seriousthistime
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Post by seriousthistime on Dec 9, 2011 23:05:28 GMT -5
Well, having been on the phone with loan officers, I figured it's not worth the money to get an FHA refi. Points are too high, PMI is expensive, can only get 85% LTV. I've done paperwork to see about an 80% LTV conventional loan at 4%, enough to pay off my HELOC. The rest would have to be my main paydown priority, but at least I would have an extra few hundred dollars to put toward the debt. Cancelled my cable (except for basic at about $12 per month). I plan to go through my budget to find more ways to cut ASAP. I hope to get it down to where I would be if I were to retire at 66. Living as if I were already retired might be a good way to go. Isn't it the wisdom here that if you're shopping for a house, try living on what you'd have to live on once you pay the mortgage? It won't be the survival retirement budget, but I can work toward it while I have the time.
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Nazgul Girl
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Post by Nazgul Girl on Dec 10, 2011 7:23:07 GMT -5
serious, there is a handy-dandy mortgage calculator which can be used to figure payoffs on any debt really, which allows you to calculate putting a lump sum on the debt at the beginning, middle or end, or adding a certain amount per month. I used it to figure out how to pay off our mortgage in ten years by adding a weekly sum. I will give you the link here because I think it might help you out. It's called Karl's Mortgage Calculator. www.drcalculator.com/mortgage/ I went through a divorce in 1999 and had to pay off some of the leftover debt from the marriage, too. It worked out, but it was hard. I hope this website helps you get to where you want to be. Good luck.
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seriousthistime
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Post by seriousthistime on Dec 17, 2011 14:23:22 GMT -5
Thanks everyone.
So I am going full steam ahead on a refi. The loan app is all set, looks good, and the appraisal is this week. The loan officer and I talked about housing values here, which are not as affected by the real estate crash as many areas are, but it's still been somewhat affected. He told me to make sure my house looks as good as it can, which is not exactly news. I knew that.
So, in the process of printing off a bunch of stuff for the loan app, I ran low on printer ink. I have an awful time getting new black ink cartridges in the size that fits (the manufacturer changed the size but uses the same number for the new cartridge and insists the new size works, but I've never been able to get it to fit). I went to one of those refill places that sells remanufactured ink cartridges. I got the cartridge out of the plastic wrapper, got it in (got black ink all over my hand too), printed out a page, looks good, no ink blotches on the paper, everything clear, and then I turn around to find a few droplets of black ink on my beige carpet. Wonderful. Fortunately, I do have some carpet cleaner that works on ink. I sprayed and blotted it and it seemed to be coming out pretty well. Half an hour later I found some droplets elsewhere. I'd planned to steam clean my carpets today anyway, so I guess I won't know how well it worked until I get everything done.
This on top of the red wine my friend spilled all over my carpet last week. It was a stunning spill that flew in an arc and landed in droplets all over one area of the room.
Why couldn't all this have happened AFTER the appraiser came?
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Gardening Grandma
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Post by Gardening Grandma on Dec 17, 2011 15:31:02 GMT -5
I plan to go through my budget to find more ways to cut ASAP. I hope to get it down to where I would be if I were to retire at 66. Living as if I were already retired might be a good way to go.
This is what our advisor suggested we do the year before DH retired. It was not as easy as it sounds. I think you are being smart and proactive to take this approach.
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seriousthistime
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Post by seriousthistime on Jan 7, 2012 13:07:42 GMT -5
Just got my first paycheck of the new year, which reflects my increased 401(k) contributions (to $17K). Last year I had a lot of money set aside in my flex spending account for health care and this year I am setting aside much less, so some of the increased 401(k) contribution is offset by the decreased contribution to the flex. But still, I was amazed to find that I have about only $140 less take-home per paycheck with the increased 401(k) contribution.
