Q. I have a car loan of about $11,000 with $116 payments taken out of my check twice monthly. I also put $120 into a 401k plan each pay period and another $60 into savings to cover the cost of my insurance. I'm single, 60, and earn $12.50 an hour working as a checker in a grocery store.

As of September, I've lost some money in the 401k plan and I'm wondering if I'm putting in too much money?

After everything is taken out of my check I bring home about $450 every two weeks. With the pad rent for my mobile home at $336 a month, $55 for electric power, $40 for gas, $24 for phone, $22 for life insurance, and $9.75 for garbage there is barely enough for me to exist. My mobile home is paid for.

I've considered getting a home equity loan to do some improvements and to pay off the car. Is this a good idea?

---M.K., by e-mail


A. I would avoid a home equity loan on a mobile home. The rates are high and you end up with your home encumbered. If you miss payments you will lose your home.

There are many lenders who will lend you money. That doesn't mean it is a good idea for you.

While I admire your contributions to your 401(k) plan, it may be more than you can handle or absolutely need. You could reduce your contributions and apply the money to your car loan so it is paid off faster. Adding $116 to your $450 net paycheck would make a big difference in your life.

I also suggest that you do something else. Get in touch with Social Security (you can do this at www.ssa.gov) and ask for your Estimate of Benefits Statement. This will tell you how much you will receive in retirement benefits at age 62 and at your full retirement age just over 65. If you have a long work history I think you will be pleasantly surprised--- by age 65 your Social Security check is likely to be close to your net paycheck because you won't be paying employment taxes, income taxes, or saving in a 401k plan.


Q. I want to retire sooner rather than later. My plan is to take the equity in my home and invest it in a duplex. The payment will be the same as I currently pay so in case of a vacancy I can still easily make the payment. Otherwise, the rent from the other side will cover the monthly payment. This will save me my $1000/month house payment, which I will invest. The downside, of course, is that I'm exchanging one mortgage where I'm paying mostly principal for a new mortgage where I'm paying mostly interest.

In 7 years I'll own my home, but I won't have that much equity in the duplex after 7 years. Balancing that will be all those months of no house payments.

Do you think this is a good idea?

---S.T., Dallas, TX


A.   Owning a duplex is a good idea if you don't pay a premium for ownership. If you pay a premium for ownership you will, in effect, always be subsidizing your renter.

How do you know if you are paying a premium for ownership?

Simple. If the rental income from both sides of the house will cover its expenses and financing, there is no premium. If the rental income from both sides of the house is far short of the operating and financing expenses, you're paying a premium.

Many duplex owners experience two kinds of benefits. In the years they are paying off the mortgage, they pay the mortgage. The rent covers the operating expenses. In effect, they have fixed their shelter expenses. After the mortgage is paid off, the rent covers all operating expenses so the owner, with one investment, has all shelter costs covered.