Trading Spaces

Upon retiring, Larry Heller's clients had to wrestle with a unique problem: mortgage or no mortgage?

Leonard and Caroline Fried retired a little differently than most other couples: They bought a new house — a bigger, more expensive house. The Frieds wanted to move closer to their two children (and their grandchildren). So, they sold their 1,200 square-foot townhouse in Valley Stream, Long Island, and, in 2005, moved into a brand-new 2,300 square-foot house in a private, gated community in Melville, also on Long Island.

What makes the Frieds (pronounced FREED) even more special is that they weren't investment bankers or heart surgeons. Lenny, now 68, spent 39 years in New York City schools (mostly as a phys-ed teacher), and Caroline, 65, owned a gift shop.

“It's unusual alright,” says Larry Heller, a CFP and CPA who runs his own RIA, Larry Heller & Assoc. in Melville. “It just shows you what you can do if you live within your means.”

Heller, who specializes in retirement issues and has about $60 million in client assets, says that a New York City pension is key to their retirement, but the Frieds also “maxed out” their defined contribution plans over the years.

“Like other teachers, I worked a million jobs,” Lenny says. As he got older and his kids became self sufficient, Lenny says, he was salting away nearly 20 percent of his pretax pay in a New York State tax-deferred annuity.

Heller says the big question was whether to take a small mortgage or no mortgage. “Who takes a mortgage at our age? I was pretty free and clear and didn't want to,” Lenny recalls. Caroline says. “I was nervous. I said, ‘Oh, no, I can't do this.’ But then Larry said, ‘Oh, yes, you can.’ And he showed us in black and white that we could afford it.”

For one, the mortgage interest deduction will help offset some taxable income. For another, Heller says: “If they didn't take at least a small mortgage, they'd have all this equity in their house and wouldn't be able to do anything with it.”

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