Q. I am 60. My husband is 63. We plan on working five more years. I am an educator and will retire with a pension. My husband only has a small IRA, about $70,000. This is a second marriage for both of us, after two failed 21-year marriages producing 7 children between us. Only one child lives with us now, my husband's 27-year old daughter, who is still struggling to "find her way."
We own a home with about $150,000 of equity, have no liquid assets, and have about $60,000 in unsecured debt— credit cards, etc. If we work hard and we may be able to pay all of it off in five years.
My question: What makes sense for us now? Should we stay in our home (a nice ranch, all one-level and renovated— but big yard to care for and constant upkeep) and work at paying off our debt? Or should we sell the house, pay of the debt and move into a small rental, investing the $90,000 we will have left after paying off the debt?
We have three grandchildren, and one more on the way. They come and stay with us, play in the yard and enjoy the quiet cul-de-sac we live on for playing and bike riding. Does it make sense to keep the house for these visits? Move on? Downsize? Where do we go with all these commitments? —V.D., by email
A. Success in everything is relative. So is failure. It always depends on what you consider important. Your previous marriages, for instance, lasted nearly 3 times as long as the average marriage. And from a biological perspective they were quite successful, producing seven children. My bet is that you would not want to trade places with a couple that was rich, but childless.
Smart use of the resources you have today can make a big difference in both your retirement comfort and your capacity to do memorable things with your grandchildren. Selling your house and renting will:
- pay off your credit card debt,
- more than double your retirement savings,
- increase your ability to save,
- eliminate the burden of home maintenance.
That’s pretty nice for a simple step. It’s a very good Plan B. It’s also possible that your grandchildren will enjoy visiting you in an apartment complex because it is likely to have a pool and may have walking paths, etc. Don’t forget: The more you do to take care of yourselves financially, the more you will be able to do with your grandchildren.
Q. One of your recent columns in the area of annuities caused me to do some research on my own. As you suggested, I went into immediateannuities.com and ran a few cases for comparison. Here are the conditions that I set up. I assumed living in Arizona with a total investment of $200,000.
For the first case I invested $100,000 in each of two separate life annuities. The one for a 72-year-old man (no beneficiaries) provided $9,120 a year. The one for a 62 year old woman (no beneficiaries) provided $6,732 a year for a total income of $15,850 a year.
For the second case I invested $200,000 in a joint annuity for a couple of the same ages for an annual income of $12,792 a year.
I was surprised to find that we would come out ahead with two single annuities versus a joint annuity. What am I overlooking? —P. J., by email from Dallas, TX
A. Life annuities are all about life expectancy. The payout on a single life annuity is higher than the payout on a joint life annuity because the life expectancy of two individuals is less than the joint life expectancy of the same two individuals. While you would receive a total annuity income of nearly $16,000 a year as long as both of you were alive, income would go down to the income of the surviving annuitant as soon as one died.