Mom has pension & $200k --> pay off mortgage? Get annuity?

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Mom has pension & $200k --> pay off mortgage? Get annuity?

Postby ebotrd » Wed Jan 11, 2012 9:20 pm

Hello, all.
I'm trying to help out my mom.
Dad's out of the picture.
She's a 63yo teacher retiring this year.
Pension will be about $2500/m.
She already takes Social Security at 62yo and is about $1500/m.
She also gett a lump sum "Drop pay" of ~$200k.
No other retirement savings.
It looks like her living expenses will be around $2500 (working on her budget now).

She has a mortgage of about $100k at 8% and (obviously) intends to refinance it. We think the house value is just about $100k as well.

I loaned her some money to pay off some debts so that over the next 3-6 months she can get the FICO up higher. Quizzle says it's about 710 right now.

QUESTIONS:
Regarding the Social Security, does anyone think it'd be worth it for her to pay restitution for SS and take it at 67yo instead?

I was thinking she should mortgage up toe 80% on the house, as we're thinking she can get a <4% rate. She seems to prefer a smaller, maybe $50k mortgage, or pay it off completely (but would only have $80k left in savings). I wonder if she's right -- if she ever ends up in a nursing home the State can seize her bank account, but not her house, right?

She's also considering putting whatever cash she has left after the refi into an immediate payout annuity. I know nothing about these -- the lingo kills me (Immediate annuity = fixed annuity = life annuity??). Would an annuity also protect her assets from the State should she end up needing long term care?

She does have diabetes and hypertension and obesity, but they are well controlled (well, not the obesity:). Tinkering with some life expectancy calculators they seem to generally give her about 20 more years.
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby bombcar » Thu Jan 12, 2012 1:07 am

The annuity is "life insurance" - it is insurance that the money will last her entire life (but not after).

If you paid off the house, and then used the rest to buy her an annuity, you'd get the following:

Pension: $2500
Social Security: $1500
Annuity: $X

Where X is the amount that the annuity would pay.

The above would continue until her death, no matter what. None could be "seized" except insofar as they can take income.
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby cheese_breath » Thu Jan 12, 2012 1:38 am

If by social security restution you mean the payback option where you can pay back everything you have received and take SS later, forget it. That option has been eliminated. You can't do it anymore.
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby tractorguy » Thu Jan 12, 2012 1:41 am

Does the pension have a COLA? From your numbers, it looks like she's got plenty to live on now but inflation can really change that in 20 years.

Most annuities are great deals for the salesman and lousy deals for the person buying them. I suggest you read Mel Lindauers series of articles on annuities in Forbes. The first one is at this link: http://www.forbes.com/2010/06/04/variab ... gechannels

If she's got plenty to live on and a COLA on the pension and SS, then why would you get an annuity? Does she need more income? If not, then her objective should be to minimize expenses and risk. To do this, I'd pay off the mortgage and price extended care insurance.
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby Watty » Thu Jan 12, 2012 1:56 am

If she had a house that was paid off years ago it would sound pretty risky for her to take out a mortgage to invest the money. This is really about the same question as paying off the mortgage or not. I would pay it off. If some of the money is needed later then she could get a home equity loan or a reverse mortgage. With a paid off house and $4,000 a month in income from the pension and social security I would suspect that most of her needs are already covered.

I was thinking she should mortgage up toe 80% on the house, as we're thinking she can get a <4% rate. She seems to prefer a smaller, maybe $50k mortgage, or pay it off completely (but would only have $80k left in savings). I wonder if she's right -- if she ever ends up in a nursing home the State can seize her bank account, but not her house, right?


I'm not an expert but once she moves out of the house and into a nursing home I would think that any protection from being a primary residence would eventually be lost. The bigger problem with trying to figure out some way to get her into some sort of nursing home for indigent people is that the quality of the nursing home will be doubtful. If she has any assets then the best use for them then would be to provide her with the best quality care that she could afford.

She's also considering putting whatever cash she has left after the refi into an immediate payout annuity. I know nothing about these -- the lingo kills me (Immediate annuity = fixed annuity = life annuity??).


If an immediate annuity is right for her then the next huge question is when to buy it.

She will get a much larger immediate annuity payment if she waits until she is older and there will be fewer years for inflation to be a problem. She also does not need the additional income now.

