Ask Terry Questions Money for much-needed house repairs and updates

Money for much-needed house repairs and updates

By Terry Savage on May 07, 2024 | Financial Planning / Retirement

I’m moving forward with a contractor to do some repairs and updates. I have funds in my checking account to cover most of it (cleaning out my emergency fund), but I’m trying to decide if I should take out a home equity loan or HELOC instead. I’m newly retired (at 68) and have funds in my 401k (but I know you do not like that kind of withdrawal). My house is paid off, I am debt-free, and I really need to get this work done; I just don’t know the best way to pay for this project. Thank you for time and advice.

Terry Says

The best way to pay this off is the least expensive way.  HELOCS have fees and interest rates, while 40l(k) withdrawals incur taxes.

Do you have a way to earn more money to replenish your emergency fund.  Is it possible for you to do some part-time work — thus not incurring the expense of a HELOC, nor the taxes on a 40l(k) withdrawal?

Are you collecting SS yet — or trying to postpone until age 70 to get a higher check?   If so, you’ll be dipping into your 40l(k) anyway.  But a lot depends on your overall situation to answer your question.  If you can slowly replenish your emergency fund, I’d pay cash.  You can always withdraw from your 40lk.

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