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Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 10097
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I'm 64 and I have a little over 400K in investments. I own

Customer Question

I'm 64 and I have a little over 400K in investments. I own a house that is valued at 450K but owe 280K on my mortgage. I have about 75K in credit card debt. Presently I have no income source. What to do?
Pay my credit card debt?
Sell the house?
Submitted: 1 year ago.
Category: Finance
Expert:  Lane replied 1 year ago.
Hi,A fairly complicated (can be art more than sciene without know more about YOUR objectives) question..From a purely financial/mathematical perspective, the credit card debt is is probably costing you the most (no associated tax deduction OR appreciating asset - the home - attached to THAT debt)..BUT, if you're saying that these are the only assets you have to work with, then selling the house (especially if you can get a fair value, and are looking to downsize) - AND given that there's an exclusion of gain on primary residences - will cost you less to sell that paying the income tax on the distribution from the 401(k) ESPECIALLY if you distribute that much all in one tax year (likely putting you in a much higher tax bracket, that spreading OUT that 401(k) income over the years, as is really the intent for that vehicle).
Expert:  Lane replied 1 year ago.
Likely a multi-factor approach can make the most sense - again LOTS of assumption here, but....Maybe look at taking only the amount out of the 401(k) that would keep you under the next highest tax bracket to pay off a CHUNCK of that credit card debt - put the house on the market to see what you can really get ... Then depending on the result of that, pull enough after Jan 1st to from the 401(k) - again staying under that next highest bracket - to pay off the rest (or anothr large chunck of the credit card debt).I'd really need to know more about the rate's you're getting/paying...Simply selling and downsizing, payng off the credit cards, and not killing yourself with the huge one time tax on the 401(k) all in one year - likely maximizes things financially (unless you really had to take a hit on the VALUE of the house)
Expert:  Lane replied 1 year ago.
I have financial planning software that can help to make hese decisions ... AND ... do so in light of what will have the lowest opportunity cost - hurt your financial well being the least, going forward.I'll make an offer for the smallest amount I can to see if you'd like to discuss further - might be more efficient - LOTS of variables here
Expert:  Lane replied 1 year ago.
Just looked back at the question and saw that you were saying 400K rather than "401(k)" ... that certainly changes the tax aspect of using those dollars..Byt again, this should really be done in light of your other goals, what kind of income you need to driver FROM those investments, what your social security payout is, etc..And now that the BIGGEST aspect of the investments is not the tax aspect, another piece bubbles to the top ... and than an analysis of the QUALITY of those invesments (which relates closely to the value of the home as well, ANOTH asset)
Expert:  Lane replied 1 year ago.
So really, the place to start is to look at what things need to be sold first and lock in the highest return for you - Getting the credit card debt (not attached to an appreciating asset like the home) paid off is the only real no-brainer piece..The rest should be done with opportunity cost (what you're giving up in one area to get something in another area) in mind..And an analysis of the QUALITY of the assets you have to work with (what they're likely to do for you going forward) has to be a part of that
Expert:  Lane replied 1 year ago.
I still don't see coming in here ... But again, you're poster child for the need to do a full blown financial plan.
You have a retirement period to deal with (income needs), different assets from different asset classes, credit card debt (probably the the simple part - depending on interest rate cost ... the source from which to retire that debt LESS simple)...
... and SHOULD weigh all this against the kind of lifestyle you'd like to have throughout retirement.
I've made what's called an "additional services" offer here. If you'll accept the offer, we can speak OR converse by email and I can lay this out for you (with some additional information from you).
I can provide access to a cloud based service that I use with clients for financial planning and analyzing the possible scenarios (what-if's).
Let me know ...
Lane