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Nearing retirement, with 3 tuition bills to pay – Aug. 7, 2013

Nearing retirement, with 3 tuition bills to pay. The Keunings imagine a retirement filled with kayaking — if they can get there. (Money Magazine) At 59 and 60, Kim and John Keuning are closing in on retirement — but they aren’t quite ready for it. Six years out from their target date, the Duluth, Minn., duo have roughly $500,000 saved. Selling the small ad agency they own could net them another $150,000, they figure. (None of their five grown children is interested in taking it over.) “We know we spend a lot on them, but it’s something we want to do,” Kim says. “So how do we do that and everything else?” Three fixes. Mortgage the plastic . The average rate on Kim and John’s plastic is 15%. To pay off the cards, Indianapolis financial planner Michael Kalscheur suggests they take out a $40,000 30-year mortgage on their paid-off vacation cabin. At 4%, the loan would cost about $200 a month vs. their current payment of $1,300. They plan to sell the cabin just before retirement, and when they do they can use the proceeds to pay the rest of the mortgage. Redirect the payments. In the meantime, they can use the extra $1,100 in monthly cash flow to pay off their car loans. Once that $10,000 debt is wiped out, they’ll have $1,600 a month to build their emergency fund. Kalscheur wants them to have at least $20,000. When this is complete, in about nine months, they should max out their Simple IRAs (in 2013, they can each put in $14,500). Assess income needs. Following this plan, Kim and John will have almost $1.6 million in six years, after selling the business, office, and cabin. That will allow them to retire with about 72% of their income. How to cut off the kids. If they want more room in their budget — to, say, escape Minnesota’s winters — they’ll have to work a little longer. Or they can beef up the business to sell it for more by nixing debt, locking clients into contracts, and recruiting employees who’ll be indispensable to the next owner, Kalscheur says.
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