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Author: rehobothfool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76237  
Subject: Re: Annuity vs. Paying off House Date: 11/24/2000 9:12 PM
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A couple of suggestions to add to some already good ones posted:
First, determine what your "after-tax" interest rate is on your mortgage. If you are 28% taxed then your 7% mortgage is costing you only 5%,(if you itemize deductions). If you don't think you can earn more than than that through investing in mutual funds or individual stocks then pay it off. Most people think they can match the historical market return of about 10% to 12%.
The other reason you may not want to pay off your mortgage is that you are essentially "investing" in a stock called "my house". If your home is appreciating 8-10% a year that's a good investment. But are you diversified enough if the real estate market goes flat or down?

Secondly, instead of an annuity you might consider a reverse mortgage if a lot of your net worth is tied up in your house. You should wait until you need the money (and don't want to sell the house) but the payments will continue as long as you or spouse remain in the house.
I am personally not annuity-minded. They may seem to provide ultimate protection but as another poster pointed out the payments may not keep up with cost of living.

Talk to a financial advisor that doesn't sell anything (unbiased). It's worth paying a fee for good information.

Good luck.

rehobothfool
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