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We are fortunate enough to have retired to a small ranch/wine grape vineyard. The home on this ranch is old and small. We have finally decided to spend some of our savings on a major addition and remodel.

We have no debt. Our savings are split approximately 60/40 between tax-deferred and after-tax accounts. We will be required to begin taking distributions from our tax-deferred accounts in the next 2 - 4 years. As we have SS and pension income, as well as occasional profits from the vineyard, I believe that our required minimum distributions will meet or slightly exceed our need for cash for living expenses.

If I pay cash for the addition it would use up the bulk of the after-tax accounts. In my retirement planning calculations I've assumed about a 5% overall return from our portfolio, and a combined federal/state tax rate of 35%

I'm trying to decide whether to 1) finance all or part of the cost of the addition, 2) pay for the addition out of after-tax funds, 3) pay for the addition with some combination of after-tax and pre-tax funds? My initial inclination is to pay cash for the addition out of after-tax funds.

Any thoughts/advice that would help me decide?


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