I would pay those two things off using his 401k because the interest rates are high enough to justify it.
He really needs to work though. He’s in the black each month by such a thin margin that one major house repair would set him back quite a bit.
Your FIL didn't "retire", he simply stopped working.
Retirement is a financial state in which you have a sufficient enough lump sum that you could withdraw from for the rest of your life.
Your father is nowhere near that, so he will need to work until his body physically fails him.
FIL really should go back to work, unfortunately. In the meantime, I’m definitely dipping into the 401k and taking care of both debts given the high rates.
Yes, pay the debt. He probably doesn't qualify for food stamps and by my math doesn't need them.
He gets ~2k and spends ~1.4k. He should be saving 600/mo. Pay the debts with the 401k, increase savings for when stuff comes up later.
> He is considering going back to work 1 day per week, $20/hr 8hr work day.
> What is the best way for him to eliminate the 2 debts that are causing him stress?
He needs to go back to work full time
Why? His social security covers his bills with extra left over. If he pays off his debts, he’ll have about $600 left a month to cover emergencies. I think working a day a week could provide more of a cushion and would be a good thing, but why does he need to work full time?
$32,000 is the 401k with $7200 of debt?
It's not the *wrong* move necessarily, but I'd be reluctant to use a quarter of his retirement savings to wipe out those debts all at once. Although the interest rates are too high to keep as-is. Especially since he'll be stuck paying taxes on that withdrawal.
Is his credit in decent shape that he could consider a balance transfer credit card to at least get the interest down over the next 12-18 months? If he can start outperforming their interest rates with his savings and make monthly payments more around $300/month he could knock it out within 2-3 years (he'd have to find a second balance offer in that plan) and keep building on his retirement balances in the interim.
You aren't necessarily wrong, but by that same logic if he takes $7,200 from his retirement to wipe out the debt, he's just as likely to find some new bill to run up $7,200 on.
It's completely possible OPs dad is fucked long term no matter how he handles this. But in the variables I see, I'd personally rather restructure the debt to blunt the interest and try to commit to a payment plan than take a quarter of the small amount of money he has getting rid of it all at once.
He can and should pay off the termite bill w cash on hand to get rid of 22% interest ASAP.
The CC interest rate isnt as urgent. But the spending is what worries me. How did he run that up and not accumulate.mpre while working? Either he has drastically cut back already or he still doesnt have spending under control but doesn't fully realize.
If feasible, it might be an ideal.case.for going back to work.full time for a year or two to pay debt and save. He could use one time do over and reset his SS by paying it back and drawing again later at higher rate.
If taking lump sum, might consider waiting until next tax year instead of taking a big sum on top of earned income from earlier this year. Just look at if it will drop him into lower tax bracket perhaps. Not talking large $ so may be no factor.
Noticed nothing budgeted for cell phone, car repair/purchase, or medical deductibles.
Thank you for your comment.
We cover his cell phone. He doesn’t have $ set aside specifically for repairs or medical, so that’s important for us to keep in mind too.. thank you!
He has enough cash to cover the termite thing. Does he have a credit card other than the local CU that can serve if he gets an emergency? Personally my cash is almost nothing and I take from HYSA to pay the CC every month.
For the credit card at 10.99%… I’d recommend overpaying by the $500 extra he has per month, but run the numbers to see what is best.
Is the monthly income just from social security?
If so, he needs to be aware that social security is taxed when you hit certain income thresholds. It's not a progressive amount, once you hit the threshold then social security becomes taxable income. There's more nuance but it's easy to find on the social security website.
So, the goal would be to only take 401k distributions to stay under the threshold. Or, to take it all out in one year and pay the taxes then put the rest into savings.
Realistically if he racked up $10K in CC debt while working, he's going to continue to do it after he's not working as I'm assuming his income is going to be less on SS. I think he needs to go back working full time or at least part time, he's unfortunately not in a situation where he will be able to retire unless he wants to do nothing every day. I really don't see the point of that.
I dont know if i would be jealous of a mortgage after retiring at 70... but yeah probably worth getting a job and wiping out the CC debt with 401k to relieve stress.
