Tax Comparison of 15 and 30 Year Mortgages

Posted On November 16, 2015 By Admin In Financial Planning / 1 Comment

I received a tremendous response from readers about last week’s article comparing 15 and 30 year mortgages (read it here). A number of readers astutely asked how the mortgage interest tax deduction would impact the decision of choosing between the 15 and 30 year note. Here is your answer!

For our example, we are looking at buying a $250,000 home, putting 20% down and assuming a mortgage of $200,000. At today’s interest rates, we’d be choosing between a 15 year mortgage at 3.00% or a 30-year at 3.75%. Here are the monthly payments, not including insurance or property taxes.

15 Year Mortgage @ 3.00%	30 Year Mortgage @ 3.75%
payment $1381.16	payment $926.23
	difference = $454.93

Over the full term of the mortgages, you will pay the following amounts of principal and interest:

15 Year Mortgage @ 3.00%	30 Year Mortgage @ 3.75%
principal $200,000.00	principal $200,000.00
interest $48,609.39	interest $133,443.23
total payments $248,609.39	total payments $333,443.23

You will pay a significantly higher amount of interest over the life of a 30 year mortgage. The interest payment of $133,443.23 increases your total payments by 67% over the amount you have borrowed. And that’s at today’s rock bottom mortgage rates! I should point out that above 5.325%, the interest portion on a 30 year mortgage exceeds the original principal. In other words, the interest would double your cost from $200,000 to $400,000.

You can deduct the mortgage interest expense from your taxes, but the amount of the benefit you will receive depends on your marginal federal income tax rate. Here is the value of the tax benefit for six tax brackets.

15 Year Mortgage @ 3.00%	30 Year Mortgage @ 3.75%
interest $48,609.39	interest $133,443.23
15%: $7,291.41	15%: $20,016.48
25%: $12,152.35	25%: $33,360.81
28%: $13,610.63	28%: $37,364.10
33%: $16,041.10	33%: $44,036.27
35%: $17,013.29	35%: $46,705.13
39.6% $19.249.32	39.6%: $52,843.52

Obviously, the 30 year mortgage provides much higher tax deductions, although they are spread over twice as long as the 15 year mortgage. If we subtract the tax savings from the total payments of the mortgage, we end up with the following costs per tax bracket.

Total Cost, after the tax savings

15 Year Mortgage @ 3.00%	30 Year Mortgage @ 3.75%
15%: $241,317.98	15%: $313,426.75
25%: $236,457.04	25%: $300,082.42
28%: $234,998.76	28%: $296,079.13
33%: $232,568.29	33%: $289,406.96
35%: $231,596.10	35%: $286,738.10
39.6%: $229,360.07	39.6%: $280,599.71

It should not be a surprise that even though the 30-year mortgage provides higher tax deductions, that it is still more expensive than a 15-year mortgage, even when we consider it on an after-tax basis.

For most Americans, the actual tax benefit they will receive is much, much less than described above. That’s because in order to deduct mortgage interest, taxpayers have to itemize their tax return and forgo the standard deduction. As a reminder, itemized deductions also include state and local taxes, casualty, theft, and gambling losses, health expenses over 10% of AGI, and charitable contributions.

For 2015, the standard deduction is $6,300 for single taxpayers and $12,600 for married couples filing jointly. So, if you are a married couple and your itemized deductions total $13,000, you’re actually only receiving $400 more in deductions than if you had no mortgage at all and claimed the standard deduction. And of course, if your itemized deductions fall below $12,600, you would take the standard deduction and you would not be getting any tax savings from the mortgage whatsoever.

While the mortgage interest deduction is very popular with the public, economists dislike the policy because it is a regressive tax benefit. It largely helps those with a big mortgage and a high income. For many middle class taxpayers, the tax benefits of mortgage interest is a red herring. With our example of 3.75% on a $200,000 mortgage, even in the first year, the interest is only $7,437. That’s well under the standard deduction of $12,600 for a married couple, and the interest expense will drop in each subsequent year.

Compare that to someone who takes out a $1 million mortgage: their first year interest deduction would be $37,186 on a 30 year note. Simply looking at the amount of the mortgage interest will not determine how much tax savings you will actually reap, without looking at your other deductions, and comparing these amounts to the standard deduction.

Even if you are one of those high earners with a substantial mortgage, you have another problem: your itemized deductions can be reduced under the so-called “Pease limitations”. These limitations were reintroduced in 2013. For 2015, itemized deductions are phased out for tax payers making over $258,250 (single) or $309,900 (married).

