Paying Down Mortgage Is Smart Move

Q. I am 67 and looking ahead to retirement. Our only debt is a mortgage loan on our house. Should I apply proceeds from a $10,000 certificate of deposit to pay down the mortgage loan, along with other savings currently about $5,000 a year? Or should I reinvest the CD proceeds, probably in more mutual funds? We have substantial assets invested in no-load bond mutual funds.

A.You failed to indicate the interest rate on your mortgage loan, but I assume it is higher than the interest rate on the CD. If you plan to continue living in your house after retirement, I strongly recommend paying off the loan or paying it down and refinancing the balance to reduce monthly cash outflow. You have been used to a relatively high income level, and reducing the cash flow to pay the mortgage loan would leave more for spending. Owning one's housing at retirement avoids a large item of cash flow and avoids the inflation risk of renting. The equivalent income value you gain from living in a house you own remains nontaxable, a substantial benefit, particularly for retirees.

Q. I got caught in the Oct. 13 market massacre and have decided to abandon my buy-and-hold strategy in favor of market timing. Could you supply the names and addresses of two or three top-rated newsletters as well as information on Hulbert's rating letter?

A. During bull markets, a buy-and-hold strategy may outperform a market-timing strategy. Timing pays off in declining markets. For timing signals, look at ``Telephone Switch Newsletter,'' P.O. Box 2538, Huntington Beach, CA 92647. Telephone Switch uses a multiple-moving-average program for calling switches. Another practitioner of moving averages is ``Fund Exchange,'' Paul A. Merriman & Associates, 1200 Westlake Ave. N., Seattle, WA 98109. A relative value system for upgrading into the top-performing funds according to their performance has produced outstanding results for ``NoLoad Fund X,'' DAL Investment Co., 235 Montgomery St., San Francisco, CA 94104. Each of these newsletter publishers will send you a free sample on request. You may contact the ``Hulbert Financial Digest'' at 643 S. Carolina Ave. S.E., Washington, DC 20003.

Q. Our first child is attending a university out of state this fall. I am concerned about his belongings. Should he buy some sort of insurance to cover theft or other loss of his property? How about his computer?

A. Generally, according to the Insurance Information Institute, your son's personal property is covered under your homeowners policy, within limits. A typical homeowners policy covers theft of property away from home up to a limit of 10 percent of contents coverage. For example, if your home is insured for $100,000, contents coverage is likely to be half, or $50,000. A 10-percent limit for property away from home would be $5,000 - less any applicable deductible.

To be sure your policy conforms to these typical coverages, check with your agent. Some policies cover a computer when it remains within the home but may call for a ``rider'' at extra cost if the computer is on a remote campus. Coverage limits also apply to jewelry, watches or other high-ticket items. If their value exceeds policy limits, you may need a ``floater'' for full coverage. Again, talk with your agent.

Caution your son to protect his property on campus by keeping his room locked, engraving identification numbers on stereo equipment and computer, and using common sense to avoid theft or fire loss.

Merle Dowd's column appears Saturdays in the Business section of The Seattle Times. Address questions to: Merle Dowd, c/o The Seattle Times, P.O. Box 70, Seattle, WA 98111.