By Mike Miles
August 27th, 2013 | Uncategorized
Q. I know that you say (almost always) not to pay off the mortgage on retirement with Thrift Savings Plan funds. So when it is a good idea to do so? I’m CSRS Offset ending at GS-14, Step 8 with 32 years of service, $300,000 in TSP, $30,000 in cash on hand, will have no credit card or vehicle debt shortly as we are selling an investment property (taking the tax hit instead of identifying a new investment property because I really don’t want to be a landlord anymore), the usual monthly expenses, and will get the law enforcement/firefighter retirement benefit bump (did my 20, then moved to a noncovered position). I am 60 (and, at 62, the offset kicks in, and beyond my way of thinking, will increase my monthly pension).
We owe about $100,000 on the 6 percent rate 15-year mortgage that has 10 remaining years. We plan on selling the house in six years when the last kid leaves for college and downsizing into a condo up the street for about $300,000. The house will sell for around $600,000+ (100+ year old historic neighborhood, prices and sales were barely affected during the recession so these numbers are pretty solid). The caveat is, we are restoring this historic house ourselves (this is the third one that we have done) and put $1,000 to $2,000 a month in parts or subcontractors for the renovation and probably have about 36 months left of work on weekends to finish the house ($36,000 to $50,000).
The calculator says my retirement income after adjusting my life insurance, tax adjustments (I claim zero now cause I am a lousy-saving person and get $10,000 average back every year) will be 87 dollars less a pay period than what I take home now (without touching the TSP). So the reason for paying off the mortgage is my wife, who works in social work at a low wage, can quit working as not having the mortgage (paid off with TSP funds) will make up for about half of what she brings in and then help me swing a hammer and finish the house and party a bit more. On a final note, we have not taken out old-age insurance for care.
A. You’ve identified an objective: To take a lump sum from our TSP account to pay off your mortgage. So the question is whether or not this is a safe — and, if safe, an optimal thing to do, given your current circumstances and future goals. Unfortunately, it’s not possible to answer this question responsibly without analyzing it in the context of your lifetime plans. Visit my website and www.variplan.com and contact me if you’d like to discuss your needs further.
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