AboutBruce Julien Expertise I can answer questions on and raise issues clients overlook in the areas of Estate Planning as far as taxes and distribution flow problems, Asset Management as far as appropriateness of assets and allocations for a desired goal and the value a consumer gets for their costs, Tax Planning related to Income and Estates, and Insurance/Annuity questions particularly in light of suitability to the consumer.
Experience I became a CPA in 1991 and began offering financial advice in 1992. I am a Registered Investment Advisor which means I sign off on putting clients' interests first in a fiduciary role.
Education/Credentials BA in Accounting, University of Maryland 1990
Question QUESTION: I purchased a row home with a down payment of $95,000 in a "not-so-good" neighborhood 8/07. I have a 30 year mortgage on $60,000 at 5.75%. The home is worth approx $140,000 today due to fall in economy.
I am 53 years old and am eligible to retire now through the State of MD. My retirement income would be approx $1,800/month before taxes/insurance (with a 5% increase per annum).
I have a 457 deferred comp investment of $55,000.
I have $65,000 in a bank.
I would like to retire
I also plan to withdraw my Social Security at 62.
I would eventually like to move out of where I am and purchase something rural and cheap...but the economy is horrible.
Based on this information:
I would like to know if it would be better to refinance my house using $40,000 from the bank as a down payment and financing the remaining $20,000 in a 7 year mortgage using
my 457 plan in a fixed monthly amount to pay my house mortgage each month for the next 7 years (when the 457 plan would run out based on the amount invested and the amount of $500/month fixed withdrawal amount).
Please let me know any financial advice. I don't want a "house payment" hanging over me when I am old. Thank you.
ANSWER: Marie
Your house payment now is $400ish? You are smart to plan out your future. Leave the loan alone. You are going to pay more to refi than you could ever save. Don't even get rid of it. Your retirement income will go up 5% but the loan will always be $400. If you are worried about a $400 payment "hanging over me" then you simply shouldn't retire.
What is the problem if the economy is horrible, if you want to buy someone's eastern shore house? The price will be low now so go steal it.
Mostly I worry about you retiring at 53 with a hand-to-mouth income, waiting for Social Security which won't be much if you are retiring now, and $120,000 to fight off the world's problems. Not enough financial power and you might always feel scared, rightfully.
Don't worry about the loan it is your best friend. Keep working. retire from MD if you want but you need to keep up income
Good Luck
bruce
---------- FOLLOW-UP ----------
QUESTION: Wouldn't I save beaucoup bucks in interest if I paid the house off early and then have more free income after the 7 years....
Answer Yes you might but you shouldn't refi the loan, the costs to refi are too high; just pay it off month by month if you insist.
BUT I see you having a house paid off, not enough income and that isn't a fun life. I see it a LOT and encourage you to invest and save your money, not pay off a 5.75% mortgage
