"If you believe in unlimited quality and act in all your business dealings with total integrity, the rest will take care of itself."
~ Frank Perdue, Chicken Farmer, Executive 

 

 

 

I was watching the Senate Banking Committee two weeks ago on CNBC while they were questioning (or as they call it, discussing) the Fed's involvement in saving Bear Stearns from a possible bankruptcy / company closure and I couldn't help but to question something important that Senator Kennedy said. He said, "People in this country are postponing retirement because their home values have fallen."

 

WHAT?!  It's been THIS government/educational system that has been encouraging our homeowners to pay off their mortgage as fast as possible, no matter what, this entire time so, what does home value have to do with anything!? Maybe they want us to have less payments so we can continue to stock our money away into taxable retirement vehicles like traditional IRA's? Did you know that the average retiree today will pay the government back 10 times the amount of money they saved in taxes during their contribution phase? Scary, isn't it? Please, read on...

 

My question is this.  If people are postponing retirement because their "home values have fallen," then why pay off the mortgage in the first place? Honestly, this really makes me mad...the things that politicians will say (aka CRAP!) just to make people think they are actually getting something accomplished! What a joke. Think I'm losing it? Please...continue to read...let me prove my point.

 

If paying off this tax favored home mortgage is the right thing to do, then why should the homes value have anything to do with retirement?? See what I mean? I can MAYBE understand if he said that retirement is postponed because of a mortgage payment and that's ONLY IF that family had no liquid savings to afford such payment BUT, if that potential retiree hadn't been stockpiling their extra money into eliminating their mortgage (one of the best tax deduction vehicles we have mind you) and instead had been stockpiling extra cash into a liquid and safe investment which was earning interest over the past decade or so, it would be the liquidity in their savings / checking / money market accounts that would've given that retiree the CHOICE to retire on time, late, or even early if they wanted to.  CASH IS KING!  It's the cash in the bank, regardless of payments (which are tax deductible thus, lowering your tax bracket while you still have it), which allow for a comfortable retirement, not the lack of payments in one's life.   We've been taught / encouraged to try to eliminate all debt AND try to save for retirement at the same time and that is about the worst advice I've ever heard for someone responsible and disciplined, especially if well, you know…one wants to retire with that green stuff called money and not that phantom stuff called equity.

 

I know this is a long one but come on....stick with it!

 

What Senator Kennedy may be insinuating but, is afraid to say, is that the homes value IS important but, he didn't specify why. Weird, right?  I think it's because he KNOWS that retirees are going to want to tap the equity in their homes and because their homes have fallen in value, there is less equity to tap.  Hence, this new boom called a "Reverse Mortgage" or as I like to call it, the most expensive last resort I've ever seen in my life!   He should've just came out and said this:

 

"Retirees may have been better off delaying paying off their home loans and instead saved their hard earned dollars in liquid environments which yielded interest, tapped the equity in their homes as often as it made sense to do so depending on home value, made small payments to the mortgage and larger contributions to their investment accounts while enjoying their tax deductible mortgage payments which simultaneously lowered their overall tax brackets and therefore would have plenty of CASH to live on during retirement making the homes value unimportant because that homes value is something that is out of our control, which means that tapping the equity at its peak value made a lot more financial sense. Then the mess we are currently in might not be so bad!" 

 

Or something like that. =)

 

Of course, he would've had a heart attack by the mere thought of such a long winded sentence but, hey, someone had to say it...and it's not the politicians, is it? Seriously though, they want you to believe that you should pay off your debt and yet at the same time, they want to add significance to a homes value.  Listen Kennedy, you can't have it both ways...pick one dude. It's hypocricy and it drives me nuts! Nuts I tell you! Listen, I know that a homes value IS important because there is equity in the home (earning nothing) that should be accessed for investments and in some cases, used to pay living expenses.

 

So, I KNOW that for the disciplined, paying off a home makes no financial sense.  Our system is broken. We need more education, not more political nonsense. If politicians spent as much time educating our citizens/teachers about the proper way to handle finances as they do jabbering at the mouth, THEN we might be headed in the right direction. Then again, with comments like the ones from Kennedy, it might be fair to say that they need some educating too. Until then, however, they'll just keep doing what they do when the cameras are rolling while the educational systems of today continue to embrace logic that have contributed to what is to be the worst year for real estate values that this country will ever see. Our lack of education, discipline, and responsibility are the cause for what is happening right now. 

 

I will continue to do my best with educating those who want it and let's just hope that we as a country can overcome the mental / self worth issues that should be on the forefront of most conversation money related. Money isn't everything but, the last time I checked, it made for a great retirement and would've been a great thing to have to avoid the problems we're in with the foreclosure market so, I want as much of that green stuff as possible for you!