Her pension and social security are very similar to immediate annuities so she should be cautious about putting even more into such a similar asset class.

There are medically underwritten immediate annuities where they may give a larger payment because of her health issues. With here health issues it is likely that starting social security was a good choice but this is a complex decision.
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby momar » Thu Jan 12, 2012 2:10 am

She already has a significant fixed stream of income that more than covers he living expenses. I would pay off the house, further reducing her expenses, and then invest the additional money each month to keep up with inflation later in her retirement.

If you annuitize any of it, isn't she just going to end up with an even bigger surplus? She already has $1500 extra per month; if she pays off the house it will be upwards of $2500. Why would she need an additional income stream right now?
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby Gray » Thu Jan 12, 2012 6:24 am

Unless the house is in really good condition, and she is likely to live there for the next 20 years or so, I would not recommend paying off the mortgage. An annuity would help supply income to pay for necessities, although at that amount it wouldn't be that significant. You could also invest it conservatively as a rainy day fund.
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby hudson » Thu Jan 12, 2012 7:09 am

If I was in that identical situation, I would refinance the house and not pay it off with the lump sum.
I would take the lump sum and invest it in Penfed 7 year CDs. or the equivalent....something safe.

The 200K would just stay there and collect interest and try to keep up with inflation. As long as I have it, my options are open....maybe a single premium annuity in my 70s?

I would live frugally and attempt to save more....maybe find a part time job paying just under the Social Security income line.

I would read this book and follow any suggestions that fit me:

http://www.amazon.com/Younger-Next-Year ... 647&sr=1-2
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby cheese_breath » Thu Jan 12, 2012 9:19 am

Watty wrote:The bigger problem with trying to figure out some way to get her into some sort of nursing home for indigent people is that the quality of the nursing home will be doubtful. If she has any assets then the best use for them then would be to provide her with the best quality care that she could afford.

+1 You get what you pay for, and the government doesm't pay much in this case. Instead of "doubtful" I would say the quality of care in these nursing homes is substandard or worse.
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby TerryDMillerMBA » Thu Jan 12, 2012 9:35 am

I noticed some misinformation about fixed immediate annuities. Most people, when they hear the word "annuity," automatically think life-time payments. However, just like insurance, you can also purchase annuities that payout only over a time frame, e. g., a 10-year term.

Make sure Mom is clear as to how she wants to live her life. That gives a "face" to this money.

If I was retired, and had $50 a day over expenses, as she does, I would gamble (horses, poker, sports, etc.) just about every day. Just an example.
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby HomerJ » Thu Jan 12, 2012 10:51 am

Pay off the house, keep 100k in the bank for emergencies, live off the pension, save a little of SS each month, spend a little for fun.

What's not to like?

Looks like she's in great shape...

How is she covering health insurance until 65?
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby cleosdad » Thu Jan 12, 2012 12:52 pm

cheese_breath wrote:If by social security restution you mean the payback option where you can pay back everything you have received and take SS later, forget it. That option has been eliminated. You can't do it anymore.

I believe that is incorrect. You say she is 63 and took s.s. at 62. I thought you had a one time option to pay it back if it was within one year. Has it been 12 months? Maybe sscritic is reading this.
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby pshonore » Thu Jan 12, 2012 1:10 pm

Are we missing something? How could she collect SS at 62 if she's still working as a teacher. Wouldn't a teacher's earnings fully offset SS for someone who is not FRA?
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby ddunca1944 » Thu Jan 12, 2012 1:38 pm

cleosdad wrote:
cheese_breath wrote:If by social security restution you mean the payback option where you can pay back everything you have received and take SS later, forget it. That option has been eliminated. You can't do it anymore.

I believe that is incorrect. You say she is 63 and took s.s. at 62. I thought you had a one time option to pay it back if it was within one year. Has it been 12 months? Maybe sscritic is reading this.


That option was removed last year. Now, once you start, that is it. No more do-overs. (I was seriously considering a do over and was quite startled when they changed the policy)

I was thinking she should mortgage up toe 80% on the house, as we're thinking she can get a <4% rate. She seems to prefer a smaller, maybe $50k mortgage, or pay it off completely (but would only have $80k left in savings). I wonder if she's right -- if she ever ends up in a nursing home the State can seize her bank account, but not her house, right?


