DEAR BRUCE: I have enjoyed your column so much over the years. I hope you will answer my questions.
I am a 69-year-old woman with some medical problems (five bulging disks in my back, scoliosis and Parkinson's disease). I have worked two and three jobs most of my life and raised three children. I worked 25 years with the city government and retired from the fire department with a pension of $1,200 a month and a drop account of $150,000. I started my part-time job 15 years ago at a church and receive a lifetime pension of $305 a month.
I applied for Social Security at age 67, but I was penalized with the governmental offset rule. They deducted about 65 percent; my monthly payment is $368, and my Medicare payment is deducted out of that. Next June I can retire from the state government job I am working and receive a pension between $800 and $1,000 a month.
I owe about $10,000 on my home and $7,000 in credit card debt. My car is 6 years old and paid for, with only 29,000 miles on it. My utilities, insurance and taxes are about $800 a month. I spend the most on groceries and gifts. I am always having my children and grandchildren over. I will have to cut back on that.
I am in a lot of pain and walk all bent over, but I am so frightened about retiring. I am worried that I will not have enough to live on. Is there anything I can do at this late date to have peace of mind before taking this huge step? Do you think the economy will get any better? Should I try to hang on a little longer in one or both jobs? -- J.R., Baton Rouge, La.
DEAR J.R.: You have, unhappily, some health problems that very likely will only get worse, not better. That having been observed, and cutting through the numbers, it seems that you probably will have to do some cutting back but should be able to handle things.
I would not leave work if you are able to continue at the present time. Meanwhile, the first thing you should work on is that $7,000 in credit card debt. The interest rates are high, and that debt will have to be eliminated before you retire.
Whether you want to stay in your home is another question. Depending on its value, which you did not indicate, you may want to consider either selling the house and moving into a smaller rented house, or taking out a reverse mortgage. The major problem is that your age likely will limit your ability to borrow on a reverse mortgage. Even though you have undesirable health conditions, you are still a relatively young person.
As for the economy, it will get better and worse; it always does.
DEAR BRUCE: Five years ago, we took your advice when we sold our large, farm-type house. Since then we have rented, being of older age (80s). We invested in mutual funds that give us enough monthly income to pay our rent on a condo in Florida, which our son lives in.
Now we are concerned about what is left of our investment and what to do with it. Of course, you know that mutual funds are not FDIC-covered. We have been happy with the performance until the economy soured.
Our question is, should we withdraw the money that we still have (about $49,000), or leave it and hope for the best? -- Don and Nancy, via email
DEAR DON AND NANCY: You have failed to tell me how much your monthly rent is on the place where you are living and on the condo in Florida where your son is living. I'm assuming that you have Social Security income that contributes to your day-to-day living expenses.
You mention you are invested in mutual funds. If the funds have been chosen reasonably well and if they are stock funds, the chances are they will generate a reasonable return. I have said so many times that the Federal Reserve has determined that interest rates will be small, so money market funds are out of the question, as are CDs and similar types of investments. That doesn't leave much to choose from.
The idea of leaving your $49,000 and hoping for the best is not smart. Making an informed decision is the only way you will get a reasonable return on your investment.
You didn't indicate how much money you need beyond rent payments. I'm assuming the $49,000 is your entire principal. I suspect that if interest rates don't improve, you will have to get into the principal, which won't last very long.
If your son is doing reasonably well, he may have to help out and pay some rent to you so you can continue to keep your lifestyle. If you have other assets that you haven't told me about, that's another story altogether.
(Send questions to email@example.com or to Smart Money, P.O. Box 7150, Hudson, FL 34674. Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.)
(The Bruce Williams Radio Show can now be heard at www.brucewilliams.com.)
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