[et_pb_section admin_label="Section" fullwidth="on" specialty="off"][et_pb_fullwidth_header admin_label="Fullwidth Header" title="Financial Tip of the Month " background_layout="light" text_orientation="left" header_fullscreen="off" header_scroll_down="off" parallax="off" parallax_method="off" content_orientation="center" image_orientation="center" custom_button_one="off" button_one_letter_spacing="0" button_one_use_icon="default" button_one_icon_placement="right" button_one_on_hover="on" button_one_letter_spacing_hover="0" custom_button_two="off" button_two_letter_spacing="0" button_two_use_icon="default" button_two_icon_placement="right" button_two_on_hover="on" button_two_letter_spacing_hover="0" subhead="January 2017"] [/et_pb_fullwidth_header][/et_pb_section][et_pb_section admin_label="section"][et_pb_row admin_label="row"][et_pb_column type="4_4"][et_pb_text admin_label="Text" background_layout="light" text_orientation="left" use_border_color="off" border_color="#ffffff" border_style="solid"]
By David S Edge
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Reason Not to Pay Off the Home Mortgage.
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In retirement… it’s all about cash flow.
We see many folks who have decided to
retire make the mistake of taking their
retirement money, or 401K money out of
income generating accounts, and pay off
their mortgage in a lump sum. What they
don’t realize is that they are now house rich
and cash flow poor. They are also more likely
to trigger a large income tax penalty for using a chunk of their taxable
retirement cash for this lump-sum pay off. Bad dog! You just shot yourself
in the foot twice!
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Keep your retirement money in play, making your income pay the monthly
house payment so that when your house is eventually paid off, that same
retirement money is now generating extra cash income for your household. In
other words, saving for retirement is more important than paying off your
house!
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You also have to keep in mind that during the last 10-15 years of your
mortgage, most of the monthly payment is principal, not interest. So making
extra payments during these years (if your income allows) is a better strategy.
An extra payment at this point is reducing your principal and will pay off your
home quicker.
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By paying off your house, you are also losing one of the last major deductions
on your yearly income tax. Again, you lose.
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So taking retirement money to pay off your home,triggering a large tax bill, and losing a major taxdeduction are the three stooges of paying off yourhome early!
Make sure you get professional advice on your whole plan for retirement so
you don’t hit one of these bumps in your road to a financially safe retirement!
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Call us! We are here to help!
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