I am 57, will retire in 10 yrs. I have about $7000 from a matured CD. My 'portfolio' consists of a 401b with my job, no matching funds, worth about 25,000.

My house will be paid off in 8 yrs. I have a home equity line of credit at $18,000 right now. Both have interest rates below 5%. I have credit card debt of about $5000. No problems paying the bills, keeping CC debt low is imperative.

There are some home repairs necessary this year, what we can do ourselves is limited, so the equity line of credit may need to be accessed.

I am not savvy with investing in stocks on my own. I was hoping to invest the 7 grand. Would this be the best use of the money and what is the best way and/or place to do this?

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    Do you have 6 months worth of living expenses saved up in an emergency account? – JohnFx Jul 7 '15 at 2:12
  • about 4 months worth. but if I use this to supplement that, then it does no gaining, and as you can see, my portfolio is poor. – Marlene Contro Living Jul 7 '15 at 3:30
  • I know how dire my circumstances are, and I know I am not alone. That's why i feel what I do with this money is so important. I will have a pension from work as well, oops, forgot about that! Still not the retirement amount i need according to financial experts I have watched. Scared to death of Suze Orman!! – Marlene Contro Living Jul 7 '15 at 3:37
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    Your circumstances don't sound that dire to me. Sounds like your house will be paid off before you retire, and at that point your expenses will (presumably) be very low. – Phil Sandler Jul 7 '15 at 17:15
  • thank you for your answer. I'm hoping things will get simpler every year. I am worried that they won't and there will be more expenses that carry through retirement. – Marlene Contro Living Jul 9 '15 at 18:55

"I have credit card debt of about $5000"

That's the answer right there. You told us the 401(b) has no match. The next highest priority would be credit card debt that's costing you interest. You didn't mention the rate on the card, I'm assuming it's 8% or more.

As far as your balance sheet (the 'bottom line') is concerned, pay off a 10% debt is the same as earning 10% on your money. If anyone promises you a higher return with a different investment, I'd run the other way. We hope the market, i.e. the US stock market, as measured by a broad index, say the S&P 500, will return 8-10%/yr over the long term, but this isn't guaranteed. Paying off that credit card will save you the interest every year, and free up the payments to invest elsewhere.

In response to Marlene's comment - Crazy? No. Human nature and emotion is what it is. I honestly don't know how to address some of it. Years ago, I was in a similar situation with a reader who had a $5000 'emergency' account, yet had $5000 in credit card debt. I had a tough time getting my head around why it wasn't obvious this made no sense. In your case, I might suggest you pay the card down to below $1000 and have the credit line reduced. Paying high interest on $5K makes no sense at any point in one's life. At least a 20-something can dig his way out and learn a lesson. A pre-retiree shouldn't be throwing this money away.

  • Thank you.I have had my debt very low before usually by refi. the house or heloc or massive overtime. I understand your bottom line. I fear I will pay off the debt with this chunk of $$ I have, and quite poss.run it up again. If it's locked in to an acct, I will leave it & focus on other debt.The investment will work for me, compounded. I make large payments on my debts. I feel I can reduce them as long as they are in my face so to speak. But I may not be able to put those payments to another investment because I will always have a bill, such as the heloc and education loans. Is this crazy? – Marlene Contro Living Jul 9 '15 at 19:14

Pay off the credit card, tear it up and never get another one. The rest of the money I would add to your emergency fund/save for the anticipated home repairs.

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    My gut says this sounds right. Yet, the "no card" solution is a tough one. Try to rent an hotel room and car, or buy an airline ticket with no card. There's a place for having a card and buying only what you've set aside the money for. – JTP - Apologise to Monica Jul 7 '15 at 13:07
  • @JoeTaxpayer If you can always pay off the card, you absolutely want a card: they give you 1-2% free for using it, but only if you always pay it off on time. If you can't always definitely do that, then definitely don't use a credit card. Renting a hotel room or buying an airline ticket (online) with no card of any type would be difficult, but places that accept credit cards almost always also accept debit cards (sadly, the reverse isn't always true, I'd love to get 1-2% back on everything.) – neminem Jul 7 '15 at 15:53
  • Debit cards will do basically everything a credit card does. The limitations on debit cards vs the increased chance of spending more (even if you are paying it off) when you have a credit card do not make it worth it, to me, to have a credit card, even with the 1-2% cash back. Especially for someone who would appear to have a problem keeping it paid off. – Kevin Jul 7 '15 at 17:20
  • thanks for the advice, scary as it is to me. I got rid of most CC, would always keep a couple. guess I need to spend less, but that is scary too! No, half kidding. I am careful with my money, but I do indulge when it's a good deal, or will pay off for me later. I applaud your ability to tear them all up. Do most of you have only 1-2 credit cards???? – Marlene Contro Living Jul 9 '15 at 19:19
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    Kevin and Anthony, you both make very good points. And almost made me feel like I was on facebook for a minute!! I see you are both passionate about financial security. The many answers with sound advice is wearing me down, I may be a saver after all. I appreciate the straight talk. I will seriously reconsider my plan. thanks again – Marlene Contro Living Jul 12 '15 at 12:41

Investing the money is only wise if the return on the investment outpaces your highest interest debt. Otherwise, you are making less than is going out. Given that you are in your late 50's, High risk investments are probably a poor idea.

If you're truly worried about having enough to retire, I would take 15% of that money and put it toward your emergency fund. Then the rest I would use to pay down your highest interest credit line.

You are short on funds right now so I would avoid using the HELOC. Your HELOC is available now, but if times get tight, the bank can decide to freeze your credit line. Instead, if you need a line of credit, look into a personal line of credit. The interest rate wont be as good as your HELOC but it's more stable.

If you haven't already, I would pickup "The Richest Man in Babylon". Read the lessons in it and see if you can use the tools it provides to tighten your situation up. The lessons mostly apply to people in the first half of life, but they are fundamentals regardless. Good Luck!

(Information on the HELOC was stolen from Jasper's answer here... HELOC with no first mortgage (for liquidity--no plans to spend it) )

  • Thank you for your sound advice, and for reminding me I'm in the second half of my life!!! Many have said to pay the CC, but what if they are used again? I am not able to pay everything cash, like emergency repairs, I online shop for better prices. I do indulge too if it makes sense in price or future need. I've only got $7000 available on the heloc, couldn't I get a personal line of credit IF it was frozen and use it until then if needed? I have googled the book and the heloc info. The book is available online-need a cc to pay for it!!! kidding, thanks again – Marlene Contro Living Jul 9 '15 at 19:27
  • No disrespect implied of course. I think if you average the answers here you'll find the best in all of them. – Anthony Russell Jul 9 '15 at 23:53

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