Since I can also do catch-up contributions, I am thinking of doing that too, for another $5,500 tax deferred. I was considering contributing more to my Roth, I was thinking of doing that instead of the catch-up, but it wouldn't be tax deferred. I am probably at the height of my career, income, and tax-paying years. I don't see a radical change in taxes at the level I'll be at during retirement, which is in 6 years at most. I could save 25% by deferring now, vs. paying 10% when I withdraw tax-deferred funds after retirement.
Does anyone see any flaws in my logic for contributing catch-up tax deferred instead of to a Roth?
The refi is percolating along, appraisal apparently came back okay, and now it's going through underwriting. Since I have a low debt to income ratio, I hope I'll be able to get this done in the next few weeks.
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hsclassic
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Post by hsclassic on Jan 7, 2012 15:09:23 GMT -5
STT - Like yourself, this is my first year to be able to make "catch-up" contributions, and I changed my contributions to make the catch-up in addition to the $17K I already contribute. Haven't gotten my first paycheck yet, and may need to readjust percentages after I get it next week.
As for 401(k) catch-up VS Roth IRA, I think it depends on how close you are to retirement (or at least leaving the full-time workforce before retirement age) to decide which is more appropriate. I'm turning 50 this year, DH 58, and we are both leaving the corporate workforce (him in Feb., me in May), so we'll need the Roth IRAs before we are eligible for full pension amounts or full SS. Because of that reason only, I'd vote for Roth IRA. However, if you don't have any plans to leave FT employment before 62, then I'd vote for the 401(k) catch-up because of the tax benefits.
If your employer allows you to adjust percentages during the year, why not fund your Roth IRA fully right away, and then add the catch-up after that?
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seriousthistime
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Post by seriousthistime on Jan 7, 2012 17:05:08 GMT -5
hsclassic, this is not my first year to make "catch-up" contributions, but it's the first year that I've been able to consider maxing out the 401(k) so the first year I've had to consider whether to make "catch-up" contributions. I just turned 60, and that milestone has made me think more holistically about my finances, about how it's not all about debt payoff and contributing to the 401(k) just enough to get the max, and so on. Since I can tap any or all of my retirement at this point, I'm not worried about having Roth funds to tap into. And, yes, my employer does allow me to adjust during the year.
I'm also working on getting my expenses closer to where they'll have to be when I retire. I hope to make it to 66, but with the way my job is structured, it is questionable whether it will last that long. I will have a one-year notice before it ends, so at this point it seems likely that unless something drastic happens very soon, I will make it to at least 62. Retirement is not that far off, and at this point I think it's likely that putting money into a tax-deferred option is a safer bet.
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The J
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Post by The J on Jan 8, 2012 14:31:50 GMT -5
One of the benefits of having money in the Roth is so that if an irregular, but large, expense comes up (like replacing a roof), you can take the money from the Roth that year so as to not create tax consequences (like if it would bump you up to paying taxes on SS).
However, you might be able to fund the catch up and partially fund the Roth with the tax savings. Depends on the numbers. If you're looking at reducing your spending in anticipation of retirement, then you might want to try to do both, at least to the extent possible, because putting more money away forces you to reduce your spending.
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zibazinski
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Post by zibazinski on Jan 8, 2012 16:49:48 GMT -5
I would look around for at least one roommate, maybe two, and put all their rent on your mortgage in the form of extra payments or on your debt. I hope you can work another6 years because that would work out well for you but always best to plan for other alternatives.
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seriousthistime
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Post by seriousthistime on Feb 19, 2012 15:58:10 GMT -5
I have taken a lot of advice from all of you and wanted to give an update and get more advice from you here.
I refi'd the house at 4%. I took out an 80% LTV mortgage, 30 years. This paid off my HELOC and most of my cc debt, which I also paid down with my tax refund. (I fixed it for next January so I should be about even.) I've got about $5K left in cc debt, a car loan of about $9K which I don't plan to do anything with in terms of paying it off early, and then the mortgage. Just the simplification alone has made it easier to budget because I don't have so many payments to make. The big surprise is that the appraisal came back higher than I thought, so my net worth jumped a bit.
