Monday, March 10, 2008

Tax benefit unlikely for making interest payments on mortgage By SCOTT BURNS

Q: I've been wondering about paying off debt.

I'll be 59 old age old in August. I do $100,000-plus today, but who cognizes about tomorrow?

Over the last three years, I have got been making my mortgage payments plus further principal.

Doing that, I have got saved nearly 17 old age of involvement payments at 6 percent. Today the balance is down to less than $30,000.

Should Iodine go on this? The lone ground not to, I think, is the $3,400 involvement write-off astatine the end of the year.

In the adjacent twelvemonth or two, I see myself dropping my income down to $20,000 or $30,000 a year. That would be a semiretirement.

Should Iodine go on to do the $1,200-plus mortgage payments?

Or should I just do the monthly payment and go on to take the involvement write-off?

C.S., by e-mail

A: Wage off the mortgage ASAP. Then begin putting the other money into your retirement portfolio.

While you may have got $3,400 of involvement to subtract each twelvemonth — asset the existent estate taxation taxation deduction — the tax deductions probably aren't doing much to cut down your income tax bill.

Remember, itemized taxation deductions must transcend the criterion tax deduction before they convey any decrease in your income tax bill.

So they have got to transcend $5,450 for 2008 if you are single or $10,900 if you are married.

If you are married and unrecorded in a no-income-tax state like Texas, likelihood are there is no taxation benefit for making involvement payments on a mortgage.

Furthermore, when you travel into semiretirement, you'll happen yourself in a low taxation bracket with no taxation benefit for a 5 percentage or 6 percentage mortgage rate.

Meanwhile, your nest egg may only be earning 3 percentage or 4 percent.

Bottom line: This is a very good clip to be whacking down any debt you have.

Q: I am 72. My hubby is 79. I am dismayed by the last three calendar months in our brokerage firm accounts, particularly after such as a good calendar month in October.

We each have got an individual retirement business relationship account.

Mine is deserving about $149,000, and his is deserving about $225,000. We also have got a joint business relationship worth about $242,000. All three business relationships are invested in common funds.

Should we see purchasing an rente (variable or fixed)? If so, can we take some money from both individual retirement account pots and go forth the joint pot for any near-term emergencies? We owe $38,000 on our comfy little place in a retirement/resort-style community.

We have got a revocable life trust and no recognition card debt. P.R., Seattle

A: Your inherent aptitudes are very good. I don't cognize anyone who have enjoyed examining their business relationship statements for November, December or January. So it's important that you believe more than about how your money is invested than whom it is invested with. That's why I believe your thought of buying an rente — a fixed rente — May be a really good manner to cut down the ups and down feathers of your assets.

A variable rente won't work out the job of marketplace ups and downs. Remember, a variable rente is only a legal negligee for common finances that endows them with taxation deferral. The assets inside the negligee will still travel up and down, just as your common finances do.

But at ages 72 and 79, you can increase your income materially by using some of your money to purchase life annuities. You can scope out the possible range of payments by visiting a Web land site like . While the life rente intends you have got exchanged your principal for a lifespan income, it also intends you'll worry less about the markets. Better still, by increasing your current income through the life annuities, you'll have got less demand for income from your common monetary fund assets.

Another very good measure you should take is to pay off your $38,000 place mortgage. The yearly payments are probably quite high as a per centum of the amount owed, so paying it off would be another measure toward reducing your hard cash necessitates and exposure to marketplace swings.

Questions about personal finance may be sent to: Scott BURNS, P.O. Box 655237, Dallas, Texas 75265; e-mail can be sent to . Burns' Web page is . Universal Joint Press Syndicate

Labels: , , , , , , , , ,


Post a Comment

<< Home