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We are a retired couple, 65 and 63 yrs old, not working,

We are a retired...

We are a retired couple, 65 and 63 yrs old, not working, buying a new home. The home we're buying is $50,000 more than the home we're selling. Current income from pensions and SSI is approximately $78,000. Are we better to look for conventional loan or, use our tax deferred savings to complete the purchase?

Accountant's Assistant: The Accountant will know how to help. Is there anything else important you think the Accountant should know?

We are concerned about being pushed to a higher tax bracket by using tax deferred accounts.

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Answered in 2 minutes by:
3/25/2018
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,026
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Hi. …. My name’s Lane,

I hold a law degree (J.D.), with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, to clients on three continents, since 1986.

I’m reading your question now.

Bear with me a moment while I type up my response.

….

Then if you have further questions we can go from there.

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Although there are subjective aspects of this, you've touched on one of the three purely financial pieces that say the mortgage might make sense (purely financial).

...

  • Increasing the tax bracket on the higher level of income,
  • the opportunity cost of not having those investments still growing (now, that we're where we are, real estate has essentially recovered) the new property likely won't grow as quickly as retirement funds - depending on how you're invested), and
  • THe mortgage interest write off associated with the new loan
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It's beyond the scope of this Q&A forum to run the full analysis, but if the objective is to maximize net worth over time, this is the way t start thinking about it ... the value of the house growing PLUS the retirement funds growing, likely increase the net worth more over time.... AND if the retirement funds are invested partially in equities, now is not the time to sell.

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Customer reply replied 1 month ago
The IRA accounts I would tap into began 20 years ago and I have contributed little the past 5 years. The origination fees and title search costs for a small mortgage seem high and I am trying to avoid those expenses.
Is there room under the new tax tables for me to add another 40-50 thousand?

Here are the brackets for 2018

...

Rate ..........Individuals........................Married Filing Jointly

10%.......…..Up to $9,525..................…..Up to $19,050

12%............$9,526 to $38,700.........…..$19,051 to $77,400

22%......…...$38,701 to $82,500............$77,401 to $165,000

24%............$82,501 to $157,500.....…..$165,001 to $315,000

32%......…...$157,501 to $200,000..…...$315,001 to $400,000

35%............$200,001 to $500,000..…...$400,001 to $600,000

37%............over $500,000.............……..over $600,000

...

But remember that you now have a standard deduction of 24000 ... and then not all of your social security is taxable (complicates things a little further, as the more you take from the the higher the likelihood ore of your benefit is taxable

Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,026
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Lane
Lane
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Category: Tax
Satisfied Customers: 14,026
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