Retired mortgages offer few financial advantages

Dear Bruce: I have an individual retirement account with about $75,000 from which I have been making withdrawals to make house payments. I have about $70,000 in mutual funds, which is what I owe on the mortgage on my home. Should I pay off my house? I’m afraid that the market will go down and I won’t have enough money to make the payments. – B.H., Houston, Texas
Dear B.H.: You haven’t indicated your age, but if you are of retirement age there is a certain value in having a mortgage-free home. From a purely financial point of view it seldom is the best way to go. If you are in your 60s and would like to have the peace of mind of having your home paid off, sell your mutual funds and retire the mortgage.

Dear Bruce: The other day I accidentally hit a lady’s car as I was backing out. I offered to have the car fixed at my body shop, where they estimated the damages to be somewhere between $500 and $750. She agreed at first but then decided to have her own shop give her an estimate and then the dealer. Her shop wants $900 and the dealer wants $1,300. Now she says that she wants the cash for the higher amount. I told her that I would settle and I would take care of this myself, as I did not want to make a claim against my insurance company. She demands to know my insurance company’s name. – Reader, via e-mail
Dear Reader: You are not obliged to tell her about your insurance. You must understand that you have no obligation to pay her anything until a court orders you to pay, and then they would set the number. When someone is without question wrong, you make a settlement, but when the other side gets unreasonable and demands that you pay the higher amount you simply say you will pay this amount or she will have to go to court and have a judge order that you pay more. The likelihood is that for this kind of money she is not going to make a trip to court.

Dear Bruce: I am 68 and I have no financial security for retirement so I will have to work the rest of my life. For 30 years my job was to raise my five children. I am divorced and get very little in Social Security. The jobs I do find only pay about $9 an hour. I owe about $7,000 in credit card debt and can barely manage the minimum monthly payments. One of my kids suggested I file for bankruptcy, but I have excellent credit and I don’t think it’s right to bail out this way. Do you have any suggestions? – Reader, in California
Dear Reader: A woman who has raised five children should have a right to look to her kids for some kind of support. It would take a relatively little amount of money from each of the five kids per month to give you a decent standard of living. Bankruptcy is a difficult process, and, as you say, there is a pride factor. I see absolutely no reason why children who have been supported for 20 years by a parent can’t help out the parent a little.

Dear Bruce: I was behind on my mortgage for a couple of months and I have worked out a plan where I’m paying the mortgage company an agreed-upon sum to get me back to where I am. I am making the current mortgage payments on time. I pulled my credit report and they show that I have been late every month. What’s wrong with this? – C.L., via e-mail
Dear C.L.: Technically, until such time that you have made up all of the late payments, you are in default and that is what they are reporting. More than anything else, this is a function of the way that the computer reports things. It may be that if you contact your mortgage company, they might report your credit history a tad differently.

Dear Bruce: We are two unmarried seniors who share a home. Should we both be listed as co-owners if we purchase a new car together? Also, what is the best way to purchase car insurance? We both have our own cars in our own names. Do we need separate policies? – S.S., St. Louis
Dear S.S.: I don’t know that there is any great advantage in putting the car in both names, although there is no reason why it can’t be done that way. Since you are currently unmarried and you have cars in each individual’s name, you will need a separate policy.
If you have your separate cars now you will indeed need separate policies on each car. Rather than worry about titling cars in each other’s names in the event of one’s demise, a properly drawn will would be a far better way to go in delineating where assets will be distributed and how.

Dear Bruce: We need a car. At our age (mid-60s) should we lease or buy a car? I hate to spend $20,000 of our savings. The leasing company said that, should my husband or I die, I could not return the car. However, they sell life insurance to cover it, providing you’re less than age 65. If you are over 65 you are out of luck. Are these our only options? – J.M., New Hampshire
Dear J.M.: There are other options. If both of you are retired and you do little driving, consider buying a good used automobile. You could buy one for a fraction of what you are intending to spend. Your insurance, collision and comprehensive, will cost you less money, and you will not be paying interest on a loan. Whether you decide to lease or borrow money to make the purchase, you will pay the interest. Take your time and find yourself a good used automobile in the $6,000-to-$10,000 range. You will find that the best buys are going to be four-door sedans in a larger model. While they are up there at the top of the price list when you buy them new, they don’t command as much as other used cars and provide excellent transportation.
Dear Bruce: My husband and I own half a condo that our daughter lives in alone. She owns the other half. The title on the property is held in all of our names 50 percent each. We do not charge her any rent as she can only afford to pay the mortgage on her half. We do not have a mortgage on our half.
Our accountant is telling us that the Internal Revenue Service code will not allow us to file a tax return listing the property without showing that we receive rent. She is saying that we have to put a rental amount received on our tax return even though we aren’t really getting paid any rent. I am dumbfounded that we have to essentially lie to the IRS. – K.P., via e-mail
Dear K.P.: I’m rather confused. What is it that you would like to claim on your income tax? Are you looking for depreciation that you would be entitled to on your half if this were an income property? Other than that, I don’t see anything that would have to be reported or could be to your advantage in reporting. Your daughter is suggesting that you are required to collect rent, and I’m not confident that this is the case either. If you do collect rent then that would be taxable income. I would pay attention to my accountant and just not take this as any benefit from a tax point of view.

Bruce Williams is a national radio talk show host and syndicated columnist.