Bottom line: If your mortgage is modest, your interest deduction may not be more than your standard deduction. And if you are a high earner, you are likely to have your deductions reduced. All of which means that the tax benefit of real estate is being highly overvalued by most calculations. There is a substantial floor and ceiling on the mortgage interest deduction and it provides no benefit for taxpayers who are below or above those thresholds.

Ceiling: Pease limits on tax payers making over $258,250 (single) or $309,900 (married).
Middle: receive a tax benefit between these two levels.
Floor: no benefit on deductions below the standard deduction of $6,300 (single) or $12,600 (married).

Financial Planning Steps When Getting Remarried Later in Life (Updated for 2026)

Posted On August 17, 2015 By Scott Stratton, CFP(R), CFA In Financial Planning /

Getting remarried later in life — whether after divorce or the death of a spouse — brings emotional fulfillment but also important financial planning considerations. At this stage of life, you and your partner may both have:

Retirement accounts and Social Security benefits
Trusts and estate plans
Inheritances or concentrated assets
Long-term care preferences
Adult children and grandchildren from prior relationships

Because of this complexity, thoughtful planning before remarriage can help align expectations, protect retirement security, and ensure that assets are ultimately directed to the people and causes that matter most to you.

Step 1 — Have an Open Financial Inventory Discussion

Before getting remarried, it’s valuable for both partners to share a clear picture of their financial situation, including:

Retirement savings and expected income streams (Social Security, pensions, IRAs, 401(k)s)
Tax filing status history and expectations
Investment accounts and capital gains/losses
Property ownership and titling
Debts and insurance coverage (health, life, long-term care)

This isn’t just about what you have — it’s about how you and your partner think about money, risk, and financial goals. Early clarity helps avoid surprises later and sets a foundation for joint decision-making.

For more on income sequencing and retirement planning coordination, see our Retirement Income Planning Hub.

Step 2 — Understand Social Security and Pension Implications

When two people remarry later in life, Social Security and pension benefits may change:

Spousal or survivor benefits can be affected depending on the timing of marriage and prior entitlements;
If one partner believes they might have a larger benefit as a divorced spouse, getting married could forfeit that option;
Pension survivor options can reduce monthly income for a spouse but provide financial security after one partner’s death.

Understanding these rules well before the wedding helps both partners make informed decisions about timing and election strategies.

Learn more about timing Social Security in our article Social Security Timing Decisions.

Step 3 — Review Estate Plans and Beneficiary Designations

Remarriage later in life often raises a central concern:

How do I provide for my new spouse while still preserving assets for my children and grandchildren?

This is where estate planning coordination becomes especially important.

Key items to review include:

Wills and revocable living trusts
Beneficiary designations on retirement accounts and life insurance
Powers of attorney and health care directives

QTIP Trusts and Blended Family Planning

One commonly used planning tool in later-life remarriage situations is a Qualified Terminable Interest Property (QTIP) trust.

A QTIP trust is designed to:

Provide income to a surviving spouse for life
Preserve the principal of the trust for named beneficiaries — often children or grandchildren from a prior marriage
Defer federal estate tax until the death of the surviving spouse

Who may want to consider a QTIP trust:

Individuals remarrying later in life with separate assets
Couples with blended families and different legacy goals
Those who want to ensure a surviving spouse is financially supported without giving full control of assets
Families where adult children or grandchildren are intended long-term beneficiaries

A QTIP trust can be particularly helpful when both partners want clarity and reassurance around inheritance outcomes while still honoring spousal support obligations.

For a broader view of how trusts interact with taxes and retirement planning, see our Retirement Tax Planning hub.

Step 4 — Consider the Financial Tradeoffs of Marriage vs. Remaining an Unmarried Couple

For some couples later in life, marriage isn’t the only framework for long-term commitment. In certain situations, staying unmarried can offer financial advantages, including:

Keeping separate tax filing statuses (which can affect income thresholds for taxes, Medicare premiums, IRMAA, and NIIT)
Preserving certain survivor benefit structures under Social Security
Maintaining individual estate planning arrangements without marital property rules

However, not marrying can also mean missing out on:

Spousal inheritance rights
Tax benefits associated with married filing jointly
Certain pension and survivor benefits

Discussing these tradeoffs with a planner or tax professional before deciding helps ensure your choice aligns with your values and long-term security.

