My husband is 65 years old, a lawyer and partner in his studio with a thriving practice; I am 59 years old. We have three children (more on that later), and I was lucky enough to be a stay at home mom. Now I work part time, which is essentially just “playing” money. Even though I studied in college, I never had a career away from home.
Our youngest recently graduated and now works full time. We provided college education for all three children and were able to afford it easily. We earn very well (over $ 500,000 a year), even if we live in an expensive city and our income tax bracket is astronomical.
Our eldest son, a son, has had mental health and addiction problems for a decade. We spent a small fortune trying to help him by sending him to multiple rehabs, sober housing, psychiatric counseling, living expenses when he was unable to work or go to school, paying for his university education, etc. It took its life several years ago, which left us completely devastated. We have done our best to move forward, but the money for our retirement isn’t just there.
The benefits are that my husband is healthy, fit and energetic and has excellent legal practice. Assuming he remains healthy, he can work for many more years and plans to do so. We own a house that will be paid for in 7 years and is currently worth around $ 1.4 million. If we sold it tomorrow, we could earn a million dollars in shares. Our city is growing rapidly and house prices have become very high, so it would be difficult to find a home for less than $ 750,000 (if we were lucky).
Would you recommend sitting while our house continues to appreciate or are you trying to downsize and pay a house in full with cash? We bought our house for a song when the market was falling. We have emptied our IRAs and have a large amount of credit card debt, which I hope I have paid in full in the next 18 months – and would like to save on retirement.
I am mortified to speak with a financial advisor. Any advice would be sincerely appreciated.
Thanks so much,
It was difficult for me to know how to start this column for you, as well as offering my deepest condolences to your son. I think any parent who reads this (and I’m one of them) may be connected to your willingness to spend so much of your savings on helping your child.
Don’t be “mortified” to speak with a financial advisor. You are human and if there is one thing I have learned from writing about personal finance for a decade, it is this: almost everyone has something in their financial life that they feel embarrassed about.
The silver lining here is that you have a high income and a ton of equity in your home. You have options even though it may not seem right now. Here’s how many experts think you should proceed in the future.
Sell your home and move to a cheaper place, using the proceeds from that sale to pay off your credit card debt as quickly as possible and start saving more for retirement, says certified financial planner Brian Bruggeman, vice president by Baker Boyer in Walla Walla, Wash. You could buy a cheaper seat. Or you might even consider renting for a few years, says Shannon McLay, founder and CEO of The Financial Gym.
If you can, consider switching to a credit card with an interest rate of 0% while paying off the balance, but be sure to pay it off before the 0% period expires. It’s also important that you use this time to make a budget and see where you can make bigger cuts in your spending to free up as much money as possible, Bruggeman adds.
“Pay off your credit card debt as soon as possible. The less debt you bring, the more spendable income you will have in retirement – period,” explains Kimberly Foss, founder of Empyrion Wealth Management in Roseville, California.
You should also start saving on retirement with those extra funds, says Foss, who recommends paying 20% on the new home (to avoid having to pay private mortgage insurance) and investing the rest to “help provide additional retirement income. ”
As for how to start saving for retirement, “the first place to look for is their workplace retirement plans,” says Bruggeman, who suggests your maximum plan to your husband and you do the same if you have a plan. of work. Since your husband is over 50, he can contribute $ 26,000 to 401 (k) in 2020.
So, he adds, consider maximizing any tax-facilitated accounts you have access to, such as an HSA, or potentially financing what is called a Roth IRA backdoor. (You can read more about Roth’s backdoor IRAs; Foss notes that you should consult a tax advisor if you are considering this plan.) “The rules around Roth’s backdoor IRAs are a little tricky if they have external IRAs, so they want to do homework before pursuing that strategy. If they are able to finance their employer plans and other accounts with tax breaks, they should fund a joint investment account and invest in a tax efficient portfolio, “he adds. (Read more about sponsored IRAs here. )
It is also a good idea, as you are already planning, that your husband continues to work as long as possible, experts say. And although you may be tempted to take social security early, don’t do it.
“Your husband should delay taking social security benefits until he is at least 70. As long as he is in good health and enjoys working as a lawyer, he should not start receiving social security benefits. His benefit will reach her maximum level at the age of 70, although she won’t have to start applying for it until it’s ready. You should consider applying for your spousal benefit when your husband turns 70, regardless of whether he retires or not, “says Foss.