 What happens to your debt when you die (UK)? |
Hi,
Quick question, if you die and you are married, what happens to the debt that you owe? It used to get wiped off, but I have heard it doesnt anymore? Please can someone help asap?
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Sirena1124 | My mother is 60 yrs old and has $5k to invest in retirement or pay towards her mortgage. What should she do? |
What factors should she take into consideration? She would like to retire in another 5 years.
Additional Details
She has a retirement account already. I mean that she just got $5k right now and is trying to decide between ADDING it to her retirement fund or putting it towards her house mortgage. |
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Joe_123
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This really depends on how soon she is going to need the money and what her mortgage costs her. If she still has sufficient income and can afford to keep the money in savings definitely start with a Roth IRA.
There are catch-up contributions that she can make at age 60 and any earnings and withdrawals are tax-free at her age! The deadline to contribute for 2006 IRA's ends April 17, I think.
However, if her mortgage rate is anything above 7% APR I would consider paying that off. Many companies now are beginning to pay for the built up equity in homes and is somewhat of a fall back for those that have not saved for retirement. Of course, it works like selling your house in increments and is not tax free like it would be if you sold your home outright. This is definitely not the best deal but is something to consider if struggling in retirement.
The variables to compare are the after tax cost of her paying down her mortgage to the earnings in a tax free retirement account, say for her age around 7% annually. Again, if she has sufficient income to pay for her mortgage, contribute to an IRA, I would recommend a Roth IRA even at her age. If she is struggling to pay this put it towards her mortgage, losing her home is a lot more costly than not saving for retirement.
FYI: After tax cost of a mortgage = Principal payment (5,000) * mortgage rate% * (1 - tax rate %)
Example: 5,000 * 7% * (1 - 25%) = $262.50
Compare: $262.50 * 5 years = $1,312.50 savings of paying down mortgage
To: $5,000 * 7% (compounded annually for five years) – $5,000 = $2,012 return on investment. |
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doanel
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She still has a house payment at 60? Get that house paid off soonest. |
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masterofthecode
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Always pay off debt first. intrest rates on debt is usally more than what she can make in an investment for a 60 year old less risky portfolio. |
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mommyme
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It depends - I would say pay it on the house. My parents are both retired and they said the best thing they ever did was pay off the house before they retired. That way they didn't have to chunk out that 600-800 a month on a house payment. |
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lizzgeorge
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She should aim to have her home paid off by the time she retires, assuming she plans to live there indefinitly.
That way she avoids additional interest payments on the loan. Plus she will need to take less income out of her retirement accounts when she retires because her monthly expenses will be much lower without a mortgage. That will allow her investments to continue to grow, even in retirement.
And it will be a psychological blessing to not have to worry about the house payment; no matter what happens in the stock market she'll have a roof over her head. |
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Lovely Lady 27
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retirement call a trust officer at a bank they will help her make the right decision. Always put extra money into retirement. Especially at 60! |
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zocko
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how much does she own on the house? does she plan to sell in the next 5 years and move? if she's going to sell then don't put it on the house. If she's going to stay then only put it toward the house if it will pay it off. I paid mine off so that I wouldn't have that payment anymore when I retired. I'm staying here. If she puts it to the house it won't change her payment . It's time to decide where she's going to live after retirement. |
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Guess Who
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Put it into her retirement fund. |
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lisa n florida
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depends... if only has $5k left on house then use for that because then can take the monthly payment and invest... however if more than that then just leave it alone... |
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coldrain
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Since she is still working and has income, I would say invest in her retirement account. |
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halgoobs1
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i think she will invest in retirement. that is what i will do when i am older. |
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A Man
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5K at 60? Might as well go to Vegas. |
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Jake
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She's in big trouble, even if she gets 20% return in five years she will only have 6K. If she wants to retire at 65, and to take a comfortable living amount for say 10 years she needs at least 400K. Plan on taking care of her. She took care of you I'm sure? |
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