Step 5 — Evaluate Tax Implications of Filing Jointly

Marriage affects your tax filing status, potentially changing:

Tax brackets
Standard deduction amounts
Eligibility for certain credits or deductions
Exposure to senior-related surtaxes (e.g., the NIIT or Medicare premium surcharges)

Because marriage can raise combined income, it may affect things like:

Net Investment Income Tax (NIIT) thresholds
Medicare IRMAA surcharges
Timing of Roth conversions or IRA distributions

We explore interaction effects between retirement income and surtaxes in our article Strategies to Reduce the Medicare Surtax.

Step 6 — Discuss and Consider a Prenuptial Agreement

For many couples remarrying later in life, a prenuptial agreement is a practical tool — not just for “protecting assets,” but for clarifying expectations and reducing future conflict. A prenuptial agreement can help you:

Preserve individually owned assets for children from prior relationships
Define financial responsibilities during marriage
Agree on how retirement accounts and property will be treated if the marriage ends
Clarify what happens with estate plans and inheritances

Importantly, a prenuptial agreement creates an open framework for financial conversations before marriage — often revealing unspoken expectations that benefit long-term harmony.

Why Early Clarity Matters Later in Life

Couples marrying earlier in life often have decades to adjust financial plans together. But when you enter marriage after age 50 or 60, there may be less time and more complexity — shorter retirement horizons, fixed incomes, accumulated assets, and grown children.

Early planning doesn’t mean formalizing every detail, but it does mean:

Understanding the financial realities each partner brings
Communicating expectations about income, spending, and legacy goals
Aligning estate plans and retirement income strategies ahead of time

This planning mindset supports not just financial outcomes, but what research shows matters most in long-term relationships: shared understanding and aligned expectations.

Frequently Asked Questions (Retiree-Focused)

Q: If we remarry, do we have to change all beneficiary designations?
Not necessarily. But reviewing them ensures they reflect your current wishes; lapse to estate or unintended beneficiaries is one of the common planning pitfalls.

Q: Can a prenuptial agreement be changed later?
Yes. A postnuptial agreement can serve a similar role after marriage. Whether pre- or post-marriage, clear documentation of financial intentions is powerful.

Q: How does marriage affect Social Security benefits for divorced spouses?
Remarriage can affect eligibility for a divorced spouse benefit if you remarry before age 60 (or 50 if disabled). This makes timing and benefit election strategy especially important for later-life remarriage.

Remarriage later in life is an important transition — emotionally and financially. If you’d like a planning-first conversation about how remarriage might affect your retirement income, tax exposure, and legacy goals, you’re welcome to Request an Introductory Conversation.

Five Ways to Be Richer in One Year

Posted On July 13, 2015 By Admin In Financial Planning /

When I tell people I’m a financial planner, I often get a response like “I wish I needed that service”. I know a lot of people live from paycheck to paycheck, including people who have graduate degrees and good jobs. It’s tough to have a conversation about something as far away as retirement when someone is worried about how they’re going to pay their bills two months from now.

No matter where you are today, it is not a hopeless situation; anyone can change their position for the better. It requires a plan, the willingness to make a couple of changes, and the determination to stick with it. If you’d like to be richer in one year from now, here’s how to get started.

1) Get organized. Do you know how much you owe on credit cards or what the interest rate is? How much money do you need each month to cover your bills? How much should be left over to save or invest? Establish a filing system, or use a tool like Mint.com or Quicken so you know how much you are spending and where. Like a lot of things in life, preparation is half the battle when it comes to personal finance. It can feel a bit daunting at first to take an in depth look at your finances, but ultimately it’s empowering because you will discover for yourself what you need to do.

2) Start tracking your net worth. There are two parts of your net worth: your assets (home, savings, investments, 401(k), etc) and your liabilities (mortgage, credit cards, other debt). Your assets minus your liabilities equals your net worth. If you take 30-45 minutes to calculate your net worth every month, it will change how you think. Just like starting a food journal or an exercise diary, tracking your net worth will make you mindful of your behavior. When you create a higher level of self-awareness of your actions, you will automatically start to change your habits for the better. And of course, if you don’t track it, how will you know if you are richer in one year?

3) Plan your spending. Most of us have a fixed salary where our ability to save depends on spending less than we make. People assume that if they made more money, it would be easy to save more. Unfortunately, what I have actually found as a financial advisor is that families who make $100,000 are just as likely to be broke as families who make $75,000. They may have a bigger house or a fancier car, but they’re no richer. If we want to save more, we have to learn to spend less.

