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My current mortgage has 10.5 years to go on a 15 year note & is 4.74% fixed rate and term; I am in 25% marginal tax bracket and age 66. Home covered by this mortgage is wonderful and I hope to never live in another, although I also own (mortgage free) a "seasonal" home in Florida. Am pessimistic about stock market and have all savings in 90 & 180 day US Treasuries plus I-series US savings bonds. Disbelieve in bank deposits and CD's even if FDIC insured. Have no credit card debt that is not paid monthly in full. Have no other debt. Credit score is 833. Since current US Treasury earnings are about 3% gross or 2.25% after tax, and current mortgage costs about 3.56% after tax, it seems like a no brainer to pay off current mortgage in full (which I can do in cash from savings), thereby improving cash flow and possibly falling into a lower marginal tax bracket (due to loss of taxible earnings on savings but not having a mortgage payment). Would rather protect principal and earn nothing on it, than invest at risk for a few percent, as current income is more than adequate. If I do this, I will still have nominal savings, same or even higher income (since no more mortgage payment) and no debt of any kind. Income comes from government pensions (about 65%), Treasuries (about 5%), owned businesses (about 30%). Intend soc security at my age 70. Your advice?
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There is no expectation that the funds invested to pay the mortgage will have a higher return than the mortgage interest. Paying off the mortgage improves your cash flow. If after paying off the mortgage you are no longer itemizing, you might even gain additional tax advantage.

I can't see any reason that you would not pay off your mortgage.

Debra
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Am pessimistic about stock market and have all savings in 90 & 180 day US Treasuries plus I-series US savings bonds. Disbelieve in bank deposits and CD's even if FDIC insured.

Since current US Treasury earnings are about 3% gross or 2.25% after tax, and current mortgage costs about 3.56% after tax, it seems like a no brainer to pay off current mortgage in full (which I can do in cash from savings), thereby improving cash flow and possibly falling into a lower marginal tax bracket (due to loss of taxible earnings on savings but not having a mortgage payment).


Since you are consciously choosing to limit your returns to a rate that is below your mortgage rate, it makes sense to get the better return by paying off the mortgage.

Income comes from government pensions (about 65%), Treasuries (about 5%), owned businesses (about 30%). Intend soc security at my age 70. Your advice?

Unless you are right on the edge of a tax bracket, I'm not sure that loss of the treasury income will drop you to a lower bracket, since it's only about 5% of your income, but you will end up paying a bit less in taxes.

The only caution that I would have for you is to be sure that the government(s) that is/are providing your pension is/are pretty stable. For instance, some states and cities are currently suffering from large deficits and in a worst case scenario, may be forced to declare BK. At that point, pension payouts may be affected. Since you also have an income stream from your owned business and you could start drawing on SS early than age 70, plus you will have reduced the need for income by paying off your mortgage, your risk is probably mitigated. As further mitigation, you could also access some/most of the equity in your main home by using a reverse mortgage, if needed.

AJ
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opinioned

Paying off your mortage gives you a return of 4.75% (the mortgage rate).
Given your distrust of most higher yield investments it is unlikely you
can match it any other way.

It will also improve your cash flow.

dond261
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