How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Megan C Your Own Question
Megan C
Megan C , Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16539
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
23669918
Type Your Finance Question Here...
Megan C is online now
A new question is answered every 9 seconds

I am 55 years old. I do have a 401k but it only started about

Resolved Question:

I am 55 years old. I do have a 401k but it only started about 7 years ago, having about 30k. I own my home outright, just paid off. I have a 2nd home, owing 95k. I have no other debt and make 67k annually. My question: I would like to retire at age 62, should I work to pay off this home in the next 7 years, where the rent I get will supplement my social security, or should I beef up my retirement funds?
Submitted: 3 years ago.
Category: Finance
Expert:  Megan C replied 3 years ago.

MyVirtualCPA :

What kind of loan terms do you have on the 2nd home?

MyVirtualCPA :

Is it a 30 year fixed rate, and at what percent?

Customer:

30 yr fixed. 4.5 interest rate. renter currently pays principal, taxes & ins.

MyVirtualCPA :

I would beef up your retirement funds. Interest rates are on an incline, and this debt is at an attractive low rate

MyVirtualCPA :

and the interest is tax deductible

MyVirtualCPA :

When lending interest goes up, so will savings interest. Soon, it will make more sense to save money than to spend it

Customer:

thank you. in which direction should i beef up the retirement? Ira's??

MyVirtualCPA :

If you were on an adjustable rate loan, I would have told you to pay the loan off...but fixed, no - this is good

Customer:

Thank you. In which direction should i beef up the retirement? Ira?

MyVirtualCPA :

You can only invest a small amount per year in an IRA. I would maximize that. I would give the max to my 401(k) plan and do the max allowed IRA contribution as well.

MyVirtualCPA :

In your IRA account, I would try to keep safe investments since you are 55. Ideally, when CD rates start to increase (right now they are earning next to nil) you want to lock in as high of rates as possible in those FDIC insured accounts

MyVirtualCPA :

But, to plan for that, keep your investments in holdings that are liquid, meaning easy to transfer out and into other investments

MyVirtualCPA :

Don't invest your IRA in real estate or hard assets

MyVirtualCPA :

Is there anything else that I can assist you with today?

Customer:

ok. You said to max the 401k. employer matches .50 on dollar, up to 6%, I contribute 6%. I can contribute with catch up funds, although there will be no matching. is this your suggestion. Also, can I print this conversation?

MyVirtualCPA :

Yes, I would suggest to contribute the maximum amount allowed which I believe is in the neighborhood of $17,500 plus your catchup contribution would be 5,500

MyVirtualCPA :

Is there anything else that you need assistance with?

Customer:

I will do that. thank you for the advise. I believe that's all i'm needing at this time.

MyVirtualCPA :

Okay great. Please take a moment to rate as "excellent" so that I may receive credit for assisting you today

Megan C and other Finance Specialists are ready to help you