Pay down your mortgage with an SPIA and get cheap longevity insurance

[Animorph]

Thought I'd combine two or three of our favorite topics.

I just refinanced my mortgage at 3.25%. I'm 57. According to www.immediateannuities.com I can buy single life SPIA that makes my (30 year fixed) P&I payments for about 94.5% of my mortgage loan amount. Pretty nice if you don't care about leaving some debt for your estate if you kick off early. Plus, the SPIA continues payments after 30 years if I'm still around (only 87), providing some longevity insurance once the mortgage is paid off. I can certainly see some cases where this might be preferred over just paying the mortgage off.

Unfortunately (or not!), I'm also married. DW is 52. That kind of kills the SPIA price for a joint annuity with a younger female. It goes to 113.5% of the mortgage amount. Maybe with the longevity aspect that still looks OK. I didn't price out a deferred annuity.

So I guess we'll wait a few more years before pricing this out again. But for some here it might be an interesting idea.

 

[2B]

I have decided not to pay my mortgage off because of a few small pensions which are the moral equivalent of a SPIA. All of my pensions are non-COLA. Their total amount when I begin to draw them will be slightly over my mortgage. The mortgage is fixed for 20+ years and the payment won't go up. I was planning to just let the mortgage get paid directly out of the checking account. I won't have to worry about the mortgage payment and in a couple of decades I'll suddenly see a little pile of free cash show up every month.

The pensions will be joint survivor so DW won't have to worry about the payment either. If we both croak before the mortgage is paid off, our kids will have to deal with it.