I'm sorry I ever mentioned any of it.
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I'm sorry I ever mentioned any of it.
I would pay off the student loan and other high-interest debt first, then pay the mortgage, then save for retirement.
I'm coming from the point of view that my house yields the highest gains of any investment I have. We have paid off our mortgage on a our house that cost around 550,000 and is now worth around 1 million. Same with my cabin - I paid off the ~150,000 (no mortgage) and it now worth over 500,000. So even without a lot of retirement savings, we'd be in excellent shape by selling off any of the real estate.
This obviously depends on where you live and when (and if) you intend to sell.
DH and I plan to downsize within the next 5-7 years, and I don't see real estate in the Bay Area taking a nosedive in that time period.
Given your age, if it were me, I'd aim for this:
1) Refinance the mortgage if possible. Even though rates are no longer at rock bottom, I would bet you can do better than a 5.xx% rate still. Or, think about moving. :( Do you plan to stay in your home indefinitely? Could you get anything comfortable in your neighborhood but for less borrowing? If you sold your home, would you expect to get more than what you owe? More rhetorical questions than anything, but feel free to answer them if you want . . .
2) Pay off the cc and car and possibly the medical debt (or maybe just stick to payment plan since it is 0%) and then start rolling those $$ into retirement savings.
3) Keep current on the student loan, but don't go overboard on paying it off. It would be interesting to know the outcome of if you are better off submitting to some garnishment of SS or by keeping with the payment plan. One of the recent Marketplace Money episodes had a good listener question about student loan forgiveness v. income-based repayment. I wish I could remember which week it was. Maybe if you poke around in the podcast archives the descriptions would tell you enough to know which one it was.
4) Put any extra available $$ toward retirement. It's an "put on your own mask before putting on that of others" kind of scenario in my mind. You might be ok with working until 70, but you may not be able to. :( I think the time to beef that fund up as much as you can is now.
You might also consider cross posting this in the MMM forums. I hate to recommend that but you won't be torn from us if you do it. :) There are a lot more people over there and many of them are very well versed in investing. You gotta have a tough skin, though. I've never been brave enough, myself. :)
ETA: Here's that student loan podcast (not the whole thing, you might have to hunt around to where within the hour they talk about it): https://itunes.apple.com/us/podcast/...234231719&mt=2
I would put the money in retirement funding after paying off the high interest loans. The mortgage will always be payable or you will sell the house if the funds change.
I agree with razz. I am usually big on paying off the mortgage but in your case I do not think it makes sense. You may need to sell the house in order to retire and you don't know what the housing market will be like then. Also Fidgiegirl is right that you may not be able to work till 70(either physically or getting laid-off and can't find another job). I would hope for the best & prepare for the worst.
I pretty much agree with fidgie. I would:
1) If you are sure you want to stay in the house for at least 5 years, try to refinance. You might want to check with BECU about their rates -- I have been a happy BECU customer for nearly 25 years. A mortgage broker might also be able to give you a sense of what you can do.
If you are not underwater, and depending on how housing values are doing in your neighborhood, you might want to consider downsizing now to a condo or townhouse, or maybe even going back to renting an apartment. 2k/month is pretty high, though I realize that includes extra.
2) Pay off the credit card, then the car loan -- both as soon as possible
3) Figure out whether you have the possibility of getting the student loans forgiven. that would be HUGE. didn't the non-profit forgiveness programs start around 2007? If so, then you've been paying several years already while working in the non-profit sector. That should count, no? EVen if you have to pay a bit more now based on your higher income, the prospect of having nearly 100K in loans forgiven is MEGA. Take this more seriously and figure out what you need to do to get in the program. End of lecture :)
4) After you have done the steps above, throw whatever you can into retirement. Given your ages, you might want to be a bit more conservative in your asset allocation. Or maybe this is the time to throw it all at higher risk/higher return options, if you really are sure you are willing to work another 10-20 years. You could go with more risky for him (since he has a longer work horizon) and more conservative for you. You are going to get better returns in the market over time than you probably will putting the extra on the mortgage. And then if you want to pay off the mortgage with retirement funds when the time comes, you can always do that.
