Mary and Bob have been married for 25 years. They are both college professors. M
ID: 2373179 • Letter: M
Question
Mary and Bob have been married for 25 years. They are both college professors. Mary (50 years of age) makes $65,000 annually and Bob (60 years of age) makes $75,000 annually. Their oldest daughter is getting married. Bob and Mary would like to either 1) take out a second mortgage on their home (they can get an interest rate of 7 percent) or 2) withdraw funds from their IRAs or 3) sell their rental property. The cost of the wedding is $35,000. The equity in their home is $150,000; they have $80,000 in IRAs between the two of them and the basis of the rental property is $20,000. The rental property can be sold for $120,000. Mary and Bob want to know how they should finance the wedding and if tax implications will be a factor. Write a memo explaning your action.
I need this written as a memo.
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Explanation / Answer
Mary = $65000, Bob = $75000 Second mortgage 7% equity ($150000) withdraw funds from IRA (have $80000) Sell rental property ($120000) Cost of wedding = $35000 Monthly salary of mary = (approx) $5000 Monthly salary of bob = (approx) $6000 Say their general expense for a month = $5000 They save bobs salary of $6000 Remaining amount that they require is $29000. A rental property is generally an asset as it generates revenue. Selling it would me stopage of revenue that would come for a life time. A second mortgage is generally riskier and come with higher rate of intest. Since bob and mary are already at 50 and 60 it is riskier to go for second mortgage. It is better to remove from IRA since most people have $30000 in IRA.