Originally Posted by cardude
lump sum amount--1,000,000 after tax is paid
is lump sum taxable or tax deffered? taxable
what will withdraw rate be if you retire and keep the mortgage?2.9%
what will withdraw rate be if you retire and pay off the mortgage?2.3%
6.5% is a high rate, what is the length of time left to payoff on normal schedule? More than 15 years? 20 years-- it's a pretty new mortgage.
What about refinancing the mortgage to a longer term (and a lower rate) to reduce the withdraw rate? Actually, that would only reduce the withdrawl rate to 2.7% at today's rates.....
My reaction is this-
2.9% starting withdraw rate is awesome, no reason to think of adjusting that at all. Chalk one up for investing and not paying off. If you can live on 2.9% of assets (most of which is in taxable accounts, correct?), then I think sticking with that plan is best. Keep the money liquid.
The 20 year period of repayment is significant. I think you will do better in long run investing the lump sum, because in 20 years, the compounding factor really favors investing. Chalk another one up for investing.
The $1 M lump sum, what would you invest in (100% stocks?). Have you looked into possibly creating a dividend portfolio with this $1 M (which generates close to 20k of income per year). I think dividend investing is most stable way to fund retirement, so I thought I would chime that opinion in.
Combine that 20k with other income sources and you probably have a better retirement portfolio.
I would look to refinance 20 year mortgage to a 15 year fixed, lower the rate and probably keep the same payment you have now. If the loan is considered "jumbo", I would pay down mortgage enough to get a normal rate (non jumbo).