Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
HELOCS and Early Retirement?
Old 01-21-2012, 08:40 AM   #1
Confused about dryer sheets
 
Join Date: Jan 2012
Location: Centennial
Posts: 5
HELOCS and Early Retirement?

I am 55 and will be retiring in June 2012. I'm wondering about setting up a HELOC before I leave my employer.

Here are the details:

I have 1.6 million in assets, however only $265,000 (Cash & Bonds) is not in retirement accounts (Traditional IRA, Roths, etc.). My house is worth about $500,000 with a mortgage balance of $164,000. In addition I have a $160,000 rental property that does not have a mortgage.

I want to live on a lifestyle withdrawal of $72,000/ year. In running the numbers I may not quite make it to 59.5 to begin IRA withdrawals without penalty. I know I can use the 72(t) SEP route and potentially sales houses, etc.......but I may not want to go through that.

However the thought occurred to me that I could set up a HELOC now and it would allow flexibility in those decisions in the future. I'm assuming it would be best to apply for one before I stop working. I have always heard it is best to apply for credit when you don't need it.

Anyone out there set up a HELOC to have some "dry powder in the keg" when planning early retirement? What were your thoughts?
__________________

__________________
ERetire is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-21-2012, 08:57 AM   #2
Full time employment: Posting here.
tightasadrum's Avatar
 
Join Date: Aug 2006
Location: athens
Posts: 803
It never hurts to have a line of credit, especially with interest rates so ridiculously low. I also left megacorp around 55, but decided to work a few more years in a different, less demanding job four days a week with flexibility. This allowed me to withdraw only enough to make up the difference and fund travel. I would have a problem borrowing money to live on. Sadly, the lender it seems always wants the money paid back with interest.
__________________

__________________
Can't you see yourself in the nursing home saying, " Darn! Wish I'd spent more time at the office instead of wasting time with family and friends."
tightasadrum is offline   Reply With Quote
Old 01-21-2012, 09:28 AM   #3
Dryer sheet aficionado
Wrirya's Avatar
 
Join Date: Dec 2011
Posts: 27
If there is a chance you would want the heloc get it now , because you won't be able to latter. The key is be careful how you use the money. I would do it, any chance you can get the house paid off before you quit the job
__________________
Wrirya is offline   Reply With Quote
Old 01-21-2012, 09:28 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 15,041
Sounds like an excellent idea to me. I found an untapped HELOC to be a very helpful option in a time of liquidity stress.
__________________
"To be a man means that you are brave, loyal and true. When you are in the wrong, you own up and take your punishment. You don't take advantage of women. As a husband, you support and protect your wife and children. You are gracious in victory and a good sport in defeat. Your word is your bond. Your handshake is as good as your word... When the ship goes down, you put the women and children into the lifeboats and wave good-bye with a smile." C Murray
brewer12345 is offline   Reply With Quote
Old 01-21-2012, 09:49 AM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2007
Posts: 5,596
You can get them for free from PENFED. Decent rates last I checked. Since getting one wouldn't cost anything, I don't see the downside.
__________________
Recently retired at 33. Loving it so far! Wife is still working for ~1 year. I'm secretly just a stay at home dad with 3 kids (2, 7, and 9) but don't tell anyone.
FUEGO is offline   Reply With Quote
Old 01-21-2012, 09:54 AM   #6
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,359
Quote:
Originally Posted by ERetire View Post
Anyone out there set up a HELOC to have some "dry powder in the keg" when planning early retirement? What were your thoughts?
Very handy, we use ours all the time and might actually have to order more checks...
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Old 01-21-2012, 10:27 AM   #7
Full time employment: Posting here.
 
Join Date: Apr 2006
Posts: 835
I retired in 06 - I set up a $100,000 HELOC with Citibank before leaving employment. I have used it several times. It has been handy if I run low on cash before a CD has matured. I can pull some cash out and repay after maturity.
It's nice to know you have low interest cash available.
__________________
Freed at 49. You only live once - live it
Donzo is offline   Reply With Quote
Old 01-21-2012, 10:30 AM   #8
Recycles dryer sheets
arky's Avatar
 
Join Date: Jan 2012
Location: Colorado
Posts: 175
Quote:
Originally Posted by Nords View Post
Very handy, we use ours all the time and might actually have to order more checks...
Is this to cover unexpected expenses when other money is tied up (for example, a CD) or are you talking run of the mill expenses ?
__________________
Don't you know that dynamite always blows down ? --- Moe to Curly
arky is offline   Reply With Quote
Old 01-21-2012, 11:40 AM   #9
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,359
Quote:
Originally Posted by arky View Post
Is this to cover unexpected expenses when other money is tied up (for example, a CD) or are you talking run of the mill expenses ?
Whenever we can't use a credit card and the amount of the purchase is more money than we have in our checking account. It might be in anticipation of next month's CD or while we're waiting for a call option to expire in a couple months.