I am assuming that you are thinking that if she ever ended up in a nursing home on Medicaid... If that happened, Medicaid COULD, after her passing, reimburse itself from the sale of her home.
I think her instinct of going for a smaller mortgage (~$50K) makes sense. Since she will be able to live on her pension (at least in the short term), she should try to save her SS and invest it conservatively.

And I would stay the heck away from an annuity - between her pension and SS, she will already have two.
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby cleosdad » Thu Jan 12, 2012 1:50 pm

ddunca1944 wrote:
cleosdad wrote:
cheese_breath wrote:If by social security restution you mean the payback option where you can pay back everything you have received and take SS later, forget it. That option has been eliminated. You can't do it anymore.

I believe that is incorrect. You say she is 63 and took s.s. at 62. I thought you had a one time option to pay it back if it was within one year. Has it been 12 months? Maybe sscritic is reading this.


That option was removed last year. Now, once you start, that is it. No more do-overs. (I was seriously considering a do over and was quite startled when they changed the policy)

I was thinking she should mortgage up toe 80% on the house, as we're thinking she can get a <4% rate. She seems to prefer a smaller, maybe $50k mortgage, or pay it off completely (but would only have $80k left in savings). I wonder if she's right -- if she ever ends up in a nursing home the State can seize her bank account, but not her house, right?


I am assuming that you are thinking that if she ever ended up in a nursing home on Medicaid... If that happened, Medicaid COULD, after her passing, reimburse itself from the sale of her home.
I think her instinct of going for a smaller mortgage (~$50K) makes sense. Since she will be able to live on her pension (at least in the short term), she should try to save her SS and invest it conservatively.

And I would stay the heck away from an annuity - between her pension and SS, she will already have two.

I still believe you can do it once but it has to be done within 12 months. Lets see if anyone else agrees.
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby cleosdad » Thu Jan 12, 2012 1:55 pm

cleosdad wrote:
ddunca1944 wrote:
cleosdad wrote:
cheese_breath wrote:If by social security restution you mean the payback option where you can pay back everything you have received and take SS later, forget it. That option has been eliminated. You can't do it anymore.

I believe that is incorrect. You say she is 63 and took s.s. at 62. I thought you had a one time option to pay it back if it was within one year. Has it been 12 months? Maybe sscritic is reading this.


That option was removed last year. Now, once you start, that is it. No more do-overs. (I was seriously considering a do over and was quite startled when they changed the policy)

I was thinking she should mortgage up toe 80% on the house, as we're thinking she can get a <4% rate. She seems to prefer a smaller, maybe $50k mortgage, or pay it off completely (but would only have $80k left in savings). I wonder if she's right -- if she ever ends up in a nursing home the State can seize her bank account, but not her house, right?


I am assuming that you are thinking that if she ever ended up in a nursing home on Medicaid... If that happened, Medicaid COULD, after her passing, reimburse itself from the sale of her home.
I think her instinct of going for a smaller mortgage (~$50K) makes sense. Since she will be able to live on her pension (at least in the short term), she should try to save her SS and invest it conservatively.

And I would stay the heck away from an annuity - between her pension and SS, she will already have two.

I still believe you can do it once but it has to be done within 12 months. Lets see if anyone else agrees.

I just went to the S.S. website and I am correct. A one time do over within a 12 month period.
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby cheese_breath » Thu Jan 12, 2012 2:18 pm

cleosdad wrote:
cleosdad wrote:
ddunca1944 wrote:
cleosdad wrote:
cheese_breath wrote:If by social security restution you mean the payback option where you can pay back everything you have received and take SS later, forget it. That option has been eliminated. You can't do it anymore.

I believe that is incorrect. You say she is 63 and took s.s. at 62. I thought you had a one time option to pay it back if it was within one year. Has it been 12 months? Maybe sscritic is reading this.


That option was removed last year. Now, once you start, that is it. No more do-overs. (I was seriously considering a do over and was quite startled when they changed the policy)

I was thinking she should mortgage up toe 80% on the house, as we're thinking she can get a <4% rate. She seems to prefer a smaller, maybe $50k mortgage, or pay it off completely (but would only have $80k left in savings). I wonder if she's right -- if she ever ends up in a nursing home the State can seize her bank account, but not her house, right?


