Dear Mr. Berko: I'm a 57-year-old woman who has been unemployed for three years — but not for lack of trying. My 57-year-old husband is a self-employed engineer and works from a home office. Our retirement portfolio is just getting back to where it was six years ago and is now almost $200,000. But this is not enough money, and I'm concerned my husband may have to work till he is 75. Our three children are out of college and more or less on their own, but we are still paying off their tuition loans. We hope they will get decent jobs above subsistence levels soon and take over these loan payments.
Because we live frugally, we have been able to save $21,000. My husband's office is converted from a third bedroom, but it's too small, so he wants to build an office on top of the garage. He thinks it would improve the resale of our home (which I don't ever want to sell) or provide rental income when he stops working. We can't refinance our home, because the lenders we talked to are leery about his being self-employed for only two years. Should we use the $21,000 for a home office? Should we invest it in stocks? Should we put it in his retirement plan or put it in a money-market account and keep it for emergencies because I worry about having a safety net?
Please tell me what you think.
J.D., Durham, N.C.
Dear J.D.: My 16-year-old grandson is a junior in high school, ranks No. 1 in his class, is captain of his school's swim team, works 20 hours a week and earns $8.75 an hour. The fellow who delivers my mail has a 20-year-old son, who is a college sophomore, is on the dean's list, works 31 hours a week as a salesman at Dillard's and earns about $12.50 an hour.
Now, I know a few business folks in Durham (I've been published in your paper for more than 25 years), and I'm told there are lots of jobs looking for people. So, my dear lady, unless there are mitigating circumstances (for example, being related to a congressperson), it seems that you may not be trying hard enough.
Stop fantasizing about the kids assuming the remaining balance on their college tuition loans, which have to be among the dumbest debts in the universe.
Unless those kids win the lottery, you'll be making those loan payments for the duration. It's doubtful your kids can improve their job-related earnings power unless they have skill sets that are in demand. We are creating a new eco/socio milieu that is forcing a diminution of our values, expectation and outcomes. Most college degrees are worth bupkis in today's job market, and recent graduates with bachelor's degrees are lucky to earn $33,000 a year.
Colleges are more interested in getting bigger than they are in becoming better, and they certainly stink at helping students develop the necessary knowledge and skills employers need.
If you would like your husband to have a larger office, then get a job now. That's your safety net, even if you have to make egg rolls at the Happy Palace on Garrett Road or fix faucets for Devlin's Plumbing on North Durham Avenue. Use those earnings to pay for the new office, but keep that $21,000 in an interest-bearing account for “just-in-case” money.
If you do build a home office, be mindful that you're unlikely to recover the cost on a resale (homes are no longer good investments) and that renting the space at some future date would be more trouble than you can imagine. Finally, unless your husband discovers a Golconda or unless you find a job, your husband — like many other 57-year-olds today — may have to work till he's 75. Accept the fact that your husband may have to work another 20 years. It's taken six years for your retirement plan to come back to even, and the future years are likely to be as unproductive.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at email@example.com.