Dear Reader,

I made a big mistake in the current column. I suggested that a reader with $20,000 in cash make multiple deposits below $10,000 to avoid undue attention and the need for a Currency Transaction Report.

I also wrote the original reader, telling him of my mistake and sending him excerpts from some of the very helpful reader mail I received on the subject.

My sincere thanks to the readers who knew better and took the time to tell me so. And my sincere apologies to any readers I led astray. Please read my response here.



Scott Burns

Q. I have a question for about paying off my mortgage. We owe about $41,000. I want to pay it off because we will not be able to itemize next year and my savings aren’t earning any interest.  We have about $20,000 in a savings account. We also have another $20,000 that we stashed away over the years, just sitting in a safe deposit box.

When I take that money out of the safe deposit box and deposit it in my account to pay off my mortgage, will that throw out some sort of red flag? I have heard that when you deposit large sums of money, the bank or maybe IRS will want to ask about it. I just want to pay off my mortgage, so I don't have to worry about it and save a little in interest. But, I don't need any hassles. What should I do? —K.B., by email

A. Under the Bank Secrecy Act, banks must file a Currency Transaction Report for amounts that are $10,000 and over. Your best option is to make a series of cash deposits for lower amounts. If you were a rich drug dealer with an unending supply of cash, this remedy wouldn’t be very helpful, but since you’re dealing with only $20,000 you’re not likely to attract undue attention. For many people, paying off their home mortgage— or any other debt— is a good alternative to paying 4, 5 or 6 percent interest on a loan while earning next to nothing on their savings.

There is one caution, however. Don’t make yourself broke but debt-free. An alternative is to take out a home equity credit line— I’ve seen rates as low as 2.70 percent— and use it to pay off your first mortgage. This will reduce your payments to the monthly interest charge. Then pay off part of the loan, but leave enough cash in your checking or savings account that you still have a cash reserve.

Q. Where does the money go when you invest? In other words, if I invest $10,000 in a single stock or mutual fund, just exactly where does every dollar go? —B.M., by email

A. Your money goes to the seller of the security. If you buy 100 shares of company A from an existing shareholder, your purchase is a transfer of cash from you to the selling shareholder. No money goes to the company. If you buy 100 shares of company A as a new issue, the cash will go to the company for investment.

Companies also have secondary issues. In those, an existing shareholder— usually one with very large holdings— will often sell shares in the offering. Again, your cash payment will go to the seller. In all instances there will also be a transaction cost, with some money going to a broker/underwriter.

Q. My wife is 12 years younger than me. I think I read somewhere that if that were the case, the required minimum distribution would be reduced. Is that true? And what would the rate of withdrawal be? —D.D., by email

A. That is true. There are two IRS tables that dictate the size of RMDs. One is for the majority of couples who are within 10 years of each other in age, the Uniform Lifetime Table. The other, called the Joint Life and Last Survivor Expectancy Table, is for couples with an age difference of 10 years or more. Both tables can be found on the IRS.gov website. At a 10-year age difference the distribution rate is about the same. The reductions in required minimum distributions start increasing rapidly as the age difference exceeds 10 years.

For most couples, the required minimum distribution rate is 3.65 percent at age 70.  But if a 70-year-old has a 58-year-old spouse (12 years younger) the RMD is 3.47 percent. The reduction increases as the age difference increases: With a 50-year-old spouse the RMD rate is 2.86 percent. In the amusing case of a 90-year-old with a 40-year-old spouse, their required minimum distribution rate would be only 2.29 percent.

In both cases the distribution rate increases with each passing year.