I'd reach out to the credit union and ask if there's any hardship program available. With his income and age the likelihood that they'd get their money from collections if he defaults is near 0, so they might be more inclined to work out a plan. He should also consider returning to work at least to pay that off.
How much longer to pay off the mortgage? What will the carrying costs look like after it is paid off?
I would pay off the Orkin immediately from cash on hand. What was the CU loan for?
He probably won’t qualify for SNAP (food stamps) but you should investigate your local food bank. Ours has no qualification, and two bags of groceries every couple of weeks might free up some breathing room.
And working one day a week would essentially pay off that bigger loan.
He refi’ed to a lower rate in 2020. Not sure what it’ll be like once it’s paid off. I know he’s got around $70k left.
The 10.99% Credit Card from the CU is just miscellaneous spending on whatever 70 year old guys buy 😬 He’s aware he needs to stop immediately.
Thank you for the info about the food bank vs SNAP.
My husband and I agree that working a bit will be good for his health (mental & physical), and finances.
The loan has got to be longer than 15 year at least. If it was a 15 year, the monthly payment would have been more than $625 once you add the property tax and home insurance. Probably either a 20 year (16 years left) loan of \~$82k which would leave around $100 per month for insurance and property tax, or a 30 year loan of \~$76k which would leave \~$250-300 for property tax and insurance (which would make sense if it's a nicer, mostly paid off home). So effectively, he'll be paying the mortgage for most of the rest of his life (or as long as he owns the home). But he'd be paying property tax and insurance either way and it's not really that big a part of his budget.
Is the termite control a monthly service you are paying for? Or is it a service they already performed. Is/was it really necessary? If not, do whatever you can to cancel it.
If you can't cancel it, find out if they can put a mechanic's lien on your home if you don't pay it.
If they can't put mechanic's lien on your home, just don't pay it. That might ding your credit but you don't really need credit. Don't feel bad about not paying it, they probably scammed or overcharged you.
Focus on paying off the credit card.
Why do people think it is okay to just not pay for a service you voluntarily asked for and received? I mean, that is the best move from a strictly financial position, but there's more to life than that.
You think an elderly homeowner buying a service from Orkin was just "voluntarily asked for and received"?
I'll bet his entire termite bill that an Orkin salesman came to his door and used fear tactics to get him to buy that service.
If you care so much about ethics, you are asking the wrong question. Here's a better one: "Why do companies think it's okay to do this to elderly people struggling to get by?"
Google "orkin scam" to learn more.
OP said the service was needed... I am well aware of predatory business practices and do not support them in any way.
>
The termite control, unfortunately, is indeed needed. He is in contract and responsible for the full amount.
You are so certain that this person was ripped off... Have either of us actually seen the bill? I conceed that they did not get a great price, OP said as much.
And I did not pull the idea that paying bills you agreed to pay is a good practice out of thin air. Listen to yourself...
Do you think it is okay to steal from WalMart just because they steal from everyone else?
* Wal-Mart pays their employees low enough wages that they almost all qualify for government assistance. They don't steal from you directly, but they definitely take advantage of your tax dollars in what I consider to be an immoral way.
* I didn't say he would be breaking the law. I said jumping right to not paying your bills just because you can get away with it legally is morally suspect.
* Just because corporations do something doesn't make it right. I believe you were just arguing that earlier.
* And again, the notion that not paying for an agreed upon debt just because you can get away with it is morally questionable is not some idea that I plucked out of thin air. I think you are being dishonest with that claim.
I agree that American corporations are generally soulless ghouls who exist for no reason other than to enrich the already incredibly wealthy. I agree that American corporations have \*far\* too much power. I agree that if the choice is between feeding yourself or your kids or getting medicine you need or whatever vs. paying the exterminator, the exterminator loses.
I just questioned the reasoning behind not paying for a rendered service just because you can get away with it.
The termite service was already performed. It was actually necessary, though I wish he’d shopped around a bit more…
I’ll look into the mechanic’s lien situation. Thank you.