A HELOC check is easier than giving someone a checking-account check and saying "Please don't deposit that for another 24 hours while I move some money around!" Instead I'll give them the paper, then go home and transfer funds from a money-market account to the HELOC. It usually takes PenFed 2-3 business days to catch up with a HELOC check.

We wrote a number of HELOC checks to the contractors while they were renovating our familyroom. Every two weeks for nearly 100 days. They don't do credit cards and the boss really didn't want that big a wad of cash changing hands in front of the employees.

Yeah, I know, I could just write a check from the money-market account too... but that doesn't always have money in it. This is the way we live when I know that I have a pension check and a rent check coming at the start of the next month.
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Old 01-21-2012, 11:44 AM   #10
Full time employment: Posting here.
 
Join Date: May 2008
Posts: 556
It sounds like an ideal way to spread out the cost of an extremely expensive year, so you don't get hit with a big tax bill that particular year in order to pull from your retirement accounts. However, probably not the best way to handle run-of-the-mill expenses.
__________________
plex is offline   Reply With Quote
Old 01-21-2012, 01:52 PM   #11
Recycles dryer sheets
OldGuy's Avatar
 
Join Date: Nov 2007
Posts: 74
After the first decade of ER, we've used our HELOC for "larger" purchases where, as Nords wrote, there might not be enough in the transaction account to pay for it. The new lakeside deck; the '04 'Vette; the things you just have to have... It's also a way to set up at-our-option repayment schedules at tax-preferred rates, rather than have to peel away the layers of financing offers to reach the real cost of borrowing. The HELOC's been a handy borrowing vehicle for us.
__________________
Those who were seen dancing were thought to be crazy by those who could not hear the music. Friedrich Nietzsche.
OldGuy is offline   Reply With Quote
Old 01-21-2012, 05:23 PM   #12
Confused about dryer sheets
 
Join Date: Jan 2012
Location: Centennial
Posts: 5
Thanks for everyone's post.

It looks like a overwhelming yes....now I will have to investigate the details and do the shopping. What are the costs, do they cancel the line in a certain amount of time if not used, if you cancel the HELOC do they charge, do you do business with your local bank or go online? etc.

Interesting that a couple of folks referenced PENFED. Why?

Thanks again!
__________________
ERetire is offline   Reply With Quote
Old 01-21-2012, 07:03 PM   #13
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,359
Quote:
Originally Posted by ERetire View Post
Thanks for everyone's post.
It looks like a overwhelming yes....now I will have to investigate the details and do the shopping. What are the costs, do they cancel the line in a certain amount of time if not used, if you cancel the HELOC do they charge, do you do business with your local bank or go online? etc.
Interesting that a couple of folks referenced PENFED. Why?
Thanks again!
PenFed is among the nation's best credit unions, #3 in size of deposits, and usually has the best interest rates on mortgages. Not always the best rates, but frequently.

New Year’s Resolution: joining NFCU, PenFed, and USAA | Military Retirement & Financial Independence
Scroll down about halfway.

Anyone & everyone can join. (I don't think you even have to be an American, but I've never checked.) If you don't have one of the many affiliations to the military or the DoD or another qualifying organization (https://netmember3.penfed.org/NetMem...igibility.aspx) then you make a one-time $15-$20 donation to one of two military charities, and you're in.

They frequently run specials for zero-closing-cost HELOCs. Other times you just pay a fee to appraise your home and they pay the rest. (They'll probably appraise your home online and avoid even that fee.) The deal is that you have to keep the HELOC open for at least two years, although you are not required to maintain a balance on it. There's no threat of cancellation, although if you canceled the HELOC within that two-year period you'd pay a few hundred bucks of their closing costs.

You do it all online. In fact, one of the most frequent complaints about PenFed is that it's hard to reach a human being in their mortgage department. You'd need to be comfortable with doing the whole thing by e-mail, and maybe visiting a notary to finish the paperwork.
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Old 01-21-2012, 07:22 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 15,041
There is one gotcha with the Pen Fed HELOCs. They require a monthly payment of 2% of the outstanding balance. Since most lenders only require payment of monthly interest, I would shop around elsewhere.
__________________
"To be a man means that you are brave, loyal and true. When you are in the wrong, you own up and take your punishment. You don't take advantage of women. As a husband, you support and protect your wife and children. You are gracious in victory and a good sport in defeat. Your word is your bond. Your handshake is as good as your word... When the ship goes down, you put the women and children into the lifeboats and wave good-bye with a smile." C Murray
brewer12345 is offline   Reply With Quote
Old 01-21-2012, 07:32 PM   #15
Recycles dryer sheets
 
Join Date: Sep 2002
Posts: 454
Quote:
Originally Posted by brewer12345 View Post
There is one gotcha with the Pen Fed HELOCs. They require a monthly payment of 2% of the outstanding balance. Since most lenders only require payment of monthly interest, I would shop around elsewhere.
I wonder if this is a new change or I just haven't noticed? I have an interest only HELOC with PENFED at 2.75%.

