It’s time to clean out the inbox and answer your questions. Thanks to all who take the time to write to me.
Q: I am 38 years old and recently discovered that my parents are not doing as well as I had thought. They are both 70 and own their own home, which is worth $350,000 (with a $93,000 mortgage). My father went through a health-care issue, which prompted an early retirement and, in the process, they blew through most of their savings and have accumulated $35,000 in credit card debt. Mom is still working and, thankfully, Dad has a pension, but they can’t seem to put a dent in the debt, probably because the interest rate is more than 20%! I have $280,000 in my 401(K) and was thinking about borrowing against it to pay down their outstanding debt. What’s your advice?
A: It would be preferable that you avoid invading your retirement savings, unless you absolutely need to do so. I don’t think that you or your parents are there yet. Before you make any sudden moves, determine if your parents can tap the equity in their home to help their situation. It might seem daunting to assume a mortgage at this point in their lives, but with the recent dip in interest rates, the numbers could work.
Emotionally, it might be a relief to them that they can take care of their own situation without turning to you for help.
Q: I am 63 and have recently inherited $200,000. I was planning to use the money to pay off a mortgage balance of $88,000 (our rate is 3.75%) so that my husband and I can retire next year debt-free. At that time, our combined Social Security benefits, as well as a small pension should cover most of our needs. We plan to use $300,000 in an IRA for any extras. Is this a reasonable plan?
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A: You didn’t mention whether or not you had any money in an emergency reserve fund, so I am going to assume that you do not. Your first priority for the inheritance is to make sure that you have at least one year’s worth of expenses socked away. Then it makes more sense not to pay down the mortgage and instead use the balance of the funds to pay for your living expenses until you reach your full retirement ages. By waiting, you will be entitled to larger retirement benefits for your lifetimes.
Q: I used to receive an estimate of my Social Security benefit via snail mail, but don’t recall seeing one in a while. How can I find out what to expect when I file?
A: Almost a decade ago, the Social Security Administration decided to save money by forgoing the benefit mailings. According to author and retirement expert Mark Miller, “It is now abundantly clear that this is not working out. The number of workers accessing their statements online has been just a fraction of those who once were reached by paper statements.”
If you want to see your benefits estimate and review your earnings history, go to www.ssa.gov/myaccount, where you can create an account. One note: If you have a security freeze on your credit, perhaps as a result of one of the recent security breaches, you will need to temporarily lift it to establish the account with Social Security. You can reinstate the freeze (or fraud alert) once the SSA account is opened.
Jill Schlesinger, CFP, is a CBS News business analyst. She welcomes comments and questions at email@example.com.