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Rakhi Vasavada
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 2608
Experience:  Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
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I am 65, retired, and owe $43,000 on my mortgage at 5%. I

Customer Question

I am 65, retired, and owe $43,000 on my mortgage at 5%. I have 48 payments left on a 15 year fixed rate loan. I withdraw $18,000 per year ($1500 per mo.) to make the house payments plus cover the income taxes and escrow (approx. $800.00 goes to principal). I could withdraw the balance due from my investments and pay 19.25% Fed/State income tax for a one time pay-off. In doing so I would just squeak in below the 25% tax bracket. My investments are in Vanguard Admiral Share S&P 500 Index with a 5% return over the life of the fund (2002) 17% both for the past 3 and 5 yr, and 7% this year to date. The withdrawals are driving up my income and causing my SS to be taxed as well as preventing me from enrolling in VA benefits. The withdrawals also prevented my wife from getting Obamacare subsidies that will probably cost me $2400 over the upcoming year. Should I pay off the house or leave the funds in my portfolio? Prior to payoff, we have about 375k in investments. Regards, cjc.
Submitted: 2 years ago.
Category: Finance
Expert:  Stephen G. replied 2 years ago.
Where are the $1,500. in withdrawals coming from? Is this a pension or IRA that is creating the income?Based upon the amount of the outstanding mortgage and given the other items you mention that are adversely affected by the withdrawals, you should withdraw the funds from your investment account and payoff the mortgage in order to mitigate that tax on your Social Security benefits as well as disqualifying you from the VA benefits and the Affordable Care Act subsidies.Questions?If not, as soon as you are satisfied with our exchange, please be sure to click on a positive rating and then Just Answer will credits me for responding to your question. If you are not satisfied, please let me know so that I can continue my response until you are satisfied. Thanks very much for using Steve G.