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Subject:  Re: want to retire 2-3 years mortgage under wate Date:  9/19/2011  3:38 PM
Author:  aj485 Number:  1408 of 1845

Purchased home in 2005; will have pension, ss and $600K 401. May need to use more than 4% to pay mortgage until the economy is better? Advice is welcomed.

If the reason you might have to pull more than 4% out of your retirement funds is because you can't afford your current mortgage payments using a 4% withdrawal rate, I would say that the issue isn't that you are underwater on your loan, it's that you are planning on retiring with too few assets.

If that's not the case, then, prior to becoming underwater, were you planning on staying in this house during retirement? If so, were you planning on keeping the loan during retirement?

If the answers to both of these questions is yes, then I'm not sure why you are concerned - nothing has changed from the plans you made in 2005 - you were going to have this mortgage on this house when you retired. You don't need to make any additional payments on the mortgage so that you won't be underwater. You can make additional payments for other reasons, but if you aren't selling, being underwater doesn't really matter.

If the answer to the first question is yes, but the answer to the 2nd question is no, how were you planning on getting out of the loan when you retired? If you had funds before to pay off the loan, and you don't have funds now to pay off the loan - that's a different question than your current loan being underwater, and you need to re-examine if you can afford to retire without those funds.

If your answer to the first question is no - then you will probably need to come up with some money from somewhere to pay your shortage when you sell, or negotiate a short sale with your bank. However, you still don't need to make additional payments (requiring you to withdraw more than 4%) until you actually have to bring money to the closing table - then you will need to figure out where you want to pull the additional money from.

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