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Author: jtmitch Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75340  
Subject: Re: Retiring with Debt and Annuities Date: 3/17/2000 12:40 PM
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I asked a related question some time back and someone gave me an interesting suggestion. Let me try to provide the substance of it for your consideration.

I don't know how many years remain on the mortgage, but she could annuitize the the annuity to coincide with the remaining years on the mortgage. Since when you annuitize, each payment is considered partly (untaxable) principal and partly (taxable) return of investment, the interest deduction on the mortgage could help offset the taxable portion of the annuity payment. (Obviously, the amount of deductible interest on the mortgage would decrease over time.) Another tact is to self-manage periodic (i.e., monthly) distributions from the annuity such that the amount withdrawn (fully-taxable since you haven't annuitized) would be offset by the tax deduction on the mortgage. The idea (at least as it was suggested to deal with my situation)was twofold:
1. To have the taxable distribution offset;
2. Ultimately to reduce the value of the annuity to the basis (amount initial contributions) so when it passes to heirs it won't be subject to income tax.

I realize this does not directly answer your question, but I found the suggestions intriguing when they were proposed to me and I thought you might also.

jtmitch
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