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Sell her a fixed annuity for a chunck of that cash sitting around. You could give her better rate of return, tax deferral, and even include a return of premium provision if liquidity is a concern.
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A little devil's advocate here.
This is what her advisor might be thinking. "Ok, so she has 550k in CDs she won't move to me and she has a mortgage for 165k with a monthly payment of $1,200. If I can't get the CD money, maybe I can get her to use the CDs to pay off the mortgage. Then I should be able to get her to EFT the $1,200 a month into an account with me. After all, it is found money to her."
This is what her advisor might be thinking. "Ok, so she has 550k in CDs she won't move to me and she has a mortgage for 165k with a monthly payment of $1,200. If I can't get the CD money, maybe I can get her to use the CDs to pay off the mortgage. Then I should be able to get her to EFT the $1,200 a month into an account with me. After all, it is found money to her."
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In my opinion I would refinance the home at current rates say 3.75% on a 15 year loan. Use the money of $165k to invest in other ways for a higher return of 7-10%.
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I agree with this but whatever the decision she needs to get rid of that high interest rate. A refi and using an ammerization schedule to pay additional principle would be a good option IMO.
- 2,455
Well that's what an adviser who plans on keeping food on the table would do. Your a sneaky guy! Playing a little Devil's advocate. I looked Devil's advocate up in the dictionary and your picture was there. Who you trying to fool?
She is currently at the 25% marginal income tax rate with her income and few deductions, especially if she pays off her house. It is nearly a toss up of weather to payoff the house from CD funds or Refi to a new lower interest rate mtg, with a shorter amortization period.
I think if it were my sister/cousin I would advise to refi to a 15 yr mtg, at appx 3.5% int, with a monthly pymt of $ 1176 (about where she is now) and it will reduce her pymts by 6 yrs. If appears that her income at retirement will be the same or slightly higher than it is while working so the mtg pymt isn't an issue for her. This way she maintains a slight tax ded for the 5500 +/- int per year that she will be earning and between it and her property taxes, also extra funding in an IRA if possible, should be able to also reduce her to the 15% marginal tax rate. We're talking small savings here but it is a savings of maybe 1K in taxes overall. (An optional idea would be to pay down the mtg to 125K, then refi with a 10 yr mtg, and pymt of 1218 mo of P&I. This 10 yrs corresponds with her retirement time line.) With a small mtg like that compared to the value of the property, 30-40% LTV, she should get the most favorable int rate available anywhere.
Even though not part of the question, as others have suggested... suggest moving 200K or so into an Annuity for tax defered growth, maybe with several diff companies.
I think if it were my sister/cousin I would advise to refi to a 15 yr mtg, at appx 3.5% int, with a monthly pymt of $ 1176 (about where she is now) and it will reduce her pymts by 6 yrs. If appears that her income at retirement will be the same or slightly higher than it is while working so the mtg pymt isn't an issue for her. This way she maintains a slight tax ded for the 5500 +/- int per year that she will be earning and between it and her property taxes, also extra funding in an IRA if possible, should be able to also reduce her to the 15% marginal tax rate. We're talking small savings here but it is a savings of maybe 1K in taxes overall. (An optional idea would be to pay down the mtg to 125K, then refi with a 10 yr mtg, and pymt of 1218 mo of P&I. This 10 yrs corresponds with her retirement time line.) With a small mtg like that compared to the value of the property, 30-40% LTV, she should get the most favorable int rate available anywhere.
Even though not part of the question, as others have suggested... suggest moving 200K or so into an Annuity for tax defered growth, maybe with several diff companies.
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Yeah if her adviser sells an annuity out of the deal with your recommendation, she might even take you to Sizzler Buffet AL or at least a gift certificate. 
Bawse
Expert
why would she refi???? at 3.75% over 15 years she would still be paying $92,812 in interest that's money down the drain....and getting a refi it alot easier said than done in this market not to mention she will have to shell out money to close and/or have it tacked on to her principal balance.....all this just to say shes paying of the home six years sooner?
If she sells now she will have saved $233,021 in interest alone....not to mention that she can invest or start earning interest on this money...even if rates suck right now interest earn is ALWAY better than interest paid.
And we can all say that we are going to work until 70-75 but we NEVER know whats down the road...altleast if she loses employment or for health reason she can work a day past 62 she can start drawing early retirement from Social Security, HER HOME PAID OFF, money from her investments/earnings and the good Lord to see her through.
If she sells now she will have saved $233,021 in interest alone....not to mention that she can invest or start earning interest on this money...even if rates suck right now interest earn is ALWAY better than interest paid.
And we can all say that we are going to work until 70-75 but we NEVER know whats down the road...altleast if she loses employment or for health reason she can work a day past 62 she can start drawing early retirement from Social Security, HER HOME PAID OFF, money from her investments/earnings and the good Lord to see her through.