Do also take the time to figure out what your social security income likely to be for you and DH at ages 62 and above. I know you had lots of years of no or irregular income, but there should be SOMETHING there and knowing what you have coming will help you plan better in terms of cash flow.
If you know you want to keep the house for awhile, I would still keep a close eye on the market and think seriously about selling/downsizing at some point. Look into whether you might eventually qualify for Seattle's subsidized housing programs for the elderly at some point -- SHAG is the big group you are probably familiar with, there may be others. If you could wipe out the student loans, get rid of the mortgage and reduce your housing cost, you might be able to retire much sooner than you think.
Good luck figuring out your plan and putting it into motion. You can do this!
My student loan is on a repayment program where I pay 10 years of payments based on my income and the rest is forgiven because I am a public servant. Thanks George Bush!
I am a public school teacher. I make a sub-standard salary. I will get a pension and Social Security. My retirement program is that I am working hard to pay my mortgage off early. When the mortgage is paid and student loan forgiven, I'm retiring. Hopefully, less than 10 years from now which will still make me 5+ years older than the average retiring teacher.
I have virtually no savings but with the mortgage gone and receiving pension and SS, I will live pretty well.
This is all very helpful, thank you!
- The house: not under water (current Zillow at 290K & local comps strong). We are planning to stay, as we've put a lot of work into it, and really like it here. It is über affordable for Seattle, well insulated, etc. I don't think we'd qualify for a re-fi due to my SL debt. Nor do I think we'd qualify for another mortgage for the same reason. Might I be incorrect, in your estimation? I have investigated senior housing which is affordable, and we'd qualify once I am retired & living on SS, but not with current income.
- The SL: I have not paid on it in some years. The interest rate is 3.2%. I will start paying a graduated payment in the next 60 days, $200-350/Mo for a year while I investigate the non-profit 10year/120 payments pgm. I want to pay on it, but it is frankly my last priority. I'm working on putting a number to what it would mean to lose 15% of my SS each month towards it.
I think it may be time to consult a financial planner. Keep those ideas coming!
I don't understand the attitude of it being ok not to pay on your SL for years, and no care from you that it might not be paid off in your lifetime????? I paid off my student loans, my kids are working hard to pay their SLs off. What makes it ok for you not to, but have a nice house, etc. I did without a lot to get my SLs paid off before I ever took on a mortgage, etc.Quote:
Originally Posted by redfox
Yarrow: It sounds like you don't understand the "Student Loan Scam." (Hint: It's not what borrowers perpetrate on the lenders/government when they borrow and fail to pay back according to the original terms.)
Sell the house, the cars, the kids, and anything else you can get your hands on. Seriously. Both of you get some kind of second income. You know the live frugal drill and start paying off debt. At 59 with no retirement savings, this is an emergency. Get everything but the mortgage paid off and get some emergency savings in place before you start retirement savings. IMHO.
I don't know why I didn't read this post earlier.. just catching up now, with interest, because, redfox, your situation is very similar to mine.. I am 61 (oops, I almost said 62, but won't be 62 until late March). I have exactly $6,000 in an IRA. We own our home but not outright--with a big mortgage--and I refinanced last year with 3.25 15-fixed year rate. Unfortunately I had to fold in DH's commercial loan balance, which brought our principal up to $260,000, but at the 3.25 for 15 years, it's amazing how the amortization of principal vs. interest works so much better in your favor vs. a 30 year higher interest loan.
I also would love to stay in our house if it's at all possible, but I'm freaked out by the uncertainties of my earning potential (I doubt DH's earning potential.. I'm planning on encouraging him to take his SS at age 62, unless he gets with the program and starts thinking rationally about our situation.
But enough about me--it's your post.. I personally like the advice offered:
1) try to refinance
2) pay off CC debt
3) pay off SL debt while checking into the non-profit 10-year forgiveness program (my DS is actually taking advantage of that plan)
4) put maximum allowable for 55+ into 401k/IRA
5) pay whatever you can towards the house. I know that if you get a low interest rate for the house (if you refinance) it's counterintuitive to sacrifice potentially higher interest earned in savings, but personally, I love the security that no bank has any say in the roof over my head.
I think it's especially hard when so many of the stories out there talk about people with hundreds of thousands saved for retirement. It would be interesting to know what's really going on with the majority of people near retirement. We are in better shape but not anywhere near what articles say we should have.
