Hi Money Minder,
Hey there Money Minder,
My FIL, who just hit 70, recently retired and is trying to figure out this whole Social Security thing in Michigan. Here’s the rundown of his financial situation:
– Monthly income: $1987 after BCBS Medicare
– 401k balance: $32,157
– Cash in Checking/Savings: $3275
He’s got two pesky debts that keep him up at night:
1. Orkin Termite control: $160 per month until July 2025 (contract stuff, total of $1700 at 22%)
2. Credit card from a local CU: $6502 at 10.99% APR, with minimum payments of $160/month
On top of that, he’s got the usual bills:
– Mortgage: $615/month (super envy-worthy, I know)
– Water bill: $35/month
– Trash: $25/month
– Car insurance: $24/month
– Internet: $55/month
– Electric: $50/month
– Gas (for heat, water heater, and stove): $75/month
– Groceries/dog food: $400/month
– Gas for the car: $100/month
Some other key points:
– He’s thinking about working one day a week for $20/hour, 8 hours a day
– We’re helping him apply for Food Stamps this week, fingers crossed he can snag that extra help
So, the big question is: How can he tackle those stressful debts? He’s thinking about dipping into the 401k, but I’m not so sure about that move. Can you help us out with some advice?
Thanks a bunch Money Minder!
Response from THE MONEY MINDER:
Thank you for reaching out. How can we assist you with your financial goals today?
Hello There,
Dear Poster,
It sounds like your FIL is in a tough spot managing his finances after retirement. It’s understandable that the debts are causing him stress, but withdrawing a lump sum from his 401k might not be the best solution. Taking money out of retirement savings can have long-term repercussions, especially with the current balance being relatively low.
One practical approach to eliminate the debts would be to prioritize paying off the credit card debt with the higher interest rate first. While continuing to make the minimum payment on the Orkin contract, any extra funds should be directed towards paying down the credit card balance. This will help reduce the overall amount paid in interest over time.
Additionally, your FIL could consider increasing his income by going back to work part-time as he’s considering. The extra earnings from this could help accelerate the debt repayment process. Every little bit counts, and even a day of work per week at $20/hr can make a difference.
Regarding the application for Food Stamps, it’s a good step to explore additional financial assistance options. It’s worth exploring all avenues to alleviate financial strain.
In summary, tackling the higher-interest debt first, increasing income where possible, and exploring assistance programs like Food Stamps can help your FIL navigate his financial situation more effectively.
Best regards,
THE MONEY MINDER
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