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Old 04-17-2015, 12:19 PM
 
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We have our money wasting away in savings account,to old now and to chicken to take any chances.Would be nice to get reasonable return.
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Old 04-17-2015, 02:36 PM
 
Location: SF Bay & Diamond Head
1,779 posts, read 1,420,794 times
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I'd rather have $200,000 handy and a $926 a month payment vs no cash and no payment.
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Old 04-17-2015, 04:37 PM
 
71,735 posts, read 71,829,507 times
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Originally Posted by DanBev View Post
We have our money wasting away in savings account,to old now and to chicken to take any chances.Would be nice to get reasonable return.
the problem is higher rates and higher inflation go hand in hand usually.
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Old 04-17-2015, 08:54 PM
 
Location: SoCal
6,075 posts, read 9,538,346 times
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Quote:
Originally Posted by whocares811 View Post
This concerns a large cash inheritance that is now just sitting in a savings account. Before continuing, just a bit of personal info:

We are 60-ish and planning to retire in four years (five at most). Our dream is to buy a smaller home in another state. We have always been fairly average as far as savings and spending; and before receiving the inheritance, we had no debts except for our car loan and our 3.75% interest mortgage; and we were looking to basically trade one mortgage for another when we retired. (With my pension and our combined social security, we would have enough to live on, even with our current mortgage payment.)

Now with the inheritance, we are able to pay off the mortgage in full and start retirement entirely debt free (paying "cash" for the new home after our current home sells). However, the "fee-only" CFP we just consulted has advised us that we should continue with a mortgage, even into retirement, and except for paying off the car ($16K remaining on a 3.75% interest loan), that we should invest the inheritance money in stocks and bonds. However, we (and especially I) are very uncomfortable doing so, as we have always been "bird in the hand" type people and are definitely not risk takers.

Does anyone have any personal experience with this kind of situation? And/or what would you advise?
Our financial advisor replied to us when we had an excess of cash, "Pay off the mortgage? Not only yes, but hell yes!" But that was when savings and investment returns were pathetic. Ask your CFP for some rational justification for his advice.
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Old 04-17-2015, 09:06 PM
 
Location: The Triad (NC)
28,522 posts, read 62,235,289 times
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Originally Posted by oddstray View Post
Ask your CFP for some rational justification for (paying off mrtg now)
How about not needing to? That their current EARNED income is handling their budgets just fine.
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Old 04-18-2015, 06:44 AM
 
29,788 posts, read 34,885,423 times
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Originally Posted by MrRational View Post
How about not needing to? That their current EARNED income is handling their budgets just fine.
There is such a thing is retirement income exceeding living expenses and a retirement nest egg in multiples of annual income with the ability to pay off all debt and still have multiples of annual income. As you note that sounds like the OP in some ways.
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Old 04-18-2015, 06:56 AM
 
71,735 posts, read 71,829,507 times
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Originally Posted by oddstray View Post
Our financial advisor replied to us when we had an excess of cash, "Pay off the mortgage? Not only yes, but hell yes!" But that was when savings and investment returns were pathetic. Ask your CFP for some rational justification for his advice.
paying off the mortgage can still offer some benefits.

if the market tanks for a while you may not have to sell equities at a loss to pay that mortgage as well as you may not have to hit retirement money to pay the mortgage and be taxed not only on the ira money taken but on your social security too.

if you are retiring pre medicare age the fact you don't need to create income to pay the mortgage may allow your medical insurance to have a subsidy.

lots of other points to look at other than keep the mortgage and invest the money instead.

there are so many perks linked to your retirement income and writing off mortgage interest is not one of the items taken in to considerations as agi /magi is before deductions.
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Old 04-18-2015, 07:35 AM
 
29,788 posts, read 34,885,423 times
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Originally Posted by mathjak107 View Post
paying off the mortgage can still offer some benefits.

if the market tanks for a while you may not have to sell equities at a loss to pay that mortgage as well as you may not have to hit retirement money to pay the mortgage and be taxed not only on the ira money taken but on your social security too.

if you are retiring pre medicare age the fact you don't need to create income to pay the mortgage may allow your medical insurance to have a subsidy.

lots of other points to look at other than keep the mortgage and invest the money instead.

there are so many perks linked to your retirement income and writing off mortgage interest is not one of the items taken in to considerations as agi /magi is before deductions.
Remember the OP is one of those pension/SS folks who don't need to draw down and until this Golden Goose it would appear were not in position to if they wanted to.
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Old 04-18-2015, 09:22 AM
 
6,305 posts, read 4,746,934 times
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Quote:
Originally Posted by mathjak107 View Post
paying off the mortgage can still offer some benefits.

if the market tanks for a while you may not have to sell equities at a loss to pay that mortgage as well as you may not have to hit retirement money to pay the mortgage and be taxed not only on the ira money taken but on your social security too.

if you are retiring pre medicare age the fact you don't need to create income to pay the mortgage may allow your medical insurance to have a subsidy.

lots of other points to look at other than keep the mortgage and invest the money instead.

there are so many perks linked to your retirement income and writing off mortgage interest is not one of the items taken in to considerations as agi /magi is before deductions.
Sounds like a lot of rationalizations and a fishing expedition to try to find reasons to pay off a mortgage. It seems to me that it is hard to lose when you use the bank's money to invest and make a return which is substantially above the cost of the mortgage. Having a substantial tax deduction is an additional benefit for most of us.

It seems to me that volatility and risk are the only concerns for most people. All of us need to have cash on hand to avoid being caught by volatility in our investments. With mortgage payments it would be wise to increase the cash on hand. I think most of us try to keep our housing costs to under 25% of expenses and the mortgage is only part of that amount. In fact for me the mortgage is only half the cost of housing since taxes, utilities and insurance are so expensive in this area. Putting aside some of the borrowed money to cover a couple of years of mortgage payments still leaves a lot available for investing.
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Old 04-18-2015, 09:26 AM
 
29,788 posts, read 34,885,423 times
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Originally Posted by oddstray View Post
Our financial advisor replied to us when we had an excess of cash, "Pay off the mortgage? Not only yes, but hell yes!" But that was when savings and investment returns were pathetic. Ask your CFP for some rational justification for his advice.
What is an excess of cash? Is there a formula to measure it by. As you note it can change with market conditions.
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