life

Think Twice Before Taking on Debt in Retirement

Life and Money With Helaine by by Helaine Olen
by Helaine Olen
Life and Money With Helaine | August 27th, 2019

Dear Helaine: I am 68. I recently sold my condo, and I am purchasing a new home in a state popular with retirees. The home will cost about $250,000. Should I get a mortgage or pay cash?

Here's the situation: I've got enough cash to pay about half outright, and then I'd need to unravel some investments. I'd still have several hundred thousand dollars remaining, something that will throw off about $15,000 annually in dividends and interest payments. In addition, I have a decent income from Social Security, and I believe I can get a part-time job, one I think will add at least $10,000 in income a year.

My accountant says I would have no tax advantage getting a mortgage, but my broker says I should mortgage the purchase since my portfolio return well exceeds the mortgage rates of 3.75% to 4%. I don't plan to make any other major purchases except maybe a new car in a year or two.

I really don't want to take on a mortgage of $1,000 per month or more. To me, paying cash is like 3.75% to 4% guaranteed money. Your thoughts? -- Soon To Start Over

Dear Soon To Start Over: There is no reason to take on a $1,000-a-month mortgage payment at your age if you've got the cash to pay the home down immediately, while still leaving you with a tidy nest egg. Common sense says we should minimize regular, repeating expenses when we leave the workforce, not pile them on. That goes double when, as in your case, you'll have an adequate income in retirement, but not an overly generous one.

The bigger question is why your broker is suggesting otherwise. I hate to be cynical, but I suspect the answer is weighted in the broker's self-interest. All that money you are putting into a home means less money for your broker to make investment suggestions on. That, in turn, means less money in your broker's pocket.

When you clean house prior to moving, let me suggest one other item to discard: your broker. I suspect someone getting paid by the hour would be best for you. You need a plan, not trading advice. When you seek a replacement, find someone who has a legal duty to put your interests ahead of their own at all times when giving financial guidance. And the only way you will know this is if you ask about it.

Good luck with your new home -- and your new financial adviser!

(To ask Helaine a question, email her at askhelaine@gmail.com.)

(EDITORS: For editorial questions, please contact Sue Roush at sroush@amuniversal.com)

life

Buying a Bigger House Has More Risks Than Rewards

Life and Money With Helaine by by Helaine Olen
by Helaine Olen
Life and Money With Helaine | August 20th, 2019

Hi, Helaine: My boyfriend and I are in our late 50s, and we live together in a house I own, along with his two teenage children from a previous relationship. He would like to sell my house and purchase a larger, more expensive house closer to his work and the children's schools. I am not so sure this is the retirement-smart thing to do, given our ages and the expenses incurred by our adult children from previous relationships.

I purchased my home several years ago, near the bottom of the market. Both my boyfriend and I would each be able to make the mortgage payment on my house if the other were to lose a job or fall ill. The home my boyfriend wants to purchase is worth about $100,000 more than I believe I could receive for our current residence. We'd need both of our incomes to meet the mortgage payments, and if something were to happen, we'd need to pay for the house out of my savings.

He earns twice what I do but has little in savings outside of his retirement account. That concerns me. I lost half my 401(k) in my divorce, and I am still making up for lost time, so I am nervous about starting over at ground zero. Could you please share your thoughts on this scenario? -- Housebound or House-Hunting

Dear Housebound or House-Hunting: It sounds to me like you do not want to sell your current home, and I agree with you. If your boyfriend wants to purchase another home, he should go off and do it. But that's the rub, right? Unless he takes money out of his retirement account, he doesn't have the money for a down payment -- not for your home, never mind one that's more expensive. So he's putting the squeeze on you. He wants you to make a financial sacrifice for his benefit, one with little to no upside for you. If anything, it comes with enormous risks.

As you noted, in your late 50s, it's more than a tad financially risky to take on increased mortgage costs. All too many of us leave the workforce earlier than we plan, either because of ill health or job loss. You might want to remind your boyfriend he's likely going to be helping out with college tuition payments well into his 60s. The last thing he needs is an increase in his monthly living expenses.

(To ask Helaine a question, email her at askhelaine@gmail.com.)

(EDITORS: For editorial questions, please contact Sue Roush at sroush@amuniversal.com)

life

Battle Between Daughters Could Alter Their Inheritance

Life and Money With Helaine by by Helaine Olen
by Helaine Olen
Life and Money With Helaine | August 13th, 2019

Dear Helaine: I am a senior widow and have been working with my advisers to leave everything equally in my will. However, I was shocked to learn recently that my younger daughter and her husband told my older daughter's ex-husband that my older daughter was getting money from me. The ex -- who is a high-net-worth individual -- took my daughter back to court and is now trying to get his alimony payments reduced.

They've been divorced for several years, and my older daughter has asked her sister many times to end her friendship with the ex, but they've refused, saying they love him like family and it would hurt them too much to end the connection. So what do I do? The division and bitterness already exists. My younger daughter's husband is a high earner, so they don't need the money. My older daughter does.

It's the disloyalty that hurts. I think my younger daughter should be financially penalized in my will, especially if my older daughter's support payments are cut. What would you do? -- Furious Mom

Dear Furious Mom: I will begin this note by telling you what I tell everyone when it comes to wills: It is your money, and you get to do what you want. Now let's get to business.

You've got a bigger problem on your hands than disposing of your estate after your death. I would urge you not to take sides in a battle between your daughters, but to try to remain open to both sides. I would furthermore urge, nay, beg you not to share financial or personal information about one with the other. Unless your younger daughter has a serious spying habit, I am assuming she's hearing this information from somewhere, and I am guessing that somewhere is you.

Given the state of the relations you describe, you must know no good will come of gossiping with either of your daughters about the other or about your personal financial business. You are culpable in stirring up this trouble, and it needs to stop. One way to do that: Stay as fair as possible when it comes to money and other matters. In our society, we equate money with love. They are both your daughters, and they deserve to be treated equally by you. It begins now.

(To ask Helaine a question, email her at askhelaine@gmail.com.)

(EDITORS: For editorial questions, please contact Sue Roush at sroush@amuniversal.com)

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