My wife and I have struggled financially over the years. He is handicapped, and I am the main source of income for my family. I am 59 years old and my wife is 58 years old.
During the 2008 housing crisis, things got worse and we lost our house. We lived in an apartment for three years trying to recover from this financial disaster.
In 2014, we were able to buy our current home, but we had a large down payment and had to finance the balance through a private lender (individual) at 8% interest. The down payment was $50,000 (we worked hard to save) and we financed $105,000.
It went well until 2015, when I lost my job and we filed for bankruptcy. We paid off the full bankruptcy, and were released in April of this year. This prevented us from refinancing our house.
Since we had a private mortgage, we did not drive our home into bankruptcy and continued to make our payments. We have no other debt and our annual household income is $98,500. I have been at my current job for six years and plan to retire here (God willing).
,‘Again, this is such a blessing to my family. I want to make the right choice. I am planning to work till I am 65 years old.,
Thankfully, the home has appreciated in value, and is currently appraised at $205,000. Unfortunately, our financial struggles are challenging us and we’ve only set aside $40,000 in our 401(k).
Recently, a close relative passed away leaving my siblings and me with his entire estate, which was estimated to be around $1 million. I have three sisters and one brother.
After disposing of the assets, we anticipate receiving about $200,000 each. My uncle worked, saved and lived a frugal lifestyle for many years, and I want to honor this gift and use it wisely.
Now the question: Do I pay off my house (the $82,000 balance on the mortgage) and invest the balance for retirement, or invest the full amount and try to refinance my home? I have been told that it can take up to two years to get a refinance after bankruptcy.
Once again, this is such a blessing to my family. I want to make the right choice. I plan to work until age 65 and make the maximum allowed contribution to my 401(k) for the next five years.
blessed but confused
Your letter gives me hope.
Your thoughtfulness and calmness about these various financial woes, I hope, will help inspire other people to never give up, even when the odds are stacked against them. I admire your determination to never give up, keep saving and start all over again. You and millions of Americans have had to start all over again. Praise!
Here’s my hot take: Pay off your mortgage, especially considering you have a loan with 8% interest (the sooner you get rid of that burden, the better); Maximize your 401(k); And set aside at least six months’ worth of expenses in an emergency fund in case you have another unforeseen medical or financial event.
If you had received it earlier, your legacy could be in jeopardy. “The general consensus among the courts is that funds received by a debtor from a POD account during the 180 days following the bankruptcy filing should not be treated as property assets,” according to Foster Swift.
In addition, $40,000 is a nominal amount in your 401(k) for the time of your life. But it’s never too late to save for retirement, says Lorraine L., chief executive and senior financial advisor at Better Money Decision, a financial advisory firm near Albuquerque. $200,000 is a windfall and she respects the value of this gift. Right to do.”
,‘The goal is to minimize your monthly expenses, and maximize your annual retirement contributions.’,
Greg McBride, chief financial analyst at Bankrate.com, recommends that you set up a Roth IRA for yourself and your spouse. Contribute a maximum of $7,000 each — including a $1,000 catch-up contribution for each of you — this year and next. “In essence, you would each have a Roth IRA worth $14,000,” he says.
Do you have health insurance through your employer? Is a high-deductible plan with a health savings account an option? “If so, you can set aside a catch-up contribution of $7,300 for 2022 and an additional $1,000, which will increase and can be taken out tax-free for future health expenses,” McBride says.
The goal is to minimize your monthly expenses, maximize your annual retirement contributions, and have a secure cash cushion. “Aim to pay current health care costs out of pocket — remember that fat emergency fund — so money in an HSA can grow and get mixed up for use in your later years,” says McBride.
modest lifestyle in retirement
El also suggests working to 67 to maximize your full Social Security benefits. “A paid-for home will not only enable you to save more in retirement accounts… but will also enable you to live a modest lifestyle in retirement. If you don’t have to pay for housing, Social Security benefits are a plus. go a long way,” she says.
This is the fun part. Start setting goals. “The remaining $120K needs to be invested in a joint taxable account; then every year, take some of the money and contribute to a Roth IRA,” she adds. “That money will be available for withdrawal tax-free in five years and growth, interest and dividends will also be tax-free when withdrawn.”
Leonard C. Wright, a CFP and current president of the American Institute of Certified Public Accountants, also recommends the benefits of aggressive savings in your company 401(k) plan. “If you saw investment appreciation of 7% per year over the next 10 years, $40,000 over $120,000 could grow to $320,000.”
“It is a wonderful gift in your time of need – not to mention the impact of saving with more discretionary income over the next five years. A financial plan will clearly guide your peace of mind,” he adds. The resolution has held you back! Vision, Values and Goals. I think you’re better off giving yourself credit.”
Continue to display the discipline and patience you have shown so far, and keep your eyes on a humble, healthy and happy retirement.
check out The Maniast Private Facebook Group, where we seek answers to life’s most thorny money issues. Readers write to me with all kinds of dilemmas. Post your questions, tell me what you’d like to learn more about, or peruse the latest Manifest column.
Dhani is sorry that he cannot answer the questions personally.
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