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Old 01-24-2015, 10:34 PM
 
10,824 posts, read 8,084,160 times
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Originally Posted by StealthRabbit View Post
we did too, back at age 39 (Donor Advised Fund).

We use the fund to contribute at will and for perpetuity (with kids as successor donees)

The Donor Advised Fund makes it quite ez to sock away contributions for later during high tax years (like severance payouts). One more tool in the "Financial management kit" (which includes home and investment property mortgages on into retirement).

Mortgage deduction was never considered to be a 'benefit'... (Spend $10 to save $2 in TAXES) There are better ways to save $2 than to spend $10
yep. Just to clarify, you take the deduction immediately during high tax years and sock away the contributions to use later at leisure and at will. It's a great tool.
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Old 01-25-2015, 12:29 AM
 
Location: British Columbia
41 posts, read 35,135 times
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Five years ago, my husband and I bought our retirement home when we had paid off the principal home we live in still. We purchased the retirement home for 400,000. put 20% down. Our mortgage rate for the last 5 years has been 2.50 %. We have a property manager who collects 10% or 150.00 per month. We pay the bi-weekly payment and the rent money goes into our savings.
We claim the rent as income but then the interest on the mortgage we pay becomes tax deductible. We have made extra payments with our tax refund. We will be selling the principal home next year and our retirement home will then be paid off. My husband and I are both 51. The retirement house also has a suite we can rent out to keep the savings account alive.
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Old 01-25-2015, 03:03 AM
 
71,946 posts, read 71,971,035 times
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Quote:
Originally Posted by ncole1 View Post
Doesn't matter. The tax rates are marginal, not total. You never save enough to pay your interest by taking the interest deduction - it is mathematically impossible.

On the other hand, the notion of investing and making a higher return than the mortgage does have some merit, though I'd think it's awfully aggressive for a retiree to have leveraged portfolios.
the only time this may play out is when you are trying to stay below a high water mark and the perk out weighs the fact you are spending 3 or 4 dollars out of pocket to get 1 back.

in fact mortgage interest will not lower magi for purposes of getting your ss taxed so even there having a mortgage does not help.

there are very very very few situations you will run into where having a mortgage deduction didn't end up costing you more than you get.
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Old 01-25-2015, 09:39 AM
 
Location: Montana
1,755 posts, read 1,660,822 times
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Quote:
Originally Posted by mathjak107 View Post
the only time this may play out is when you are trying to stay below a high water mark and the perk out weighs the fact you are spending 3 or 4 dollars out of pocket to get 1 back.

in fact mortgage interest will not lower magi for purposes of getting your ss taxed so even there having a mortgage does not help.

there are very very very few situations you will run into where having a mortgage deduction didn't end up costing you more than you get.
Concur with the above.

I have always thought of the mortgage deduction as an interest rate adjustment, not a tax strategy. Why pay $10,000 in interest to get a $1,500 tax reduction? I'll pay the taxes and keep the $8,500 every time.

I understand investing and outperforming the mortgage interest, but I am not that investment savvy, nor do I have the assets that would make this strategy a winner for me personally. Mortgage free is the best strategy for most of us.
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Old 01-25-2015, 11:09 AM
 
41 posts, read 89,559 times
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Banks want to see income. I should not have used the word "verifiable" income in my OP so I will try to edit that. I should have said regular income.

Here's the rub.
A fair number of people have a sizable portion of their assets in tax-advantaged accounts. Because these accounts are allowed to grow tax-deferred and because withdrawals from these IRA's or 401k's are taxable events, many choose to sequence withdrawals of income from taxable accounts first.
So, for example, if 50% of assets are held in tax-deferred accounts, that means only 50% of ones assets are producing "income" for purposes of a mortgage.

For instance, someone with $1 million of investable assets earning 4% or $40,000 per year would be looking at only $20,000 per year if 50% of the assets were in tax-advantaged accounts with no withdrawals.

Also, unlike many retirement calculators, the banks are not going to assume your assets will produce an 8% rate of return.

Unless someone also has a pension in addition to investment income, I don't see how a bank would approve a mortgage based solely on investment income. And even then the bank requires a documented record of that income over a period of time.

Some folks are fortunate enough to have both investment income together with regular pension income sufficient to meet the debt to income ratio required for a mortgage.
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Old 01-25-2015, 12:34 PM
 
41 posts, read 89,559 times
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Originally Posted by dbsteel View Post
Wouldn't it be smart to have all this in play then before you retire? It seems fairly doable to play the game at 63 and retire at 65, for instance.
If only life were that predictable. Companies were downsizing. Many "retired" sooner than they planned.
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Old 01-25-2015, 06:25 PM
 
Location: Cape Cod
647 posts, read 1,038,441 times
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Isn't that age discrimination and, therefore, illegal?
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Old 01-25-2015, 06:41 PM
 
Location: Chesapeake Bay
6,048 posts, read 3,881,093 times
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Of course age discrimination is illegal but it still happens.

Some people are able to make the best of the situation, sell their house, move to a cheaper part of the country with a lower COL, buy another house (at a much cheaper price) and live quite well on their reduced pensions, SS and investments.

Others are not so lucky and are caught in miserable circumstances.
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