I probably would, but realize he doesn’t have emergencies funds. He really shouldn’t use credit. If he can go back work a few days, it would help his situation. To be perfectly honest, if he doesn’t pay the CC what are they going to do to him. He doesn’t have anything to garish as SS and retirement accounts aren’t allowed. So what if they call, so what if they sue, eventually they will write-it off. He just not be able to handle, not paying his debts.
I'd call Orkin, as it's for July 2024 forward and tell them he didn't understand, Say elder abuse, they'll likely cancel. For the credit card, maybe a loan from the CU to pay it off and tell him to stop using it.
Most of that being credit card debt that he is only paying the minimum on? No, do not withdraw from 401k to pay off the debt.
Instead: Go to the credit union, and do two things:
(1) see if they will give him a personal loan to pay off both debts in full with a fixed-per-month payment plan that he can make given his income and expenses, based on step 2:
(2) this part is very important, also have them set up his credit card going forward so that it pays off the balance every month from his checking accoun, after it’s paid off. So that it’s up to him to never spend on the credit card each month more than he has in his account to pay it off in full. He needs to change his CC spending habits and this is the best way to do so. Paying the minimum is a terrible practice!
For the loan:
Owes 6502+1700 =$ 8202;
$8202 - savings of 3275 = $4927; But I’d get the loan for $5927 and keep a buffer of $1000 in checking, which he can start adding to but try not to drop below that.
(This doesn’t account for any future true emergency spending on that card if needed but that should be an unusual situation and can be handled on a case by case basis.)
Disagree. There is no way his savings will grow faster than the interest on a credit card balance. That has to be paid off ASAP. And if the other thing allows prepayment, that, too.
That said, he's got to watch his budget going forward.
The termite control, unfortunately, is indeed needed. He is in contract and responsible for the full amount. If it’s still needed next year, we will be helping him shop around.
I would pay those two things off using his 401k because the interest rates are high enough to justify it. He really needs to work though. He’s in the black each month by such a thin margin that one major house repair would set him back quite a bit.
Your FIL didn't "retire", he simply stopped working. Retirement is a financial state in which you have a sufficient enough lump sum that you could withdraw from for the rest of your life. Your father is nowhere near that, so he will need to work until his body physically fails him.
FIL really should go back to work, unfortunately. In the meantime, I’m definitely dipping into the 401k and taking care of both debts given the high rates.
Yes, pay the debt. He probably doesn't qualify for food stamps and by my math doesn't need them. He gets ~2k and spends ~1.4k. He should be saving 600/mo. Pay the debts with the 401k, increase savings for when stuff comes up later.
> He is considering going back to work 1 day per week, $20/hr 8hr work day. > What is the best way for him to eliminate the 2 debts that are causing him stress? He needs to go back to work full time
Why? His social security covers his bills with extra left over. If he pays off his debts, he’ll have about $600 left a month to cover emergencies. I think working a day a week could provide more of a cushion and would be a good thing, but why does he need to work full time?
$32,000 is the 401k with $7200 of debt? It's not the *wrong* move necessarily, but I'd be reluctant to use a quarter of his retirement savings to wipe out those debts all at once. Although the interest rates are too high to keep as-is. Especially since he'll be stuck paying taxes on that withdrawal. Is his credit in decent shape that he could consider a balance transfer credit card to at least get the interest down over the next 12-18 months? If he can start outperforming their interest rates with his savings and make monthly payments more around $300/month he could knock it out within 2-3 years (he'd have to find a second balance offer in that plan) and keep building on his retirement balances in the interim.
If he had the self control to pay down the debt over 2-3 years he wouldn’t be 70 with only $20K to his name.
You aren't necessarily wrong, but by that same logic if he takes $7,200 from his retirement to wipe out the debt, he's just as likely to find some new bill to run up $7,200 on. It's completely possible OPs dad is fucked long term no matter how he handles this. But in the variables I see, I'd personally rather restructure the debt to blunt the interest and try to commit to a payment plan than take a quarter of the small amount of money he has getting rid of it all at once.
