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Hi, I am nervous about letting go of my money...
Old 08-11-2011, 03:53 PM   #1
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Hi, I am nervous about letting go of my money...

Hello,
I am 60 yrs. old,single, retired one month ago. Have a pension as well as SSDI totaling $5K gross/mo. I also have a 401K with $92K and $125K in a MM account. My 401 is in a stable value fund which is earning 3.85%. I have a mortgage which I am upside down on approx $40K. I can meet my bills but barely. I am not worried about my children, they are in good shape financially.

I have been speaking with a fin. advisor who is encouraging me to take my money out of my 401K and get a Aviva annuity which is 7.25%. I know nothing about annuities but am very nervous about tying up my money for 10 years. His goal is to help me supplement my income monthly. I am scared to death of committing for such a long period.

This is all the savings I have with zero chance for earning due to a disability. My income has been cut by 50% and don't know if I can afford to live where I do unless I figure out a way for my money to work for me.

I am ready to tell him forget it because I feel so unsettled. Can anyone provide insight on a way to earn a little interest and not have my money tied up for so long? I am grateful for any feedback.

Thanks
nana S.
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Old 08-11-2011, 03:59 PM   #2
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You probably don't want to hear this but your best choice is likely downsizing your home and/or make cuts elsewhere in your budget rather than chasing yield with your precious savings.

If you post your monthly budget you will get plenty of good advice on where to make effective changes.

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Old 08-11-2011, 04:05 PM   #3
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Originally Posted by nanaS View Post
I am ready to tell him forget it...
Good!

Trust your instincts and be very cautious about purchasing an annuity unless you have done a lot of research and fully understand what you are buying.

Many times - way too many times - the fine print says "the agent who sells you this will make more money than you do on the transaction". Of course it isn't spelled out that clearly, but that's the end result.
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Old 08-11-2011, 04:16 PM   #4
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Single with pension and SSDI income of $5K month? I'd take a hard look at your expenses. Now may not be the best time to buy an annuity because rates are so low. Plus, you just retired and are going through a transition. Ask questions, learn all you can, track your expenses, and give yourself time to think all this through. Don't let anyone talk you into something you're not comfortable with or don't understand.
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Old 08-11-2011, 04:36 PM   #5
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I'd be nervous too.

I agree with Purron. You need to take a hard look at your expenses. It seems to me that one of your biggest expenses is housing (since you still have a substantial mortgage). If you could have a paid for home, it sounds like you should be able to live comfortably on your pension + SSDI. Can you use part of your saving to pay off the mortgage? If not, would you be willing to move?

Does the pension have a cost of living adjustment?
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Old 08-11-2011, 04:37 PM   #6
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Originally Posted by nanaS View Post
His goal is to help me supplement my income monthly. I am scared to death of committing for such a long period.
No, his goal is to sell you an annuity.
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Old 08-11-2011, 04:38 PM   #7
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Hi, NannaS. Welcome to the forum.

I look at annuities as a way to stretch a meager retirement portfolio or else to provide longevity insurance. Unfortunately, as others have pointed out, this may be a bad time to buy an annuity due to the poor return. For now, based on your income (probably not as fully taxed as all pension??) you probably should be able to survive without an annuity if you cut expenses. There are folks on this forum living on half your income - and doing well.

Within this forum, there are tons of ideas on saving money. Before going the annuity route, PLEASE investigate all the other options. Once you buy an annuity, you can't get the money back. I would even say "sit on the cash" before I would suggest an annuity - at least until you have proved to yourself that it makes sense to you.

Don't mean to beat up on you about annuities. They do have their place. But, you can go that route next year if you are still convinced it's a good idea. Don't let a salesman pressure you.

Very best of luck. Check back often. We rarely bite and, once in a while, we have some good advice.
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Thanks for the foodback
Old 08-11-2011, 05:05 PM   #8
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Thanks for the foodback

That 5K is a gross figure. I have medical ins. which is $650/mo, PITI plus HOA and utilities that totals 2400. (I bought in 2005, put $110K down, paid $320K, now worth $150K Owe $205K). Planned on selling home when I retired, but can't do that.

Gross $5K
Net $4200.