I am assuming that you are thinking that if she ever ended up in a nursing home on Medicaid... If that happened, Medicaid COULD, after her passing, reimburse itself from the sale of her home.
I think her instinct of going for a smaller mortgage (~$50K) makes sense. Since she will be able to live on her pension (at least in the short term), she should try to save her SS and invest it conservatively.

And I would stay the heck away from an annuity - between her pension and SS, she will already have two.

I still believe you can do it once but it has to be done within 12 months. Lets see if anyone else agrees.

I just went to the S.S. website and I am correct. A one time do over within a 12 month period.


OOPS! Looks like you are right. I am wrong. Here's the link to the SSA website.

http://www.ssa.gov/retire2/withdrawal.htm
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby Watty » Thu Jan 12, 2012 2:33 pm

If I was in that identical situation, I would refinance the house and not pay it off with the lump sum.
I would take the lump sum and invest it in Penfed 7 year CDs. or the equivalent....something safe.



I don't see how that would work.

https://www.penfed.org/productsAndRates ... icates.asp

The PenFed 7 year CD is getting 2.75% but that is taxable and it might even cause more of the social security to be taxed. As a guess the effective after tax interest rate might be more like 2.25% if even that.

There is a good chance that the standard deduction will be used so that most or all of the mortage interest will not be reducing her taxes. Hard to geuss what the real effective tax rate would be but even if it is 3% then that would still cost a good amount of moeny each year.

Using the 3% and 2.25% guestamates that would cost 0.75% a year or $750 for a $100K loan.

There are other cash flow problems that this would create as well. At 2.25% a $100K CD would generate $2,250 a year in after tax income. A $100K mortgage might have a mortgage payment in the ballpark of $420 a month depending on the terms. That is $5,040(12*420) a year which would be $2,790 (5040-2250) a year more than the CD income that would have to be paid out of savings to cover the mortgage payments since then principal is being paid down.

That seems to be a lot of downside that you would be locked into for the next seven years.
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby GregLee » Thu Jan 12, 2012 2:53 pm

Her finances are in good enough shape that she should be thinking about how to spend more, I think. Does she really want to keep that house? If she decides to spend her retirement in travel, or at least elsewhere, it might make more sense to sell it. After my father died, my mother retired with a very modest pension and SS -- she had a big garage sale to get rid of much of a lifetime accumulation, moved into a small rented townhouse apartment, got together with some friends and went on trips to Spain, Greece, and so on. It worked out well for her. So I'm suggesting that your mother not think in terms of hunkering down in that house and just getting by for 20-30 years.
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby Gray » Thu Jan 12, 2012 4:32 pm

Say she buys the so-so condition house, and it requires major repairs, where's the money going to come from?

Say she buys the so-so condition house, and then loses the ability to move around due to knee/hip problems so she really can't function independently? And then you've got the massive illiquid investment in a fixed asset in a depressed housing market.

In your planning you need to consider, if I make this choice, what *can* I do in that specific bad situations.

My mother in law bought her house, but it was the worst thing she could have done. She didn't have the energy or ability to properly maintain it, and finally when she sold it, the housing market was going downhill. Had she got an annuity after her husband died, she would be in much better shape financially than she is.
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby hudson » Thu Jan 12, 2012 8:55 pm

Watty wrote:
If I was in that identical situation, I would refinance the house and not pay it off with the lump sum.
I would take the lump sum and invest it in Penfed 7 year CDs. or the equivalent....something safe.



I don't see how that would work.

https://www.penfed.org/productsAndRates ... icates.asp

The PenFed 7 year CD is getting 2.75% but that is taxable and it might even cause more of the social security to be taxed. As a guess the effective after tax interest rate might be more like 2.25% if even that.

There is a good chance that the standard deduction will be used so that most or all of the mortage interest will not be reducing her taxes. Hard to guess what the real effective tax rate would be but even if it is 3% then that would still cost a good amount of moeny each year.

Using the 3% and 2.25% guestamates that would cost 0.75% a year or $750 for a $100K loan.

There are other cash flow problems that this would create as well. At 2.25% a $100K CD would generate $2,250 a year in after tax income. A $100K mortgage might have a mortgage payment in the ballpark of $420 a month depending on the terms. That is $5,040(12*420) a year which would be $2,790 (5040-2250) a year more than the CD income that would have to be paid out of savings to cover the mortgage payments since then principal is being paid down.

That seems to be a lot of downside that you would be locked into for the next seven years.