In the best possible scenario, I continue making what I've been making consistently over the next seven years. If I do, I can probably pay off all debt. Then spend another year saving like crazy. If I take SS at 70 and my earnings are in the same ballpark as in the past, I actually get a pretty good SS check, and if the house is paid off, I'm not worried.Quote:
Originally Posted by redfox
But, that's best case scenario. And it's just one slim step away from worst case scenario which would be work stops flowing, I can't pay the bills and all the other financial doomsday stuff occurs. I have actually considered selling my house and buying a Tumbleweed house and parking it in my son's back yard in VT. That would be the doomsday scenario, and to be honest, things could be worse, so I am doing my best to stay busy and active in my career, and if s**t happens, c'est la vie. I'll be fine, one way or another.
Redfox, I hate that you have had to spend so much $ to pay for your cancer treatment. I have friends that had a paid for home, savings,etc and even though they had health insurance are now broke & both sick again. I will never use all my $ to pay for health costs-they can take small payments. I know you & others had the best intentions but it does not seem to matter. I like Mr MM for inspiration but people seem to be smug & don't realize what can happen in life-they are mostly young. Pinkytoe, most people have very little $ if you look at the stats. We used all our savings to pay our house off. WE can live frugally on our pensions or better with our consulting work until we either can't get any or are too old.
Deleted. Op took my comments the wrong way.
So true. When you are young, all things seem possible. All the planning and saving in the world can't save one from things like illness or accidents.Quote:
I like Mr MM for inspiration but people seem to be smug & don't realize what can happen in life-they are mostly young.
I love to think about all these financial scenarios and how to climb out of them. My older brother, now 65, recently came for a visit and we were shocked to learn that he and his wife have quite a bit of debt ($125K mortgage, credit card, car) yet they have been retired for 10 years. They live off of SS and his small military pension.
Redfox, I understand completely-we also had to rescue our step son. Pinkytoe, that is too bad about your brother but it sounds like they are making it work. Even though we don't have much $ saved I feel blessed that we are debt free, have our pensions and right now the health to be consultants. However, that can all change in an instant. WE have some friends ( a couple) that both have serious cancer at the same time. They are wonderful people but are having a tough time.
Thanks, Terry. Being a stepparent is the hardest thing I have ever done. I am proud that we sacrificed for our two kids. I am holding your friends in the Light... I cannot imagine both my DH & me having cancer at the same time. Wow.
I must confess that I was rather shocked by Yarrow's words and the assumption that she, and apparently flowerseverywhere made, that my debt was either being defaulted upon or was due to personal irresponsibility, without any evidence to support those conclusions. (I've reached out to Yarrow to talk about it.) Never in my wildest imagination would I make those assumptions. I always assume that life hands out what it does, and we all do the best we can.
If you feel you did the best you could hold your head high and be proud. I am not your enemy by any means, just human.
I listened to an audio lecture from Effective Communication atThe Great Courses in which a quote from a Finnish prof resonated with me. Paraphrased, "If you hear and fully understand all that I have just said to you, culturally, in context and life experience, it is probably a mistake". It is so easy to misunderstand and misinterpret even with the best of intentions. That quote has since governed my responses as much as possible but I am still learning.
REdfox, thanks for the positive thoughts for my friends. I was also surprised at some of the comments. Even if you were in default over student loans there could be an extremely good reason for it. No One ever knows what life will throw at them and all the best financial planning in the world goes up in smoke. Besides there are worse things then losing your $-losing your life or a loved one. My best friend lost her 19 yo daughter to a rare liver disease(well one day & dead a year later) and I have friends now that their only child (8yo) is battling brain cancer. All that seems pretty insignificant when compared to $.
I think you've gotten some great advice and I admire how you have handled everything that has been thrown your way.
In order of debts, I would only pay minimum on the mortgage until the credit card and car loan debt are paid in full (with the extra you've thrown towards mortgage you could probably have those knocked out in a year). Continue the minimum on the medical debt (so amazed that that is all the medical debt you have after the cancer) and pay the minimum on the student loan. After the credit card and car loan are gone, re-fi the mortgage and then pay extra on that. I would probably put 2/3 extra towards mortgage and 1/3 extra towards retirement until the mortgage is gone.
