I am 62 years old and out of work on long term disability due to a serious medical condition.
I do not have any significant debt. My question is:
I have 2 car payments, one is $245 per month with 29 payments left. The other is $196 per month with 29 payments. I could pay both off for about $12,000.
I am contemplating withdrawing the $12,000 out of my retirement savings. I only have approx $185,000.
Would this be a wise decision, considering I have such a relatively small amount saved?
Hello and thank you for coming to Just Answer. We appreciate the opportunity to help you with your tax questions. I need a little more information in order to determine what I would recommend as your best option at the moment, if you don't mind answering a couple of questions.
Thank you for this information. It will enable me to advise you better.
First, thank you for being so thorough...I appreciate it.
Now, to answer your questions:
Again, thank you...Very much for being so thorough...I look forward to your reply.
Thank you for the information. In looking over your situation, I believe this question is outside of my area of personal expertise. My expertise is primarily in tax planning and I think your question falls more into the area of financial planning, which is a different specialty. I am sorry that I can't help you personally, but I want to make sure that you receive the best advice possible. In order to facilitate that, I will opt out of your question in order to open it up for another expert and have it moved to the financial planning category.
Again, I'm sorry that I can't help you, but I think this is the best way for you to get the most accurate answer. It has been a pleasure working with you.
Hello again. I am very sorry that none of the other experts have been able to answer your question. I want to help you and while I am not a professional financial planner, my profession requires tax planning, which is part of the issues you need to consider and I have significant financial knowledge. If you are willing to work with me, then I will be happy to advise you as best I can. You are not required to pay for an answer unless you are satisfied with it.
In reviewing your information I have a couple of additional questions whose answers would help me provide better advice.
Thank you for the additional information.
Thank you...Very much for trying to answer this question. I do appreciate it.
I did some additional figuring myself concerning this. You are correct. When I figured what it would cost me to withdraw the money, it totalled more than what I will make in regular payments.
So...I decided to leave the money in the IRA. Hopefully, it will help it grow. Also, I will try to place a little towards the princapal of those loans.
Fortunatly, the payments are not a financial burden to us and they will end before the disability sponsered by my employer stops (Age 65.)
Again, I truly do appreciate your imput and would love to hear from you as to whether you think I made the right decision.
I am going to go ahead and pay you. However, I truly would enjoy hearing back from you with any comments/suggestions concerning my decision.
Very truly yours
Hello again Jesse,
Now I can't locate the link to submit a payment... Could you please send it when you reply to me?
Thanks so much!
Thank you very much. I wouldn't have expected payment since you have worked out your question mostly by yourself, but I appreciate it and I will try to provide worthwhile advice.
I think that your decision is very wise. Since some of your money is in stocks, selling those stocks now will lock in the losses you've probably experienced in the last few years. By keeping those stocks, you may be able to recover some of those losses.
The tax money that would be withheld from your IRA (the 20%) if you withdrew the money would be sent to the IRS to offset your 2011 taxes and you should get much of it back, but the money you withdraw would be considered taxable income and would increase your taxes this year.
Paying extra money on the principal of your car loans is very smart. You need to check and make sure that neither of the loan have an early payoff penalty, but, as long as they don't have penalties for early payoff, you can pay extra money on your loan payment, designated to be applied to the principal, and pay off your loan more quickly saving interest payments without paying any additional taxes. Make sure that you identify on your payment that the extra money is to go to pay the principal, otherwise some companies will apply that money to the interest. You may want to check with your loan companies on how to pay extra money toward the principal, so that they don't have any excuse to not put the extra money where you want it.
I think that keeping the lump sum of money available is safer than paying off your loans right now. It will cost you a little bit of extra money, but you're going to be dependent on your savings to pay your bills in a few years, and there is no way to get the money back once you use it to pay off the loans if an emergency arises.
If you had more resources or were in a situation where you could recover if something goes wrong with your finances, paying off the loans would make sense. But in your situation, I think that your decision to be conservative is very wise.
I wish I could have helped you more. You might look at some of the potential pitfalls with Medicare and your wife's health insurance. If one of you goes on Medicare before the other, you may be paying Medicare premiums and still paying health insurance premiums. My spouse is going on Medicare before I do, but our health care premiums through our employer aren't dropping even though only one of us will be covered.
Please let me know if you need any more information about this topic. It has been a pleasure working with you. Thank you.