So, as I mentioned earlier, I increased my 401(k) contributions to $17,000. When I got used to that, I signed up for catch-up contributions which are another $5,500. That hasn't started yet but it is partially offset by changing my withholding. I'm still getting just the 5% match.
Here's the latest issue: Once I get used to the catch-up contributions and pay off the last 5K in cc debt, I expect to make another leap into fully funding the Roth. But should I fully fund the Roth for 2011, slow down the debt reduction on the last $5K to get the Roth funded before April 17, and then blast away at the last $5K in cc debt and then work on funding the Roth for 2012?
ETA: The interest rate on the $5K cc debt is now at 0%. It increases on May 1, to about 15%.
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Phoenix84
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Post by Phoenix84 on Feb 19, 2012 16:48:41 GMT -5
Wow, that pension of your XH is one hell of a pension. Just your share would be more than I make in a month, and I make about 75k/year.
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seriousthistime
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Post by seriousthistime on Feb 19, 2012 16:58:59 GMT -5
I know, Phoenix. If XH retires, it would change my life to a point where cat food would not have to be a staple in my post-retirement diet.
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endofera
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Post by endofera on Feb 19, 2012 17:02:13 GMT -5
Can you fund the Roth for 2011 and still pay off the credit card debt before the 15% rate kicks in? If not, I would pay off the card and start the Roth funding with the 2012 contribution. You have made a lot of positive changes in a short amount of time!
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seriousthistime
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Post by seriousthistime on Feb 19, 2012 17:16:48 GMT -5
endofera, I would basically have to come up with almost $6K by April 17, and another $5K by May 1. I can do one or the other, but not both. I could do some robbing Peter to pay Paul and take money from some earmarked savings that I don't need RIGHT NOW and divert any added funds to those savings, but then it would be panic time when my property tax becomes due at the end of May.
I'm leaning toward paying off the cc balance and skipping the fully-funded Roth for 2011.
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Plain Old Petunia
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Post by Plain Old Petunia on Feb 19, 2012 18:44:47 GMT -5
There are LOTS of 0% balance transfer offers out there, even some with no balance transfer fees. Fund your Roth. Transfer the balance of your CC debt to keep it at 0%.
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seriousthistime
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Post by seriousthistime on Feb 19, 2012 21:33:37 GMT -5
Petunia, it's something to think about. If I can find a 0% balance transfer with no balance transfer fee, I should certainly consider it.
I could also divert money that I would ordinarily keep putting into earmarked savings for big expenses that come due in September. I'll have to plot it out and see what's possible. Right now, I have just about what I need to have for my property tax installment due at the end of May. Trouble is, the other property tax installment comes due September 1, so I make equal deposits into savings throughout the year, have a surplus after the May payment, and then use the surplus and the added deposits in June, July and August to make the September payment. I could stop making the extra deposits now, meet the May installment without any problem, and then with money left from not having to send it to the cc, I could catch up on my property tax stash over the summer. I could also do that with about $3,000 of other expenses due later in September. As long as I can see my way clear to meeting my September expenses in September, there's no need to set aside equal amounts in savings to get there. It's more comfort level than anything, knowing I'm on track to meet those expenses.
Another option would be to partially fund the Roth. It doesn't have to be all or nothing. And a month or two of a few thousand bucks on a cc at 15% interest isn't the end of the world.
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The J
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Post by The J on Feb 21, 2012 10:35:20 GMT -5
You only get one opportunity to fund a Roth for a year. I'd do that, even if it meant paying interest for a couple of months (caveat: this is assuming it's a normal interest rate increase, not an issue where there's been deferred interest building up for X years which all then capitalizes on May 1st).
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Gardening Grandma
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Post by Gardening Grandma on Feb 21, 2012 10:44:38 GMT -5
As close as you are to retirement, I agree with TheJ. If you can find a 0% bal transfer offer, that'd be great, but even if you can't, the long term benefits of the Roth outweigh (imo) the short term interest savings on the cards.
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