tolerant you are, what your other financial resources are, what your earnings capabilities are, and other factors which are very individual.

However, being retired, and not having house payments is a nice feeling. Being retired with another 20 or 30 years worth of house payments is not so nice. In that case, you do need 25x your annual prinicple and interest payments. For most people, retiring at normal age means another 20-30 years of living.

For most people, hopefully they will be close to having their mortgage paid for by the time they retire, and have the remainder they need for the next five years NOT in the market. Any money you absolutely need for the next five years should not be in the stock market, but part of your CD/bonds/ allocation of your investments.

Most of the planners assume you will live to 90 for men, 94 for women.

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