I have a question on the school loan. I didn't know about them taking 15% off SS for school loan debts. What then happens upon death? Do they take what they can out of assets to clear the debt? If that is the case I would just pay minimum through out the life of the loan. I ask because at 47(tomorrow) I'm considering going back to school to work on a masters and if I do it will have to be through loans.
Float on, if you had good grades for your BA there is a good chance your MA would not cost you anything. You can usually be a TA and then tuition is free. I had 2 graduate degrees paid for. One I was a TA and one the feds were offering free tuition and a small stipend to live on to put more professionals in the work place in this certain field. Then I had to work for 3 years in non-profit and it was forgiven. If I had worked in a for profit would have had to pay it back. It is worth looking into.
Teacher Terry, that is some wonderful advice. Thank you. I really do need to start looking into what is available.
That is good advice. I imagine it's true for public schools, though not private ones. I wish I'd gone to law school instead of the MA I got.
I dont' know, there's lots of reports of lawyers being unable to get anything but mediocre paying these jobs these days (with hundreds of thousands in debt - that's the killer there). May as well play the lottery as try to figure out a sure bet in this economy.
Terry, when did you get your MA? Because with the higher education sector employment situation being what it is, I think TA and RA positions are harder to get than they used to be. Even when I was in grad school back in the 90s, there weren't enough to go around. Depends a lot on the discipline and the school's funding situation -- Ph.D. candidates at Harvard and other schools with large endowments typically get 5-6 years of funding, which includes some time that has to be spent as a TA or RA. At a state university like mine, if you don't have an external fellowship (I had an NSF to start) you might get a recruitment fellowship the first year, then be able to teach for a year or two, and then it is up to you to figure out how to get more grants or part time employment. In our department you were not allowed to have TA positions for more than a year before you were put on the bottom of the priority list.Quote:
Originally Posted by Float On
I know some unemployed attorneys although they are likely unemployed in that field by choice. And I know ones that hustle to make a living. I have no envy of a law degree. That was one discipline my parents considered over supplied even way back when I was first in college so they never encouraged me to do that, unlike many parents who seems to hold The Law Degree in awe.Quote:
Originally Posted by redfox
There are a lot of Tax Attorney law types in my husband's family. They seem to be doing pretty well but they are all based in the DC area. His brother went a different direction in law - he does real estate (still requires a lawyer to close deals in his state) and bankruptcy. He figured if people were doing well they were buying and if not they needed someone to clean up the mess. He was doing great until just the last two years. He now pays his staff a lot more than he takes home.
Ihamo, I received my first MA from 1988-1990 and my 2nd from 1992-1993. My son went to a state university for his MA & PHD in 2003-2008 and got it every year.
Redfox, I somehow missed this thread which gave me the chance to read it over and think about what everyone is saying. I am your age (well, turn 58 next month, lol) so yeah, very interesting topic to me, too.
I think your situation may be more complicated (and improved) by the fact you have a younger spouse. So he can keep working for at least 20 years, and you can work for maybe 10 more years, something like that. So one thing to do is talk to people at SS about what you would get in the different years, like Catherine is saying. I think since you guys are at different places vis a vis retirement, the usual advice might not apply.
Same thing with your house. I wouldn't be so freaked about paying mortgage off early if I had a younger spouse paying it, too. WE have no mortgage because we elected to buy cheap, cheap, cheap foreclosure and never have a mortgage again, but it has meant stuff like living with no heat for 2 years, doing our own repairs, etc. But with a builder husband, that is certainly a possibility. But if you are happy in your 'hood and it seems very affordable for your area, I might just keep doing what you are doing there. Or if you want to get aggressive, how about making the studio apt a rental instead of the house, and having boarders live there? You have to think of your own comfort and your own stress level. Since you have faced a life threatening illness in the recent past, I vote you keep your comfort, happiness, security, and home at a premium. I wouldn't knock myself out to pay off the house. The only thing I might get gazelle about would be the credit card and the car. I would put eveyrthing into those 2 and lay back on the other stuff.
As for the student loan, I would pay the minimum til the cows come home or ss or whatever. I think that if that is what you have to do to get a job in this economy, and it sure seems to be, then it can come out of ss or whatever. If you can get the forgiveness program, fantastic. I'd look into that intensely, but I would not stress about paying it off early. I think it is very low priority and a cost of doing business in today's world.
