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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 6691
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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Im 5 years from retiring, should I pay down my mortgage as

Resolved Question:

Im 5 years from retiring, should I pay down my mortgage as retirement money or just save the cash or do annuities?
Submitted: 6 years ago.
Category: Tax
Expert:  Stephen G. replied 6 years ago.

Stephen E. Grizey :

Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything you don't understand.

Stephen E. Grizey :

Naturally, as you might expect, this isn't a simple question. When you do a financial plan for someone many things come into play; so giving you a simple answer to what appears to me a simple question of choice, isn't quite so simple. So while I can't tell YOU what I'd recommend in your particular circumstances (since I don't know what they are), here are a few things to consider.

Customer :

did not come through

Stephen E. Grizey :

If cash flow isn't a problem for you, ie you have enough liquid assets or assets easily converted to cash to get you through an emergency, then paying down your mortgage may be a good idea, depending upon your interest rate etc. Whatever extra principal you pay is just like investing the money in a CD or a bond with a term equal to the remaining life on your mortgage

Stephen E. Grizey :

I'm working on it

Customer :

so far so good

Stephen E. Grizey :

For example can you itemize deductions or not? If not then it makes even more sense, if so, it reduces your return as the real cost of the mortgage interest is whatever it is after taxes;

Stephen E. Grizey :

it doesn't make it bad if you can itemize deductions it just reduces the rate of return

Stephen E. Grizey :

Annuities can be effective in the right circumstances; again the interest rate makes a big difference...........

Stephen E. Grizey :

What's the interest rate on your mortgage & how much longer does it run?

Stephen E. Grizey :

What type of annuity are you considering?

Customer :

4% 9 years

Customer :

annuity that pays the most when I retire

Stephen E. Grizey :

How much cash do you have to play with and will you have extra cash each month?

Customer :

10,000 per month yes ill have cah still avail

Stephen E. Grizey :

the mortgage is at 4%?

Customer :

yes 4

Stephen E. Grizey :

what I meant re the annuity is fixed or variable investments

Stephen E. Grizey :

do you have any annuity investments now?

Customer :

re; annuity, i dont know enough about them to answer that, no i have no annuities

Stephen E. Grizey :

Do you itemize deductions?

Customer :

yes

Stephen E. Grizey :

I take it you generate a pretty substantial income from your job?

Stephen E. Grizey :

Are you married?

Customer :

yes, before everything, 57,000 per month with mortgage the biggest divorced

Stephen E. Grizey :

OK, let me say this...........off the top of my head, not for you particularly (I have to say this), I'd sock it away in the mortgage; BUT

Stephen E. Grizey :

If you're making that kind of money, you need to see a fee only based financial planner, such as a CPA with the PFS (personal financial specialist) designation. It will be well worth the money & it won't be expensive & he or she won't try to sell you anything as long as they are FEE BASED.............A CFP (certified financial planner) works too, but generally, they get commissions based upon what investments you make, if any............of course, I'm biased toward CPAs with the PFS credential as I am one, now semi-retired and not practicing which is why it isn't listed in my bio...............

Customer :

sounds great

Stephen E. Grizey :

You should come away with a short-term & flexible long-term road map for the next 10-15 years which will give you some confidence that you're headed in the right direction..............he/she will consider & discuss many things with you; you'll be surprised at the depth of their knowledge............Thanks again, good luck & Happy New Year! Feedback, if you have time is always most appreciated!

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