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High-tech company expands downtown
Folgers coffee perks up Smucker earnings
Region's stocking full of ideas for those on the prowl for holiday gifts
Ohio sues credit-rating companies
Study tracks newspaper, online readership
Michelin chief says revenue won't increase
Most Read Stories
Police accuse bank robbery suspect of gobbling up note (with dashcam video)
Man found dead in North Akron home is identified
Dad accused of forcing son into field, killing him
NFL star Chris Spielman's wife loses cancer battle
Coventry man killed in crash at I-77 ramp
College student mistaken for deer, shot to death
Man allegedly paid teens to spit in his face
Angel Food Ministries helps stretch grocery dollars
Blogs:
Pets:
Cat-loving chihuahua suckles seven abandoned kittens
The Heldenfiles:
Friday Night Notebook
Patrick McManamon:
For your Saturday entertainment …
Akron Zips:
Hitchens leads Zips in second-half comeback
Tribe Matters:
Seven players added to Tribe’s 40-man roster
Cleveland Browns:
Holmgren expresses interest in Browns position
Kent State Sports:
Kent State blown out in second half, loses to Temple 13-47
Cleveland Cavaliers:
Gameblog: Cavs at Indiana Pacers – Here’s to LBJ and Free Throws
Buckeye Blogging:
OSU – Michigan college football rivals meet in Baghdad
Varsity Letters:
Four area football teams play tonight
All Da King's Men:
Headed For Disaster
Blog of Mass Destruction:
Will Health Care Reform Pass?
Akron Law Café:
Federal Judge Declares DOMA Unconstitutional
See Jane Style:
Vintage Chic
Car Chase:
TIME TO GET YOUR COLLECTOR CARS WINTERIZED
Let's Talk Real Estate:
Silverdome Potentially SOLD!
Ohio Travels with Betty:
George is looking for a Thanksgiving buffet in Akron.
Sound Check:
Steely Dan Plays "The Royal Scam" at E.J. Thomas Hall
HRLite House:
Colloquium at University of Akron
Akron Gamer:
Nintendo's Mario endures even as games come and go
Interest deduction not cutting income tax bill much. Start putting extra money into retirement portfolio
Published on Monday, Mar 10, 2008
Q: I read your article Hard Work Doesn't Pay on msn.com, and I agree. I also believe Corporate America will use you, abuse you and show you the door when they are done with you.
That makes me wonder about paying off debt. I'll be 59 years old in August. I make $100,000-plus today, but who knows about tomorrow? Over the last three years, I have been making my mortgage payments plus additional principal. Doing that, I have saved nearly 17 years of interest payments at 6 percent. Today the balance is down to less than $30,000.
Should I continue this? The only reason not to, I think, is the $3,400 interest write-off at the end of the year. In the next year or two I see myself dropping my income down to $20,000 or $30,000 a year. That would be a semiretirement.
Should I continue to make the $1,200-plus mortgage payments? Or should I just make the monthly payment and continue to take the interest write-off? — C.S., by e-mail
A: Pay off the mortgage ASAP. Then start putting the extra money into your retirement portfolio. While you may have $3,400 of interest to deduct each year — plus the real estate tax deduction — the deductions probably aren't doing much to reduce your income tax bill.
Remember, itemized deductions must exceed the standard deduction before they bring any reduction in your income tax bill. So they have to exceed $5,450 for 2008 if you are single or $10,900 if you are married. If you are married and live in a no-income tax state like Texas, odds are there is no tax benefit for making interest payments on a mortgage. Furthermore, when you go into semiretirement, you'll find yourself in a low tax bracket with no tax benefit for a 5 percent or 6 percent mortgage rate. Meanwhile, your savings may only be earning 3 percent or 4 percent.
Bottom line: This is a very good time to be whacking down any debt you have.
Q: I am 72. My husband is 79. I am dismayed by the last three months in our brokerage accounts, particularly after such a good month in October. We each have an IRA account. Mine is worth about $149,000, and his is worth about $225,000. We also have a joint account worth about $242,000. All three accounts are invested in mutual funds.
Should we consider purchasing an annuity (variable or fixed)? If so, can we take some money from both IRA pots and leave the joint pot for any near-term emergencies? We owe $38,000 on our comfortable small home in a retirement/resort-style community. We have a revocable living trust and no credit card debt. — P.R., Seattle
A: Your instincts are very good. I don't know anyone who has enjoyed examining their account statements for November, December or January. So it's important that you think more about how your money is invested than who it is invested with.
That's why I think your idea of purchasing an annuity — a fixed annuity — may be a really good way to reduce the ups and downs of your assets. A variable annuity won't solve the problem of market ups and downs. Remember, a variable annuity is only a legal wrapper for mutual funds that endows them with tax deferral. The assets inside the wrapper will still go up and down, just as your mutual funds do.
But at ages 72 and 79, you can increase your income materially by using some of your money to buy life annuities. You can scope out the possible range of payments by visiting a Web site like http://www.immediateannuities.com. While the life annuity means you have exchanged your principal for a lifetime income, it also means you'll worry less about the markets. Better still, by increasing your current income through the life annuities, you'll have less need for income from your mutual fund assets.
Another very good step you should take is to pay off your $38,000 home mortgage. The annual payments are probably quite high as a percentage of the amount owed, so paying it off would be another step toward reducing your cash needs and vulnerability to market swings.
Questions about personal finance and investments may be sent by e-mail to scott@scottburns.com or by fax to 505-424-0938. Check the Web site: http://www.scottburns.com. Questions of general interest will be answered in future columns.
Q: I read your article Hard Work Doesn't Pay on msn.com, and I agree. I also believe Corporate America will use you, abuse you and show you the door when they are done with you.
Get the full article here.
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