Med. Ins. $650.
Med. Co-Pays/RX's $50.
PIMI/HOA/Utilities/Home maint. $2400.
Car Pmnt/Ins. $600.

Phone $105.

Total $3805.

I have not included life ins. prem., gas, food, clothes. I know the house is costing me alot, but how do I get rid of it? The home is fairly new, does not need any repairs, in a safe neighborhood (nothing fancy, gated 55+ neighborhood), taxes are very high (I have it reassessed each year)
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Old 08-11-2011, 05:43 PM   #9
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How much longer is the car payment?
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Old 08-11-2011, 05:43 PM   #10
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The thing that jumps out to me is your Car Payment. Unless you have a zero interest rate loan, or some type of early penalty for paying it off, I definitely pay off your car loan. That would drop your expenses by $500 a month a make it relatively easy for you to pay the bills. Once you hit 65 you'll be eligible for Medicare which will drop your expense even further.

The house situation is tricky. It is certainly worth a phone call or two to the lender to see if you can at least refinance at a lower interest rate.
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Old 08-11-2011, 05:45 PM   #11
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48 mo
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Old 08-11-2011, 05:49 PM   #12
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None of my business, but the phone charges seem like a lot. Any way to cut that down?

Or is that what phones cost in the USA?
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Old 08-11-2011, 05:55 PM   #13
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48 mo on car. Int rate 3%. Chase stated they will refi 1/2% less 5.25 for about $2500. Reduce pmnt $150. I don't want to do that because I hope to eventually get out of here.
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Old 08-11-2011, 05:55 PM   #14
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If the interest rate on the car loan isn't zero, strongly consider paying it off.

And I agree the phone bill looks high. If you have both a land line and cell phone, consider dropping the land line. We dropped our land line several years ago and never missed it.
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Old 08-11-2011, 05:58 PM   #15
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Since you say your children are OK financially, I question the need for any life insurance (your post #8). How much are you paying, and why?

Also, what will your retirement income be? I assume you go from SSDI to SS? And a pension?

You'll need to dig deeper into those numbers, but I'm starting to think you may need to rent out the house? Take in a room-mate?

-ERD50
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Old 08-11-2011, 05:58 PM   #16
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Wow, you took a big hit on the house. What area of the country do you live in?
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Old 08-11-2011, 05:59 PM   #17
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Iphone cost is pretty standard about $100 mo. Includes long distance and my internet.
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Old 08-11-2011, 06:00 PM   #18
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Quote:
Originally Posted by nanaS View Post
That 5K is a gross figure. I have medical ins. which is $650/mo, PITI plus HOA and utilities that totals 2400. (I bought in 2005, put $110K down, paid $320K, now worth $150K Owe $205K). Planned on selling home when I retired, but can't do that.

Gross $5K
Net $4200.

Med. Ins. $650.
Med. Co-Pays/RX's $50.
PIMI/HOA/Utilities/Home maint. $2400.
Car Pmnt/Ins. $600.

Phone $105.

Total $3805.

I have not included life ins. prem., gas, food, clothes. I know the house is costing me alot, but how do I get rid of it? The home is fairly new, does not need any repairs, in a safe neighborhood (nothing fancy, gated 55+ neighborhood), taxes are very high (I have it reassessed each year)
You may want to consider a short sale on your house. It would be hard to lose that much money but it is unlikely to recover enough to ever get your money back out of it. I live in Vegas, so see this kind of situation a lot.

I wish you luck!
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Old 08-11-2011, 06:07 PM   #19
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Is the pension COLA'd? If it is then I think you should be fine. I don't think it makes sense to do an annuity when you already have a large(IMO) pension. I'd keep the lump-sum cash to help with any emergencies. It also gives you the option of selling your house and paying the difference. For now you can just use a few hundred a month from the MM to cover any shortfall with your expenses if needed.
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Old 08-11-2011, 06:08 PM   #20
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My life ins. is not much. I think about $25 mo. It is just enough for funeral expenses and a little extra. I can cancel my land line, it is $18. I would like to rent out the house, if I didn't live here, I would be in the red about $500 mo. If I rented a room, I could get about $400 extra in my pocket. Have considered that. Cross my fingers for a good renter.
I bought at the absolute worst time, Dec 05. I live in central California.
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