Yes, I'll take David's question.
David, here's the next question from Nicole D.
David, reverse mortgages are a fairly new product and they are expensive. I expect those costs to go down over time as there is more competition in that marketplace because of aging boomers. But right now it is a great way to get a monthly paycheck from the equity in your home. The biggest mistake people make is taking a lump sum, spending it all, and then being back in the same position they started in. If you do this, start as late as possible and remember that, like most pensions, the amount will not increase over time (so save /invest some of the first payments to make up for the additional money needed in future years). Alas, I don't know of another product that would serve your needs. Be sure to read all the disclosure information the government requires on reverse mortgages.
BilboShire, not knowing what your net income is or what other expenses are such as mortgage, utilities, etc, I can't give a percentage. What I would say is that $1150 for food for two people sounds a little high. Do you shop at expensive grocery stores such as Whole Foods? Are you "foodies" meaning is food quality very important to you? If so, you may sacrifice another expense to have a higher food budget. To start with make small changes and tract your food expenses. Try to use a less expensive store for canned goods and frozen foods while maybe going to your favorite store for perishables. Finally, separate out the "merchandise" from actual food and you may find that you aren't really spending that much on eating.
Thanks, Bobbie. Here's a question from JG
Great advice, Debbie. It's definitely easy to spend a lot on food without realizing it. Here's the next question from MBA.
JG, sometimes applying for additional credit can make your credit score go down which would make it less likely that you could get lower rates on your current card. I suggest that you just call them, tell them you got a pre-approved offer a X%, that you've been with them for some time and would like to remain with them. What can they do for you? See what they say. Do check out your credit reports before you do this as they might take an additional look/see and you want to make sure nothing has cropped up. BTW, leveraging one vendor against another is also good for things like cable, phone, and internet rates.
Absolutely, Bobbie. All the companies are fighting for your business. Here's our next question from HeyItsRick.
Is the college you are going to a federally qualified school? It needs to be for you to avoid the 10% penalty for withdrawing funds from your ROTH. Having said that, I would prefer that you use as much loans as possible becuase I do not think the payback would come close to being the same as a ROTH account growing over your working lifetime and THEN, being able to be withdrawn tax free. IT is a tremendous gift from the government.
Some great resources there, thanks David. We love your gone fishing portfolio calculator. How about you take this next question from Jackson Tan.
(David, that's all one question from Jackson).
And Debbie, what do you think about this next question from EarlyRetiredCouple?
@Jackson Tan: Those two choices are better expanded on. (1) IF you *know* you need to spend the money in the next 3-5 years, and you *need* to spend the money then and couldn't just wait a little longer THEN you are safer to keep the money liquid in cash, CDs or bond-like investments. BUT (2) If you just suspect you might want to get to the money and you could just delay the expenditure because it is discretionary anyway THEN keeping the money invested in the markets which average 10% means that your savings fund will - on average - double every 7 years.
My wife and I put our savings into investments. We've been married 30 years, which is just over 4 doublings: 1-2-4-8-16. I'd rather keep it invested and adjust my purchasing, not spending it if the markets are down and it is important to keep it invested until they come back up.
EarlyRetiredCouples, what a great question and one that is getting alot of interest and press these days. If your are speaking of an annuity contract in your IRA, the answer for me is a clear no. You pay insurance companies fees in part to have tax deferred investment income, which you already have in an IRA. SOme of the new annuity products are almost impossible to understand. You didn't ask this question, but I would caution you about etf funds in difficult times. We use them for certain portions of our invested funds, but a managed mutual fund, with an experienced manager can really help navagate these difficult times. I say that particularly for bond funds. hope this helps
Thanks for the personal insight, David. That makes a lot of sense. This next question is from F Williams.
Thanks, Debbie. Perhaps you have some insight for our next reader, GCDubya.
Hello HeyltsRick. This is a good question. As I often comment, there can be a difference between the great technical answer and the answer that is correct for you and your wife. Some advisors say to keep that mortgage and tax deduction as long as possible. But even then, the value of the deduction diminishes as you get closer to the end of the mortgage. I love for clients to have a paid off mortgage in retirement. When retirees have no mortgage and up to 3 years of living expenses in cash, market fluctuations are much easier to ignore (and the reactive behavior that often gets investors in trouble). I is difficult in this forum to know enough of your circumstances to make a determination. I suggest that you are the perfect age to spend just a bit on planning. Have a fee only planner who works hourly run some projections with you re: this is what we have, this is what we are saving, and this is what we want in retirement. Are we going to make it OR do we have to make some changes. That kind of work could make the answer very obvious. The planner could use funding your annual expenses as one goal and then add the remaining mortgage payments as a separate goal. I am confident this kind of work at this stage in your life would be very beneficial (I was able to tell a couple just last week that they could achieve their goals without working as long as they planned). Sans that, it is just your gut call. And I like the paid off mortgage.
Sounds like a lucky couple, Bobbie! Thanks for the insight. Here's a final question for you from Jeff B.
Yes, that was a lucky and happy couple. But it was because of the hard work they did after our meeting two years ago, saving as much as they could since then.
I like that quote, David! Do you have time for one more question?
It is great GCDubya that you are trying to get a handle on these expenses now before they become a problem. The car loan and mortgage payments are straight monthly payments and don't need to be accelerated for now. Start with your highest credit card loan and pay as much extra as you can afford until it is paid off, then down the line to the other cards. Don't close them as doing so impacts your credit score. IT doesn't sound like you can free up money from your loans, in fact, I am recommending paying on a larger level. Other ways to free up money will have to come in reducing life expenses such as food, vacations, gifts, cable and other things like that.
Another question would be great!
A topic I'm sure many of our readers have questions about, David. Thanks!
David, here's one more question from Timster.
I am still free to take questions