A Financial Plan
Hi Terry, I hope you are safe and all is well. I’m writing to you about my wife’s cousin. She is 59, a single grandmother, on IDES unemployment, that is about to expire! She needs a financial planner to help her! She has some money in savings in a 401K, w/($100K) and, an IRA, w/($50K) from past employers, and that’s it! She’s been out of work for a year and interviewing for administrative, office type jobs! She has a $70K mortgage balance on her home, valued at $190-200K, and has not refinanced, for 6 years, (currently at 4%?) It’s a sad case, not unlike a lot of folks today! We help her as best we can but at some point?? I told her I’d reach out to an expert and ask you if you would be so kind and recommend, or suggest, a ‘no fee’ fiduciary financial planner who will go over her situation and discuss her options and design a plan that may hopefully get her to S/S retirement, or until she can find employment and an income until retirement, hopefully beyond early retirement S/S age! Thank you so much, Terry! Be safe!
Terry Says
OK, this is a tough one I am thinking that this is what a financial planner would be asking — and it’s all common sense that she should sit down and do even before meeting with a planner. And I’ll give you a link to trusted help at the end of this.
But here’s the math. She needs to sit down and write out what she spends every year –and then divide by 12. The best guide to doing this is Judy Lawrence’s Budget Kit– still the best paper workbook for figuring this out, not forgetting annual expenses, etc. Here’s a link to it on Amazon.
She may “think” she knows her “budget” — but it is helpful to write everything down — especially things that happen only once or twice a year — everything from auto insurance to dental visits. She needs to know what’s going out and what can possibly be cut.
By the way, my own first thought is what is she going to do for health insurance for the next six years till she qualifies for Medicare? This is going to be one of her largest costs. Go to www.eHealthInsurance.com to research this. Without a job she might qualify for an Affordable Care Act subsidy.
Next, she needs to check with Social Security about what she could get in benefits at age 67. I hate to see her take SS early, because it is a steep 8% a year permanent reduction –and a lower base for future inflation adjustments. Plus if she does get another job, she will be heavily penalized if taking SS. So the best planning idea will be to withdraw from savings and wait until her full retirement age at 67.
Right now, without income and unemployment ending (there is an additional 20 weeks after the 39 weeks for Illinois residents) there is a HUGE gap — money going out and nothing coming in. It is certainly frightening.
And with offices closed, many for another year, that is not where she should be looking for income. But if she is experienced and organized and computer literate, perhaps she could set up a home based business being an executive assistant to a wealthy family –paying their bills, keeping track of households etc. It’s worth a try. This is the time to be creative.
But those things take time. So now is the time to consider BIG cuts in expenses. It might be time to sell the house and stash the cash. Being unemployed, she can’t refi — and it wouldn’t make much difference anyway.
OR, consider taking in a roommate to share expenses. Check with your trusted church or community group to perhaps make a match. Or maybe move in with her grandchildren after selling her home.
Or consider this: There is a huge need for childcare by two-income parents — even those working from home. Perhaps she could find a family that would pay her to drive the kids to school (or help with homework at home), shop and cook dinner, etc. If she sold her house, she could even live with them, but probably it would be best to start on a daily basis.
You notice that so far, I haven’t mentioned a word about how her 40l(k) and IRA should be invested! At this stage, she should be in the most conservative investments — and might consider a direct rollover of her 40l(k) to Vanguard, with about half in a money market fund where she won’t earn a penny — but won’t lose a penny. And the other half in an equity-income or other conservative stock fund for growth over the long run.
This is a critical moment for an entire pre-retirement generation! It is make it or break it time. I know that the economy will rebound — but I’m not sure her skill set will have value in the new economy. So it’s definitely time to get creative.
And if you still want her to meet with a fiduciary financial planner, do your search at www.Wealthramp.com-– where fee-only, carefully vetted planners are matched with clients. You can trust them.
