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Q&A: Your retirement plans require lots of decisions. Get help

January 13, 2020 By Liz Weston

Dear Liz: We are a working couple in our late 50s. We live a comfortable lifestyle, have no mortgage, no debt, and we enjoy our careers. Through luck and diligence we have built a sizable net worth of $4.5 million (37% equity in our primary residence, 37% IRAs, 25% taxable equities). The investments are being managed by a family member. We plan to wait as long as possible before taking Social Security but would like to quit working within the next five years. As we look to retirement, we are undecided about where we’d like to live. We could stay in our current large house in Los Angeles, or we could move to a just-as-expensive nearby beach town and opt for a much smaller condominium.

I’d like to purchase the condo before retirement (paying cash, as we are debt-averse at this stage of our lives). This plan could improve our current lifestyle by providing a weekend retreat. Once retired, we might then have the luxury of deciding which home to keep and which to sell.

However, my partner is rightfully concerned about having too much exposure to real estate and missing out on the portfolio growth we’ve enjoyed by staying in the stock market as long as we have. What should we do?

Answer: It’s not a bad idea to test drive your planned retirement community before you give up your current home. But your partner is right to be concerned about having too much money tied up in real estate. Most people need to keep a substantial portion of their portfolios in stocks even in retirement. Plus, any money you pull from your investments could incur a rather substantial tax bill.

One solution could be to purchase the condo using a mortgage. Interest rates are quite low, and it sounds like your finances are in good-enough shape to pass the extra scrutiny lenders often give second-home purchases. If you eventually decide to sell your current home, the proceeds could be used to pay off the loan.

This would be a good time to hire a comprehensive financial planner who can help you figure out how this next phase of your life will work. The planner also could help you with all the other retirement issues you’ll face, such as picking a Medicare supplement plan, managing required minimum distributions and paying for long-term care.

You can get referrals to fee-only planners from a number of organizations, including the National Assn. of Personal Financial Advisors, the Garrett Planning Network, the XY Planning Network and the Alliance of Comprehensive Planners.

Filed Under: Q&A, Retirement Tagged With: q&a, Retirement, retirement planning

Friday’s need-to-know money news

January 10, 2020 By Liz Weston

Today’s top story: How to take charge of your credit this year. Also in the news: Several Chase cards will earn more rewards of Lyft rides, 6 inspired ideas for traveling smarter this year, and how much you need to save every month to earn $50K a year in interest for retirement.

How to Take Charge of Your Credit This Year
Take a crash course in credit.

Several Chase Cards Will Earn More Rewards on Lyft Rides
A boost for rideshare customers.

6 inspired ideas for traveling smarter this year
Rethinking old travel habits.

How much you need to save every month to earn $50,000 a year in interest alone for retirement
Crunching the numbers.

Filed Under: Liz's Blog Tagged With: Chase, Credit, Lyft, retirement savings, ridesharing, travel, travel tips

Thursday’s need-to-know money news

January 9, 2020 By Liz Weston

Today’s top story: Here’s what bad financial advice can cost you. Also in the news: VA home loan limits disappear, fees rise, FAFSA and the military draft, and key questions to ask before buying that annuity.

Here’s What Bad Financial Advice Costs You
Don’t make someone else rich at your expense.

VA Home Loan Limits Disappear, Fees Rise
Changes to the program.

Will the FAFSA Get Me Drafted Into the Military?
Separating truth from fiction.

These are the key questions to ask before buying that annuity
What you need to know before signing on the dotted line.

Filed Under: Liz's Blog Tagged With: Annuities, bad financial advice, FAFSA, financial advice, military draft, selective service, VA home loans

Here’s what bad financial advice costs you

January 9, 2020 By Liz Weston

Good financial advice leaves you better off. Bad advice does the opposite, and may even enrich someone else at your expense.

In my latest for the Associated Press, some areas where you need to be particularly careful to seek out good advice, since bad advice can be so costly.

Filed Under: Liz's Blog Tagged With: bad financial advice, financial advice, tips

Wednesday’s need-to-know money news

January 8, 2020 By Liz Weston

Today’s top story: Turn your next car purchase into a vacation. Also in the news: The new version of layaway, how soon you’ll recover from holiday spending, and why Travelex users need to lock down their financial information right now.

Turn Your Next Car Purchase Into a Vacation
The car you want might be cheaper in another state.

You can have the item now. But can you really afford it?
There’s a new version of layaway.

How Soon Will My Credit Recover From Holiday Spending?
It’s going to take a bit.

Travelex Users: Lock Down Your Financial Info Right Now
A serious data breach.

Filed Under: Liz's Blog Tagged With: buy now pay later, car shopping, credit card debt, data breach, holiday spending, layaway, Travelex

Tuesday’s need-to-know money news

January 7, 2020 By Liz Weston

Today’s top story: How to create a retirement ‘paycheck’. Also in the news: Handy money rules of thumb for a quick financial checkup, how one woman ditched nearly $60K of debt in less than a year, and the retirement savings blind spot you don’t realize you have.

How to Create a Retirement ‘Paycheck’
Creating a reliable retirement income stream is complex but worth it.

Handy Money Rules of Thumb for a Quick Financial Checkup
Stop winging your way through it.

How I Ditched Debt: A Spender, a Saver and Dreams of a Family
How one woman conquered nearly $60K of debt in less than a year.

The retirement savings blind spot you don’t realize you have
You could be retiring too early.

Filed Under: Liz's Blog Tagged With: debt, financial checkup, money rules, Retirement, retirement savings

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