These are all of my exact thoughts too…
He can and should pay off the termite bill w cash on hand to get rid of 22% interest ASAP. The CC interest rate isnt as urgent. But the spending is what worries me. How did he run that up and not accumulate.mpre while working? Either he has drastically cut back already or he still doesnt have spending under control but doesn't fully realize. If feasible, it might be an ideal.case.for going back to work.full time for a year or two to pay debt and save. He could use one time do over and reset his SS by paying it back and drawing again later at higher rate. If taking lump sum, might consider waiting until next tax year instead of taking a big sum on top of earned income from earlier this year. Just look at if it will drop him into lower tax bracket perhaps. Not talking large $ so may be no factor. Noticed nothing budgeted for cell phone, car repair/purchase, or medical deductibles.
Thank you for your comment. We cover his cell phone. He doesn’t have $ set aside specifically for repairs or medical, so that’s important for us to keep in mind too.. thank you!
He has enough cash to cover the termite thing. Does he have a credit card other than the local CU that can serve if he gets an emergency? Personally my cash is almost nothing and I take from HYSA to pay the CC every month. For the credit card at 10.99%… I’d recommend overpaying by the $500 extra he has per month, but run the numbers to see what is best.
Is the monthly income just from social security? If so, he needs to be aware that social security is taxed when you hit certain income thresholds. It's not a progressive amount, once you hit the threshold then social security becomes taxable income. There's more nuance but it's easy to find on the social security website. So, the goal would be to only take 401k distributions to stay under the threshold. Or, to take it all out in one year and pay the taxes then put the rest into savings.
Realistically if he racked up $10K in CC debt while working, he's going to continue to do it after he's not working as I'm assuming his income is going to be less on SS. I think he needs to go back working full time or at least part time, he's unfortunately not in a situation where he will be able to retire unless he wants to do nothing every day. I really don't see the point of that.
I dont know if i would be jealous of a mortgage after retiring at 70... but yeah probably worth getting a job and wiping out the CC debt with 401k to relieve stress.
If he bought the house at 40 his mortgage would be 0 by now, having a mortgage and living off social security isn't a great thing.
I'd reach out to the credit union and ask if there's any hardship program available. With his income and age the likelihood that they'd get their money from collections if he defaults is near 0, so they might be more inclined to work out a plan. He should also consider returning to work at least to pay that off.
How much longer to pay off the mortgage? What will the carrying costs look like after it is paid off? I would pay off the Orkin immediately from cash on hand. What was the CU loan for? He probably won’t qualify for SNAP (food stamps) but you should investigate your local food bank. Ours has no qualification, and two bags of groceries every couple of weeks might free up some breathing room. And working one day a week would essentially pay off that bigger loan.
He refi’ed to a lower rate in 2020. Not sure what it’ll be like once it’s paid off. I know he’s got around $70k left. The 10.99% Credit Card from the CU is just miscellaneous spending on whatever 70 year old guys buy 😬 He’s aware he needs to stop immediately. Thank you for the info about the food bank vs SNAP. My husband and I agree that working a bit will be good for his health (mental & physical), and finances.
The loan has got to be longer than 15 year at least. If it was a 15 year, the monthly payment would have been more than $625 once you add the property tax and home insurance. Probably either a 20 year (16 years left) loan of \~$82k which would leave around $100 per month for insurance and property tax, or a 30 year loan of \~$76k which would leave \~$250-300 for property tax and insurance (which would make sense if it's a nicer, mostly paid off home). So effectively, he'll be paying the mortgage for most of the rest of his life (or as long as he owns the home). But he'd be paying property tax and insurance either way and it's not really that big a part of his budget.
Is the termite control a monthly service you are paying for? Or is it a service they already performed. Is/was it really necessary? If not, do whatever you can to cancel it. If you can't cancel it, find out if they can put a mechanic's lien on your home if you don't pay it. If they can't put mechanic's lien on your home, just don't pay it. That might ding your credit but you don't really need credit. Don't feel bad about not paying it, they probably scammed or overcharged you. Focus on paying off the credit card.
Why do people think it is okay to just not pay for a service you voluntarily asked for and received? I mean, that is the best move from a strictly financial position, but there's more to life than that.