Great discussion! just some thoughts....probably not correct answers....just thinking outloud...

A 200K Penfed 2.75% CD should be worth $242K in 7 years....I know that taxes and inflation will erode that....but his mother will have enough monthly income to cover taxes and expenses ...I brought up the CD because most people understand CDs...very simple. A more sophisticated investor might move the money into IBonds and or Vanguard Intermediate-Term Tax-Exempt Fund Admiral Shares...but that's not for the novice....also, she can likely get her mortgage down to 5% from 8%....I'd use a credit union. (Penfed CDs can be broken at any time for any reason...it's not cheap, but the money is available if needed.)

I think that if you are ever lucky or skilled enough to accumulate a pile of money, that you should consider holding it. It can solve problems that were not anticipated. I hate having any kind of debt, but in this situation, it's getting late. If I was in this situation and didn't like debt, I would try being frugal and pay it down with monthly money or a part time job. If she pays off the house, that feels good, but she's locked into that house....and that situation....and her pile is down to 100K.

So this is the pack rat theory....hold on to that pile....put it somewhere safe....hoard it...if possible protect it from inflation and the tax collectors. Your slowly growing pile gives you options that disappear if you pay off a house.
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby ebotrd » Thu Jan 12, 2012 9:34 pm

Here's mom's reply so far:
I will have COLA with my pension not much but a little.

I will have to pay for health insurance from August till January when I
turn 65. I am choosing the School Board insurance - which I now have
difference is I will have to pay the whole premium till Medicare kicks
in but that will only be 6 mos. and then I will use school board
insurance for my supplemental. The state will pay me an extra 130.00 a
month to help with the cost of insurance both before and after medicare.

The purpose of rolling into an annuity is to keep from paying taxes.
That is already established in a fixed account about 3% interest I can
only allow it to sit until I am 70 then I have to take a monthly
amount.

I'm still weighing whether to pay off house or 50% of house.
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby malloc » Fri Jan 13, 2012 2:04 am

Be aware that in some states your SS benefit goes down if you retire as a teacher.
You may be overestimating what the income from SS will be.
I suggest you talk to SS to be sure if the benefit will change upon her retirement as a teacher.
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby pshonore » Fri Jan 13, 2012 9:49 am

malloc wrote:Be aware that in some states your SS benefit goes down if you retire as a teacher.
You may be overestimating what the income from SS will be.
I suggest you talk to SS to be sure if the benefit will change upon her retirement as a teacher.

That is only true if she does not have substantial earnings from a job covered by SS. I'm still trying to understand how she's collecting SS while still working as a teacher.
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby ebotrd » Fri Jan 13, 2012 10:17 am

MOM SAYS:

I believe it's like 20% of the $200k in tax on anything that
is not rolled over into an annuity.

I don't believe at my age I could get a 30 year
mortgage.

[guess mom was alarmed by the suggestions that she may someday choose to sell the house!]
I know you all are trying to look out for my best interest but as far as they
house goes I have heart and soul invested not money - it's a female
thing - my mother and I had this house built together, it's where my son
grew up, all the azaleas that bloom every spring were planted by my son
and me. Call me emotional, sentimental or whatever but no I do not
want to sell my home, to me it is more than property. What ever I
choose it will be to make sure that I can stay in this home as long as
possible and if and when the time comes to sell then I really don't
care if there is a loss or a profit it will only be sold when I can no
longer live in it. May not be practical or best investment wise but
then in the Animal Kingdom Men are the Gatherers and Women are the
Nesters.
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby cheese_breath » Fri Jan 13, 2012 10:20 am

pshonore wrote:I'm still trying to understand how she's collecting SS while still working as a teacher.

She can collect SS while working, but the payments may be reduced depending upon how much she earns.

http://www.ssa.gov/retire2/whileworking.htm
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby pshonore » Fri Jan 13, 2012 10:30 am

Quite true, but OP states she is collecting $1500 per month which is not too far from the max for a 62 yr old (approx 1750 per month).
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby HomerJ » Fri Jan 13, 2012 11:36 am

ebotrd wrote:The purpose of rolling into an annuity is to keep from paying taxes.


What taxes? Sounds like she's been talking to an annuity salesman.

The only appropriate annuity is a SPIA (Single-payment Immediate Annuity), where you give the insurance company (for example) $100,000. and they pay you $500 a month for the rest of your life.

