Mike Earl, CFP®, CPWA®
Mortgage-Free By 43: it’s got a nice ring to it, right?
This month, The Wealth Group is celebrating a major milestone reached by one of our team members: Adam Colby and his wife Kristi paid off their mortgage this month. Adam is just 42 years old. And his family doesn’t live in a van down by the river.
In fact, they live in a multi-million-dollar home on Lake Minnetonka. Yet he was able to get his mortgage paid off this early.
Just kidding. His family lives in a modest townhome. Well, it’s modest from the perspective of the southwest suburbs of Minneapolis. To Adam and his family, it’s a luxurious 2,000 square-foot home that more than meets their needs for space, amenities, and location.
From top left: Kristi, Emma (16), Adam, Anthony (10), and Andruw (13). Photo by Carrie Schaefer.
Adam and Kristi have prioritized being 100% debt-free over other goals such as fancy homes and cars and keeping up with the Joneses. They have had a relentless drive to be free of all debt. This wasn’t a decision made by Adam or Kristi alone, but by Adam, Kristi, and the family together. How did they do it?
Over the past 5 years, Adam and Kristi have written down their long-term goals/dreams.
Then, each month they communicated with each other in their “family finance meetings” to make sure they were on the same page, while agreeing upon how each dollar was to be allocated before the month began.
They have been open all along with their children regarding money – even letting them be a part of the budgeting process when it came to vacations and activities.
Most impressively, they achieved this milestone without earning a massive income; in fact, their household income since college has mostly been lower than median incomes within the communities in which they have lived.
Imagine being 100% debt-free with multiple decades left in your prime earning years.
It’s a beautiful vision, and it’s one shared by all of the team members here at The Wealth Group. We walk the walk around here: every team member is in a 15-year or less mortgage, with goals of having mortgages paid off between the ages of 40 and 50.
The current average retirement age in the U.S. is 61 years old. Yet the median household retirement savings for folks ages 55 to 64 is just $120,000. It seems to me that many people choose to retire simply because they can start drawing on Social Security at age 62 (34% of Americans claim right at age 62, and 57% of Americans draw Social Security before full retirement age – meaning they take a permanent reduction in their benefit).
Regrettably, a recent AARP survey found that 44 percent of Americans between the ages of 60 and 70 have a mortgage when they retire. Americans are having a harder time paying off their mortgages than ever.
For Adam and Kristi, they now have the next 20 years or more to stockpile assets for their future. Without a mortgage payment each month, they have serious cash available to invest and grow their wealth.
Their three children are ages 16, 13, and 10. They will have zero stress about being able to help their children out with college (and yes, they also have significant dollars saved in 529 plans, which they built through steady, modest contributions over time – and some generous gifts from grandparents).
Lest you think they were only able to pay off their home through saving less for retirement, their retirement savings rate in 2018 was 23% of their gross income (not including employer match). When it comes to saving for retirement vs. paying off debt, it’s not an either/or scenario: you can both save aggressively for retirement and be 100% debt-free in your 40s. It does require steadfast commitment to your long-term goals, though.
Congratulations to Adam and Kristi on a tremendous accomplishment. Job well done.
Because The Wealth Group, Austin B. Colby & Associates is independent of Raymond James, the expressed written opinions above are our own and not necessarily reflective of Raymond James’ opinions.