You think an elderly homeowner buying a service from Orkin was just "voluntarily asked for and received"? I'll bet his entire termite bill that an Orkin salesman came to his door and used fear tactics to get him to buy that service. If you care so much about ethics, you are asking the wrong question. Here's a better one: "Why do companies think it's okay to do this to elderly people struggling to get by?" Google "orkin scam" to learn more.
OP said the service was needed... I am well aware of predatory business practices and do not support them in any way. > The termite control, unfortunately, is indeed needed. He is in contract and responsible for the full amount.
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You are so certain that this person was ripped off... Have either of us actually seen the bill? I conceed that they did not get a great price, OP said as much. And I did not pull the idea that paying bills you agreed to pay is a good practice out of thin air. Listen to yourself... Do you think it is okay to steal from WalMart just because they steal from everyone else?
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* Wal-Mart pays their employees low enough wages that they almost all qualify for government assistance. They don't steal from you directly, but they definitely take advantage of your tax dollars in what I consider to be an immoral way. * I didn't say he would be breaking the law. I said jumping right to not paying your bills just because you can get away with it legally is morally suspect. * Just because corporations do something doesn't make it right. I believe you were just arguing that earlier. * And again, the notion that not paying for an agreed upon debt just because you can get away with it is morally questionable is not some idea that I plucked out of thin air. I think you are being dishonest with that claim. I agree that American corporations are generally soulless ghouls who exist for no reason other than to enrich the already incredibly wealthy. I agree that American corporations have \*far\* too much power. I agree that if the choice is between feeding yourself or your kids or getting medicine you need or whatever vs. paying the exterminator, the exterminator loses. I just questioned the reasoning behind not paying for a rendered service just because you can get away with it.
The termite service was already performed. It was actually necessary, though I wish he’d shopped around a bit more… I’ll look into the mechanic’s lien situation. Thank you.
I probably would, but realize he doesn’t have emergencies funds. He really shouldn’t use credit. If he can go back work a few days, it would help his situation. To be perfectly honest, if he doesn’t pay the CC what are they going to do to him. He doesn’t have anything to garish as SS and retirement accounts aren’t allowed. So what if they call, so what if they sue, eventually they will write-it off. He just not be able to handle, not paying his debts.
I'd call Orkin, as it's for July 2024 forward and tell them he didn't understand, Say elder abuse, they'll likely cancel. For the credit card, maybe a loan from the CU to pay it off and tell him to stop using it.
I think it's OK to withdraw from the 401k to eliminate high interest debt. Do you think he can keep that credit card from creeping back up again?
Most of that being credit card debt that he is only paying the minimum on? No, do not withdraw from 401k to pay off the debt. Instead: Go to the credit union, and do two things: (1) see if they will give him a personal loan to pay off both debts in full with a fixed-per-month payment plan that he can make given his income and expenses, based on step 2: (2) this part is very important, also have them set up his credit card going forward so that it pays off the balance every month from his checking accoun, after it’s paid off. So that it’s up to him to never spend on the credit card each month more than he has in his account to pay it off in full. He needs to change his CC spending habits and this is the best way to do so. Paying the minimum is a terrible practice! For the loan: Owes 6502+1700 =$ 8202; $8202 - savings of 3275 = $4927; But I’d get the loan for $5927 and keep a buffer of $1000 in checking, which he can start adding to but try not to drop below that. (This doesn’t account for any future true emergency spending on that card if needed but that should be an unusual situation and can be handled on a case by case basis.)
No, I'm not jealous of someone who still pays a mortgage at age 70.
Is his place big enough that he could take in a roommate?
He has a spare room (2BR house), but he’s not willing to take in a roommate. His personal preference.
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Disagree. There is no way his savings will grow faster than the interest on a credit card balance. That has to be paid off ASAP. And if the other thing allows prepayment, that, too. That said, he's got to watch his budget going forward.
The termite control, unfortunately, is indeed needed. He is in contract and responsible for the full amount. If it’s still needed next year, we will be helping him shop around.