The key to spending less is to find a system or process that works for you. For some people, creating a detailed and strict budget is key. For others, it may work best to become a cash consumer, where you leave the credit cards at home and only spend a set amount of cash each week. It can be helpful to comparison shop all your recurring bills and look to switch providers to save money. (For example, home/auto insurance, cell phones, gym membership, electric provider, etc.) Lastly, people are saving money by dropping their landlines, or dropping cable for Netflix.

4) Put your saving on autopilot. Money that you don’t see can’t be spent. You’re more likely to be a successful saver when you establish automatic contributions, versus waiting until the end of the year and hoping that something will be left over to invest. If your company offers a 401(k) match, that’s always your best place to start. If a 401(k) is not available, consider a Roth or Traditional IRA. If you don’t have an emergency fund, set up a savings account separate from your checking account, so you can’t easily access those funds. Even if you can only save $100 or $200 a month for now, that’s okay, because you’re creating a valuable habit. When you get a raise or receive a bonus, try to increase your automatic contributions by the amount of your raise.

5) Don’t go it alone. People are more successful when they have help, good advice, and accountability from another person. That may mean hiring a Certified Financial Planner, joining a Dave Ramsey Financial Peace class at a local church, or finding a knowledgeable friend who can lend an ear. If you’re looking for help with debt and improving your credit, contact the National Foundation for Credit Counseling at www.nfcc.org or by phone at 800-388-2227.

If you make these five changes today, you will be richer a year from now. Habits are important. For most people, wealth isn’t accumulated suddenly or through significant events, but by years of getting the small decisions right. Build a strong financial foundation, then you will find that a financial advisor can help you take the next steps to creating the financial life of your dreams.

The Best Way to Get in Shape

Posted On June 29, 2015 By Admin In Behavioral Finance /

In December, after years of good intentions and a couple of false starts, I finally joined a gym and hired a personal trainer. I meet with my trainer once a week and workout two or three times separately. Previously, I thought I could just get in shape on my own, but it was always too easy to find an excuse why today wasn’t a good day to exercise. And then days become weeks, you find other demands more pressing, and you just never get around to it.

Working with my trainer, Clint, has been great. I’m getting in shape and feel very confident that I’m now on the right path. Looking back, my only thought is that I wish I had gotten started much sooner with this process. Why are people more successful with a personal trainer than on their own? Here’s what a coach has to offer:

1) Knowledge. Clint has spent thousands of hours in education and his certifications demonstrate commitment to being qualified and skilled to help others. As for me, I have neither the time nor the interest to learn this information. Since you don’t know what you don’t know, it’s smart to seek out expert, objective advice.

2) Experience. Clint has worked with many clients and knows what works. While everyone’s individual situation is slightly different, a professional trainer has probably seen a lot of clients who have similar needs to mine.

3) A written plan. We started with a physical assessment to document my starting point, and after discussing my goals and commitment, developed a plan unique for me. Now I know what I need to do on a daily basis in order to reach my long-term goals.

4) The right tools. My trainer selects the most appropriate equipment for me to use and makes sure I use them correctly for maximum benefit and to avoid injury. When you combine discipline and consistency with doing the right things, good results happen.

5) Motivation. We have a workout schedule which has become a habit and routine. It’s rewarding to see our plan working, and when there are occasional set-backs, it’s helpful to have Clint’s patience, support, and encouragement to get back on track.

While I certainly suggest others take good care of their health and bodies, here’s what I want people to recognize: just as using a personal trainer is the best way to get in shape physically, using a financial planner is the best way to get in shape financially. What we offer is very similar. As a CFP(R) practitioner, I help individuals accomplish their financial goals, bringing professional knowledge, years of experience, a written plan, the right tools, and ongoing motivation.

Can you get in shape on your own? Of course it’s possible, but you’re more likely to be successful with professional guidance. You can be sure that athletes and actors always have a personal trainer or a team of trainers. Likewise, many of the most financially successful individuals I’ve met, including multi-millionaire entrepreneurs, board members of Fortune 500 companies, and Harvard-trained surgeons all use a financial advisor. It’s not a question of whether or not they’re not smart enough to do it on their own, it’s that they recognize the value in hiring an expert and the benefit that relationship can bring to their financial well-being.

If you are like I was, having good intentions, but procrastinating getting going, it’s time to give me a call. We will put together a financial plan you can understand and I’ll be there in the months and years ahead to help you stay on track with accomplishing your goals. If you’re waiting for tomorrow, don’t. Aside from yesterday, today is the best day to get started.