Thought I would get some reasoned responses on this forum. I have three years left on my 10 year mortgage at 3.0% interest. Would you get a new 2.25% 10 year mortgage with opportunity to cash out up to conforming loan limit? No other big savings needs.
would not cash out. If doing a refi, make sure its a so-called, no-cost refi.
But what I am doing in a similar sitch is just paying down current mortgage with extra payments to pay it off much sooner.
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Thanks, just figured I can earn more than 2.25% on investments. DW and I plan to work for another ten years.
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Personally, I donât like to gamble with my house. Can you stomach a 50% drop in the value of whatever you invest in?
Plus, the payment will be $4,000+ (depending on what âconformingâ is in your area, thatâs a big hit to your cash flow. If one of you loses a job, can you still swing that payment? Age discrimination may make it difficult/impossible to get a similarly-paying job. Depending on what you invest in, it may not be easy to quickly cash out if you need to.
It always makes me worried that the market is headed for a crash when I hear regular people wanting to cash out their house to play in the stock market, lol. If you are a sophisticated investor, maybe; if youâre just trying to ride the wave while the market seems to endlessly go up, well⊠govât stimulus isnât going to last forever, rates will go up someday, and the market will do what it does.
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@tristatecoog I do think it is one thing when you have a real driving need for having the mortgage extended in the here and now - some necessary home repairs, crunch with college expenses/education expenses for children.
You are creating a risk if you plan to use the money to invest. This year IMHO is a risky one. Who really knows what is going to happen. We had two really good years with our investments, and this year has been OK/fine, but I would not be sleeping well at night with this âplanâ.
Right now, houses in many areas are going up and up in selling prices obtained. This can turn.
During the last 10 years of working, you should be at a good time to be saving as you perhaps are getting peak earnings. Focus on how to save and invest.
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A 3% mortgage sounds pretty good. One thing you could do while pondering options is to look at your principal/interest breakdown on recent mortgage statement. Normally the last 3 years are heavily titled toward principle, but probably not so on a 10 year mortgage.
For a 10 yr, 2.25% mortgage, about 80% of the payment is principal to start.
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@SOSConcern : When you say âGo the distance,â do you mean heâll wait until heâs full retirement age, or until heâs 70? Even after you reach FRA, your benefit continues to grow 8% a year until age 70.
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Mom60- your sister-in-law sounds very accomplished - good for her! Very surprised to hear about these states that offer benefits for part-time teaching/professorships! Will look into that moreâŠ!
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We wonât pull out our equity to throw into the current market. We pulled $ from cash reserves to cut our mortgage balance in half. (Weâre in the final eight years, and the mortgage balance was already low.) Weâll save $5k in interest, which is a nice, safe return. Weâll pay off in four years.
We want to enter retirement (in 8-10 years) with no outstanding debt, though weâll probably have a car loan by then. Cars are currently 2011 and 2017 models and with interest rates so low, it makes no sense to pay cash.
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@VeryHappy - no trying to get as close to 66 yr 4 months. That ends the early penalty of 5/9 of 1% per month for life. I believe we will do better on other investments than 8% overall. My older brother, who is financially very comfortable, will college at 70 - he says as long as he makes it to 80 he will be âaheadâ. We have a risk balanced investment portfolio. I think DH will live very long and healthy life based on his genetics. But I want the cash flow to lessen the use of retirement assets in these early years â we will use retirement assets, but will not feel bad about expenditures.
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âŠGuaranteed???
Yes, long-term many can beat the 8% SS number, but from a finance perspective, thatâs not necessarily the correct discount rate to use.
Suggest you look at OpenSocialSecurity; use the Additional input tab.
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My husband retired last year. A large part of the equation is the cost of health care. He retired at 60, so he has 5 years before he can get Medicare. Our plan is to use only post tax money and not collect SS for these five years. This means we have little taxable income during this time and makes our market insurance plan significantly cheaper (like 1/10 of what it would be). Then at full retirement age, he will get Medicare, get SS, and start to draw from retirement accounts (pre tax money).
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Questions for the group.
Met with our financial advisor yesterday. It almost seems that his primary job 
is asking us if we are going to choose the monthly or lump sum payment on husbandâs pension. It seems to me that the rate of return on the monthly payment is about 6% if we live for 20 years. He keeps reminding us if we pick the monthly payments, the money will die with us and we can not pass it on to our heirs. We arenât that concerned with passing on our wealth but enjoying OUR retirement.