(and this is new thinking for me, I admit.)
So I would prioritize credit card, then car, then retirement, all the while checking out forgiveness on student loans.
And one possible idea is if you can find a new employer who would pay off those loans as part of your package. No idea if this is feasible in your industry.
And I was like you, gave a lot of energy/time/money to my kids. And seriously, best investment ever.
+1Quote:
Originally Posted by Florence
http://www.simplelivingforum.net/ima...quote_icon.png Originally Posted by Florence http://www.simplelivingforum.net/ima...post-right.png
Sell the house, the cars, the kids, and anything else you can get your hands on. Seriously. Both of you get some kind of second income. You know the live frugal drill and start paying off debt. At 59 with no retirement savings, this is an emergency. Get everything but the mortgage paid off and get some emergency savings in place before you start retirement savings. IMHO.
This, or you may end up living with your kids.
If you sell the house, then the big positive is that your debt goes from $383,000 to $118000. You would not end up with much cash--if you can sell it for 300 and you owe 265, then after all the fees and commissions, you might end up with around 11,000 cash, right--you sell at around 300k and then have maybe 8%, or 24k, and you pay off the 265, and you end up with 11,000.Quote:
Originally Posted by dmc
So you could use that to pay off both credit card and car.
That leaves you with medical debt of 7, plus the student loan debt.
It's certainly one option. If you could get forgiveness for the student loans you might get something like half forgiven, since you have to make 10 years of payments? Don't know the specifics on your loan, but you could figure that out.
I guess question is how important is the house for you? Where could you live more affordably, and still get to work and sustain your health?
Which stressors are worse, the debt, or the uncertainty about where to live?
I guess that is why the advice about sell everything has to be weighed against personal circumstances.
On other hand, that is how we got out of debt--but it was a better sich because we owned house outright and used 30k to pay off debt and bought foreclosure with remainder.
Maybe get a realtor in to give you a good estimate on the house? I don;'t trust Zillow, but I guess it's a good place to start.
What happens with a 10 year loan payoff if you cant work 10 more years? I would also look at putting money into your own IRA. That would give you a tax break now, and if you need the money you can alway's take some out when your 59.5 can't you. I don't know how IRA's work if your still working, so you would need to check that out. It may be a good place to put some of your emergency fund.
Redfox, I do apologize for maybe being too blunt, but I've never been one to sugarcoat things. We should probably just agree to disagree as far as SL debt goes. Yes, life happens, but I was raised to always be responsible for my debt, and to be cautious about taking on any debt that I couldn't possibly pay back, including SLs. I've lived on the edge of poverty all of my life, raised 3 kids on my own after divorce from their father who was a drug addict. Never received child support after he disappeared. My son had a medical problem that required several surgeries, and I, myself, have fought a battle with breast cancer the last 10 years, and progressive MS the last 20 years, that has disabled me so much at this point that I am in a wheelchair fulltime now. So yeah, life happens...but I did without a lot over the years to pay all of my debt off, including my SLs, and I always made sure my kids were fed, clothed, and warm, but I did not take on a mortgage or own a car. I guess I expect no less from anyone else....and that's just my opinion. You can take it or leave it. Peace.Quote:
Originally Posted by redfox
And you may be married to the most wonderful guy in the world, but it is never good for any woman to put full reliance on any man to give them a comfortable retirement. I hope for your sake that he is always there for you, but there's always that chance he may not be. He's young and may move on someday, leaving you floundering in your older years. It happens everyday to women that never thought it would....
It is your choice to not take on a car loan or mortgage but that does not mean that is the absolutely correct thing to do. Really you are being very judgmental by assuming that your path should be everyone's path.
Like I said in my above post - it's my opinion and redfox can take it or leave it. Just because I disagree with how she handles her finances doesn't mean that I am being judgemental....just sharing my opinion like anyone else here, which is what the OP asked for originally.Quote:
Originally Posted by Teacher Terry
So, being judgmental and name calling is allowed, only if one is a moderator? (Redfoxes posts calling others racists)Quote:
Originally Posted by Teacher Terry
When are views not judgments?