JDARNELL
__________________
JDARNELL is offline   Reply With Quote
Old 01-21-2012, 08:33 PM   #16
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,359
Quote:
Originally Posted by brewer12345 View Post
There is one gotcha with the Pen Fed HELOCs. They require a monthly payment of 2% of the outstanding balance. Since most lenders only require payment of monthly interest, I would shop around elsewhere.
Quote:
Originally Posted by JDARNELL View Post
I wonder if this is a new change or I just haven't noticed? I have an interest only HELOC with PENFED at 2.75%.
JDARNELL
I'm afraid I usually don't carry a balance long enough to notice either. I'd have to read the fine print.

I'm not sure how long I had last month's check on the HELOC, but I don't think I paid a 2% balance on it.
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Old 01-21-2012, 09:06 PM   #17
Recycles dryer sheets
OldGuy's Avatar
 
Join Date: Nov 2007
Posts: 74
A coupla criteria to keep in mind as you shop around:
+ There are HELOC loans, and HELOC Lines of credit. Or at least there used to be both animals when we got our line 8-9 years' ago. One draw & (usually) immediate payback with a HELOC loan, versus the capability to take multiple draws over a period of time, and a longer payback period, with a line of credit. Ours has a 10 year draw period, and any outstanding balance at the end of that time converts to a 20 year payback. It's also with the holder of our first mtge, but that pays off in September, so we'll see how badly they want to keep our business. You should be able to deal with most lenders as the end of the draw period approaches, and roll the line into a new HELOC.
+ Given the appropriate LTV ratios, FICO scores, etc., etc., lenders are s-l-o-w-l-y getting back to lending money, but are faced with greately decreased borrowing demand. Should give you some leverage in negotiating terms & rates.
+ Shop around. Great referrals from these posts; but don't overlook local lenders if personal contact is important to you.
+ Never pay fees for a HELOC. Maybe an appraisal charge, but you should not have to pay for the privilege of paying additional interest when you borrow.
__________________
Those who were seen dancing were thought to be crazy by those who could not hear the music. Friedrich Nietzsche.
OldGuy is offline   Reply With Quote
Old 01-22-2012, 05:48 PM   #18
Confused about dryer sheets
 
Join Date: Jan 2012
Location: Centennial
Posts: 5
Thanks Nords for posting the link. You have given me more to think about.

From OldGuys description its sounds like what most folks on this board are using a Home Equity Line of Credit that can be drawed upon in small amounts through checking convenience.

Thanks everyone.
__________________
ERetire is offline   Reply With Quote
Old 01-22-2012, 07:00 PM   #19
Recycles dryer sheets
 
Join Date: Apr 2010
Posts: 265
Quote:
Originally Posted by brewer12345 View Post
There is one gotcha with the Pen Fed HELOCs. They require a monthly payment of 2% of the outstanding balance. Since most lenders only require payment of monthly interest, I would shop around elsewhere.
The 2% thing is to prevent people like me using it as a backdoor no closing cost mortgage refi, with massive flexibility since its a line of credit.

I considered doing it anyways thinking I could always pay 2%, then draw on the line as needed to make up the shortfall from writing such a big check (I owe 275K on a 425K house, but have some hefty stock grants vesting over the next couple years) but decided it was too risky in the event that they froze the line.

If it was a 1% minimum payment, which is about what I pay anyways I would have done it. Instead I refi'd into an ARM with minimal out of pocket. Can't wait to pay it off.
__________________
Sesq is offline   Reply With Quote
Old 01-22-2012, 07:57 PM   #20
Recycles dryer sheets
 
Join Date: May 2008
Location: Chicago area
Posts: 130
Quote:
Originally Posted by brewer12345 View Post
There is one gotcha with the Pen Fed HELOCs. They require a monthly payment of 2% of the outstanding balance. Since most lenders only require payment of monthly interest, I would shop around elsewhere.
I have a Pen Fed HELOC (variably rate line, not fixed rate loan). I have had it a few years at least. Very useful to fund fluctuations and settlements in investments. Won't use it much when rates go back up, though.

Never had to pay anything but the interest monthly. Are you talking about a home equity loan instead of a HELOC?
__________________

__________________
45th Birthday is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 03:50 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2014, vBulletin Solutions, Inc.

Early Retirement News right to your Email!

Stay up-to-date with all the latest news to your inbox!

unsusbcribe at anytime with one click

Close [X]