Should I liquidate an annuity to pay off my mortgage?

Should I liquidate an annuity to pay off my mortgage?
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#1

I am 62 years old and recently got married. My husband’s home is paid for, but my home worth 175,000 still has a mortgage for $110,000. As part of my retirement account, I have an annuity that will pay $537 per month. I was wondering if I should liquidate this annuity which would pay off my mortgage and use my house for rental income (est. monthly rental $1400). I would still have about $450,000 left in my retirement account after using the annuity.


#2

There a many factors to be considered before making this decision. Discussing this in more depth with a qualified financial advisor is a good place to start. With more detail in regard to interest rates, tax rates, type of annuity product, type or account held in (qualified, non-qualified) etc., a better decision can be made.

What is the interest rate on the mortgage? Are you receiving a tax benefit for the mortgage? What is the interest on the annuity? Type of annuity? (fixed, variable, indexed) Is the annuity in a retirement account? (IRA, ROTH) Cost basis of annuity if in non qualified account? How long have you owed the annuity? Are there any contingent deferred sales charges still applicable? What is the cost to carry the home in addition to the mortgage? 

You mention rental income potential;

Is this an area you are familiar and comfortable with? Will the rental income alone cover the mortgage and cost to carry the home? Do you have other reserve funds for repairs and maintenance during the rental period? What is the value of the home itself ? Would you be better investing the equity from the home elsewhere for better income and/or growth potential?

Have you filed for or do you plan to file for your social security benefit? 

As you can see, there is much to review and discuss in making this decision and a blanket answer would not be appropriate. I, or another qualified financial advisor would be happy to help guide you through this important juncture in your life.

I know I gave you more question than answers, but I hope this helps you make the best choice for your situation.

Chris


#3

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