So is the 6% return fine and should we decide to keep the monthly payments? No COL but will be fixed.
Also Roth conversions. He says to wait until retirement (which may be 10/22 but you never know H may decide to hang it up any day now). He says to wait until retirement and then convert any money we have until we hit the next income tax jump. Iâm making this up. Convert enough money until we hit the 22% bracket. And do that until full retirement age which is 67 and I think we canât convert anymore?
I maybe confused because itâs A LOT of information.
Any advice or opinions welcomed. We have retiree health benefits so the latest H will retire is 62. Can comfortably retire this year at 61 but the plan has been 62.
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6% seems like a decent return. If you arenât concerned about inheritance, I would prolly keep it. (btw: investment advisors are conflicted when advising on these things, bcos if you take the lump, they have more $$ to invest adn therefore boost their own income. Not saying that your person is biased, but its built-in to their work.)
re: Roths. You can do them for years. The best time to do them is when you have limited income. Say, retire at 62, but donât start taking pension until 66. Or, do Roths during 60âs adn hold out SS until 70. Whether you fill a 12% or 22% bracket depends on your future income streams, including RMDs. Note, many convert Roths up to the IRMAA limit (~$170k) so as not to add that tax onto next yearâs Medicare premiums.
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My advice is to take the lump sum payment (we did). With the idea that the money is better in your pocket than in theirs. My husbandâs pension buy out deal (getting a lump sum from them now prior to retirement age), including a nice boost (so more than the value of the pension account). We moved it to a rollover IRA which we can mange. So the buyout is tax free, and hopefully we can keep it growing.
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@kiddie - weâre in a similar situation, but have been taking some pre tax distributions, staying under the income limits for subsidized medical insurance, but also keeping an eye on future RMDs and when to start SS. It was enlightening to explore what that looks like. Weâre also contributing to HSAs and converting $$ to ROTHs as we have the income space. 2023 will be an interesting year (as will 2022), as that will be my first full year on Medicare (2022 will be a partial year on Medicare and last child graduates ug), which changes the insurance/tax equations again.
We faced the same issue. For us, the amount of the pension was relatively low (40+ years, but amount frozen in late 2000âs). We had enough other retirement savings that we chose (in consultation with our financial advisor) to take the lump sum. That gave us a better chance of making more in the long run. My good friendâs H worked the same amount of time for the same company, but he was a high level executive. They chose the pension because it was high enough that they could use their savings as fun-money. If you do choose the pension, and if the survivor benefit drops significantly (as ours would have), consider insurance on your H.
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You have a lot to consider. I personally would probably take the lump sum. 6% seems like a fine amount now, but it depends on what happens with the market and with inflation. I assume you know the amount you would get if he takes lump sum. It might be interesting to put that info. into a couple of on-line annuity tools to see how that compares to what youâre being offered. You also need to think about what will help you âsleep well at night.â
Regarding Roth conversions, Iâve been trying to figure that out. IF there is a year you wonât have much earned income, then itâs probably smart to do a ROTH conversion. BUT, a tax accountant I respect a lot keeps reminding me we donât know what the tax law will actually be when we hit 72 (or whatever the age for RMDs will be). For example, itâs possible there could be some kind of âwealth taxâ based on how much you have in accounts, including ROTH. You want to consider your state taxes when you make decision also. If you live in a state where income is taxed, and you think you may move to a state where itâs not taxed, you want to wait to do conversion. Our state and local taxes are over 8%, so thatâs another big tax bite if we convert. You also want to consider the impact on Medicare costs related to any ROTH conversions. Medicare does a âlook backâ starting the year you turn 63, to determine what your rates will be. The lowest rate is in the $100s, and the highest for this year is close to 500, IIRC.
Hope there was something help full in all that 
@bluebayou we have annuities that are earning good returns - and that is based on decisions and built in percentages each year over the term of the annuity. We just purchased another annuity for some guaranteed returns - better than other choices and reducing our risk. One company annuity has been earning 5.75% - and we had an option to lock in now or wait until auto lock on 12-15 and we chose to lock in just to keep us from the unknown the remainder of the year; one annuity company has lifetime payout of 7%. The new one has value and dividends after fees of 9.3%. That latest purchase brought our portfolio risk down to a risk score of 49 where it had been 58/59.
There are many people who do not know what they are doing and their portfolio outside of real estate may have a lot of risk. That is why we have a financial advisor who researches and gets us into less risk pieces of our portfolio.