09-04-2018, 01:02 AM
I am approaching retirement somewhere in my late 50s (anywhere from 6 months to 4 years from now for me, 2 to 6 years for my wife) and would like to not worry about generating income to cover a mortgage once I'm there. I'd be fine having an account sitting there generating guaranteed income to pay for the mortgage if I continued to profit from it.
My mortgage stats:
Owe: $157,000
Final payment: 10/2027
Interest rate: 2.75%
Monthly P&I: $1662
2018 tax brackets:
Federal: 32%
State: 6.37%
Combined: 38.37%
Future bracket after retirement would be pure speculation. I may be in another state by then. I'll probably be delaying social security and living off taxable investments for a while after my wife retires, but not sure how much will be taxable. I'll also have a modest corporate pension of $1800-$3000/month (depends on how long I delay it and if I take a lump sum payment for a portion of it)
I am currently sitting on $160,000 cash (earning 1.45%, temporarily in a savings account) that I can use to pay off the mortgage. The money was previously in bond funds which I don't want to hold in a rising interest environment, so this was part of my [relatively] "safe" money.
So here's my question: Should I pay off the mortgage or not? Given current CD rates, I can put the cash away in a CD ladder and anything over 3 years from now will be paying more than the cost of the mortgage. I expect that under the new tax laws however, I will be taking a standard deduction, so the 10 year 3.45% taxable CD will only yield (after 38% tax) about 2.14% income given my 2018 tax bracket. I am guessing I will be taking the standard deduction with the new tax structure and if I do, there would be no tax benefit to the mortgage interest.
Since I don't want to think about how to cover the mortgage payments, if I don't pay off immediately, I would like keep the money in something guaranteed. Fidelity's CD rates are listed below.
The bottom line is that this is a really good problem to have - should I use cash to pay off my mortgage since I plan to retire before 60....I'm just not sure how the math would work out best for me.
Thanks in advance for any thoughts / advice!
My mortgage stats:
Owe: $157,000
Final payment: 10/2027
Interest rate: 2.75%
Monthly P&I: $1662
2018 tax brackets:
Federal: 32%
State: 6.37%
Combined: 38.37%
Future bracket after retirement would be pure speculation. I may be in another state by then. I'll probably be delaying social security and living off taxable investments for a while after my wife retires, but not sure how much will be taxable. I'll also have a modest corporate pension of $1800-$3000/month (depends on how long I delay it and if I take a lump sum payment for a portion of it)
I am currently sitting on $160,000 cash (earning 1.45%, temporarily in a savings account) that I can use to pay off the mortgage. The money was previously in bond funds which I don't want to hold in a rising interest environment, so this was part of my [relatively] "safe" money.
So here's my question: Should I pay off the mortgage or not? Given current CD rates, I can put the cash away in a CD ladder and anything over 3 years from now will be paying more than the cost of the mortgage. I expect that under the new tax laws however, I will be taking a standard deduction, so the 10 year 3.45% taxable CD will only yield (after 38% tax) about 2.14% income given my 2018 tax bracket. I am guessing I will be taking the standard deduction with the new tax structure and if I do, there would be no tax benefit to the mortgage interest.
Since I don't want to think about how to cover the mortgage payments, if I don't pay off immediately, I would like keep the money in something guaranteed. Fidelity's CD rates are listed below.
The bottom line is that this is a really good problem to have - should I use cash to pay off my mortgage since I plan to retire before 60....I'm just not sure how the math would work out best for me.
Thanks in advance for any thoughts / advice!