She has no need of this, really. Her pension and her Social Security already cover her for life, and they take care of her needs.

The $200k should be invested in CDs, stock index funds, bond index funds... Taxes will be minimal. And she can get to the money if needed for car/house repairs, take a vacation, etc.

Do not lock her money up in some variable annuity with long-term surrender fees to "avoid taxes".

Someone is scamming her.

She's in solid shape... Personally, I'd pay off the house, invest the $100k:

20k checking account
20k CDs
30k Total Stock Market Index Fund
30k Total Bond Market Index Fund

And live a little... spend some of that SS money.
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby HomerJ » Fri Jan 13, 2012 11:43 am

ebotrd wrote:MOM SAYS:

I believe it's like 20% of the $200k in tax on anything that
is not rolled over into an annuity.


Ah, it's 401k or some other retirement plan money.... She can roll it over into an IRA. Call Vanguard, and they will do all the work for you....

Zero fees. No need to buy an annuity. An annuity is very different from an IRA. She won't be able to touch the money for years (without severe penalties) if she puts it in an annuity. IRA, she can withdraw whatever she wants, but it's considered income for that year.

Never mind on paying off the house immediately then... since pulling that $100k from the IRA will count as you making $100k in income that year... Instead, pull just enough from the IRA each year so that your "income" is still in the lowest tax-rate. And use that money to pay extra on the house.

Ebotrd... you and your Mom should read some of the books on the wiki...

http://www.bogleheads.org/readbooks.htm

I highly recommend The Bogleheads Guide to Retirement Planning. I think it will help.
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HomerJ
 
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby Gray » Fri Jan 13, 2012 11:46 am

Not everyone can manage financial assets well. I had to intervene twice with my mother-in-law who depleted assets and ran up debt.

Now her cash flow consists of Social Security, two separate USAA fixed annuities, a small federal civil service pension, and a federal civil service survivor pension. She has a solid cash stream, three elements of which increase over time no matter how the market performs.

She's saving, investing, has LTC insurance, a new car, an inexpensive apartment just the right size, and operates entirely on the basis of cash, so there's no debt concerns. I sleep well.
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby ddunca1944 » Fri Jan 13, 2012 12:22 pm

ebotrd wrote:MOM SAYS:

I believe it's like 20% of the $200k in tax on anything that
is not rolled over into an annuity.

I don't believe at my age I could get a 30 year
mortgage.

[guess mom was alarmed by the suggestions that she may someday choose to sell the house!]
I know you all are trying to look out for my best interest but as far as they
house goes I have heart and soul invested not money - it's a female
thing - my mother and I had this house built together, it's where my son
grew up, all the azaleas that bloom every spring were planted by my son
and me. Call me emotional, sentimental or whatever but no I do not
want to sell my home, to me it is more than property. What ever I
choose it will be to make sure that I can stay in this home as long as
possible and if and when the time comes to sell then I really don't
care if there is a loss or a profit it will only be sold when I can no
longer live in it. May not be practical or best investment wise but
then in the Animal Kingdom Men are the Gatherers and Women are the
Nesters.


Clearly the house is a priority to her. She may be surprised to learn that she probably CAN qualify for a 30 year mortgage. If she refinanced a $50K mortgage at 30 years, her payments would be quite small. I'd really be considering this.
Also, while initially, it looks like she won't have any cash flow problems, she is relatively young and (hopefully) looking forward to a very long retirement. In time, inflation could ravage her assets, so I would not spend too much right now. I'd try to live on the pension and save the SS.

Do not lock her money up in some variable annuity with long-term surrender fees to "avoid taxes".

Someone is scamming her.

She's in solid shape... Personally, I'd pay off the house, invest the $100k:

20k checking account
20k CDs
30k Total Stock Market Index Fund
30k Total Bond Market Index Fund

I think this is good advice. The only thing I'd do differently would be to refi the mortgage to $50K and invest the remaining $150K proportionately
She needs (I think) a 20% exposure to equities to help with inflation down the road....
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Re: Mom has pension & $200k --> pay off mortgage? Get annuit

Postby bombcar » Fri Jan 13, 2012 8:15 pm

It is actually illegal for banks to discriminate based on age; so if you have the income to qualify for a 40 year mortgage, it doesn't matter that you're already 99 years old.
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