I wonder why the news and brokerage firms seem so intent on scaring everyone? I get it that people have not saved enough, but the “you’ll need xx million dollars” is kind of ridiculous. Like telling a kid with a b average he needs a 4.0 to go to college…not true, and if you say that, they’ll just give up!!
Or refinance and then rent the house out and rent a smaller place for themselves, banking the excess?
I don’t know how much sense refinancing makes for them, unless they can really lower the rate and get a very short time period. Just refinancing in order to invest that money? Is it ever smart to borrow money to invest, unless you can get a super low interest rate, and can invest it well? If they have nothing invested, they may also be clueless about what to invest in, and could pick something poorly performing. An obvious choice is a good growth mutual fund, with a long track record, but not everyone is going to choose that.
I think I’d give them the Dave Ramsey book. His mantra doesn’t work for everyone, but might for them. I wonder if they have a lot of debt? If they are barely making it on that income, they either spend way too much, or have significant debt.
There are fairly simple things people can do to cut costs in retirement. I am in NJ which is high cost and could cut my housing costs by $500 a month and put $75,000 in the bank just by moving 9 miles. The towns are really equivalent towns so it is not like I am going from an elite town to a slum either.
Can they get a HELOC because they plan to sell a their house anyway. It would solve temporary problem.
Plus there are lots of ways to retire. One gets creative if money is tight.
^^ I don’t think additional debt is the answer. There are many ways to retire and one can be creative, but I think first one must answer the question: what do I do if I am struggling on a 6-digit income and will retire on half of that? A smaller house with lower property taxes isn’t a sufficient answer IMO.
Bob, I agree with you on the 6-figure income. I was just offering an alternative to refinance by opening a HELOC account.
I suspect they’d be very helped by a very clear and cold look at their budget and seeing where the leaks are happening and questioning each and every expenditure. Cable TV at $120/month? Cell phones at $160/month? High grocery bills? Unneeded insurance? There are a lot of ways that a seemingly decent salary can dribble away. Going to cash instead of using credit cards can really quickly help someone clamp down on unplanned spending.
They don’t have long until retirement, and they need to rather quickly learn to live on a much leaner lifestyle even outside the mortgage/tax issue. My concern is that if they refinance, and then keep on with the current spending they’re not doing themselves any favors. Also, if their mortgage balance is very low, they probably wouldn’t get the best mortgage rates. We used the HELOC method of effectively re-financing our mortgage when our mortgage balance got low, but we paid it off much more aggressively than the HELOC required. It dropped our mortgage interest rate by 1.2%, with the side benefit that the monthly payment that was required was a lot lower than what we were actually able to pay. We didn’t end up needing that flex, but it could have been helpful.
Exactly, arabrab. Sounds like perfect advice for them.
I like Bob’s advice about selling the house now and either renting or buying a lower cost housing option. Why stay in it another 10 years?
Use the money for the retirement accounts.
@arabrab, I agree with everything other than the cash recommendation, because if you put everything on a credit card, you can more easily see where the money is going. After they have figured out where the leaks are, they can go to cash.
I think our situation is better than the family as described in post #6931, in terms of our retirement savings and pensions. But two things work against us: it would take us more than 4 years to pay off our mortgage and it is unlikely we could work for another 10-12 years. (I recently read that the average ages of employees at two well-recognized companies in our area are 28 and 29 respectively!)
We made a “mistake” of moving and refinancing too many times, but what else could we do when we could not afford a house in a good school district when we were young and we had to move to a better public school district later?!
Re: “selling the house now and either renting or buying a lower cost housing option.”
We thought of this as well.
Re: " rent the house out and rent a smaller place for themselves, banking the excess?"
We thought of relying on the same strategy. Also, retiring in another cheaper country is another move we (at least I) are considering. We could possibly cut our COL by 30 to 40% by going overseas - especially before we get Medicare. (The mandated insurance by ACA makes this more complicated.)
I think we have had enough to live on if not for the medical expenses – the high medical expense in this country has always scared me to death. Last week, I just paid $500 for an MRI prescribed by my doctor (why using the costly MRI? My surgeon prescribed half a dozen of CT scans in a couple of months without any concern about how damaging the radiation might have done to me - his priority was to locate the spot where it leaks. He did not but my body cured it by itself after 4-5 months of IV and antibiotic.) Two years ago, the insurance company paid almost half a million for my cases due to a botched surgery. I think I could be a cash payer and could still be ahead in terms of medical expenses if I live in some other country.
I am hoping someone here can tell me where to start my new hunt for old SS records. H and I are starting to put our retirement strategies in order and our planner was asking about my SS benefits. I have been a SAHM for the past 27 years. When I pulled up my SS records I have three years that are missing. I know I worked then and I know I was married then and filed jointly with H. His records are on line but not mine. As I understand it I need those years to qualify for SS on my own or else I will qualify for 50% of H’s, correct? Thanks for any help!
@NorthMinnesota , Just a quick response. You should look thru your tax returns and Form W-2s to substantiate your income for those missing years when you contact the SSA. It’s possible that the benefits in your own right might be higher than your 50% spousal benefit, so you should check.
Edited to add: if you can’t find your old W-2s, it’s possible that your earnings records won’t matter too much because you’ve been out of the workforce for 27 years and would get more through your spousal benefits. It’s more important to make sure the higher-earning spouse’s SS record is accurate.
My concern on your friends plan is “he plans to work another 12 years”…well, maybe that work and maybe it doesn’t I know several people including my own H who got hit with a lay-off and basically never got back to that same career place. Obviously, as you mentioned, health concerns that pop up work similarly.
AttorneyMother…that would be wonderful if we had the records! Somehow those records from the early 1980’s are missing. H isn’t sure if they got lost in a cross country move or whether he purged them by mistake. Any way to track them down if we don’t have them?
@NorthMinnesota , if you mean tax returns, you could order them from the IRS (caveat, I’ve never done that myself). Copies of the W-2s you filed should have been attached to the returns.
SS benefits are calculated using your highest 35 years of earnings. If you don’t have 35 years, you take a zero for the missing years.
And you need 10 years of earnings above a certain amount (actually, 40 quarters) to qualify for a benefit on your own.
So you may not even qualify for benefits on your own. And with so few work years, it seems unlikely that your own benefit would exceed half of your husband’s.
The IRS probably still has records of your returns, you might be able to get it from them.
@NorthMinnesota, take a look at this publication to see what the maximum FICA earnings were historically and see if it is still worthwhile for you or your H to track down those missing records. Good luck!
NM - As mentioned above, research your figures and then compare to 50% of you husband’s. Very many SAHM find that the spouse benefit is higher.