Updated on 01.19.11

Reader Mailbag: Travel

Trent Hamm

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Infant car seats
2. Roth and 403(b) questions
3. Paying off mortgage early
4. Managing a pay increase
5. Bonds owned by the deceased
6. Using bonuses
7. Depression and the reader mailbag
8. Paying off credit cards efficiently
9. Paying for nursing care
10. Handling a small debt load

I’m currently fleshing out my travel plans for the year and making needed arrangements. I have a trip to Seattle and a trip to Indianapolis on the docket this summer, possibly with a stop in Chicago as well early in the summer.

The trip to Seattle is going to be the most interesting of the lot, I think. We’re currently planning on flying out of Minneapolis, taking our three young children on their first plane flight. I can’t think of anything more fun than corralling a five year old, a three year old, and a one year old through airport security!

Q1: Infant car seats
How did you decide which infant car seat to buy? Did you use the same one for all 3 kids?

– Amanda

In 2005, we purchased a Graco SnugRide, a rear-facing seat that worked very well for us. We have used this seat for all three children, but will be retiring it after our youngest outgrows it regardless of future child choices, as the environmental wear on the plastic makes such seats less safe after five to six years of use.

However, we have heard – and some reviews reflect this – that Graco made some changes to their SnugRide seat in 2008 (or so) and the seat is not as highly regarded. If we were to have another child, I would research the seat all over again.

Our original seat research was based heavily on Consumer Reports comparative testing, which is what I would do again. The complaints a couple years ago about Consumer Reports baby seat testing mostly came down to their tests being too rigorous, which, when it comes down to the safety of a baby, I’m fine with.

Q2: Roth and 403(b) questions
I have question regarding Roths. Lets’s talk about roth IRA first. I always get confused by what you can withdraw. I think you can withdraw your contributions anytime- is that right or you need to wait 5-yrs before you can withdraw the contributions? If the 5-yr timeline is true- how does it work? Let’s say I opened a roth IRA in 2006 and was contributing to the max till 2010. So in 2011 can I withdraw all of 5×5 =$25,000 contribution if I want or would it be only the 2006 contribution which is $5000.

The second component concerns the roth 403b. My employer recently started offering roth 403b option. I know I can convert my vanilla 403b to the roth flavor by paying taxes from outside the retirement funds. But then can I withdraw the contributions in 5-yrs if I want since I have already paid the taxes or that provision is for roth IRAs only?
– William

You can withdraw your contributions to a Roth IRA at any time. The five year restriction means that you cannot withdraw gains within five years of opening a Roth IRA without paying a tax penalty, a restriction in addition to the age restriction of being 59 1/2 years old.

The rules (in terms of withdrawing contributions) are the same for a Roth 403(b). You’ll want to contact your investment company that holds the 403(b) for specifics on how your employer’s contributions will work, though.

My concern with this is that you’re looking at a Roth as a savings account of some kind rather than as a retirement vehicle. Remember that once you withdraw contributions, you cannot put them back. You can only make new contributions up to the annual limit. This can seriously dent your retirement plans.

Q3: Paying off mortgage early
My husband died in Oct. and my monthly income has been reduced substantially. I have $421,000+ in IRA’s and $119,000+ in a savings account. My monthly income is $2176. I’m not sure what my tax bracket is based on the annual income of $26,112. I have no debts other than my house but the utilities, insurances, utilities eat up most of this money

My mortgage is $1358.46 including $320.26 for taxes & insurance. I owe approximately $175,000 on my home.

My question is, Does it make financial sense to pay off the mortgage using a combination of funds from the two sources? I know I will pay taxes on the monies from the IRAs (in 2 1/2 yrs I will need to take the distribution) but saving over $1,000 a month is very appealing. I don’t know what the tax bite will be but I don’t think there are any funds that will return $12,000 annually. I am only getting 1 1/2% on the savings acct. so it would seem to make more sense to take the bulk of the repayment from that acct., leaving myself an emergency fund.
– Ellen

It sounds to me like your largest concerns are monthly cash flow and being sure that your money will last through the end of your life. Given those two concerns, I would pay off your house now rather than later.

In terms of cash flow, it’s a no-brainer. If you pay off your mortgage, your pile of monthly bills will be much smaller than before.

In terms of long-term finances, it’s a mixed bag that depends heavily on what happens to you in the future. Obviously, paying it off now puts a significant dent into your retirement money, but after that, the monthly impact on your savings will be much less. At some point (in about twelve years), you’ll have saved an amount equal to the total balance of your mortgage by paying it off now and, after that, you’ll be in better shape because of the early payoff.

I’d pay it off now, given all of the concerns together.

Q4: Managing a pay increase
I recently just got a new job that has increased my income significantly.

I also have around 15000 in CC debt that I’m looking to pay off using a debt snowball.

Following The Total Money Makeover system I’ve stopped my retirement contributions. The only thing I do do is place 10% of my paycheck into an emergency fund on ING Direct.

With my new increase in income do you recommend restarting my contributions to my 403b?
– Justin

If you’re following Ramsey’s methods, you would keep that retirement level at 0% until you pay off all high-interest debt, and most likely all of that credit card debt would be high interest debt.

I think that’s a reasonable plan if you’re committed to remaining debt free. If you look to a future without debt, then getting rid of that debt as soon as possible is probably the best long term financial move.

If any of your debt is below a 10% interest rate, though, I would pay that debt off last and restore retirement savings before tackling it. The reason is that once you drop down to interest rates that low, you’re not really beating your potential retirement returns by much and you’re better off, over the long term, having money in the bank.

Q5: Bonds owned by the deceased
About a year ago my wife’s Aunt gave her some US bonds that she and her husband had. These bonds where in her husband’s name with her name on them as co-owner. The husband past about 17 years ago and the Aunt passed last year. What does my wife have to do to either cash them or put them in her Name. These bonds are before 1976 and there is 10 of them in $1000 dollar denominations.

– Evelyn

You need to have the bonds reissued for them to be in your wife’s name. The government makes this easy – here are the forms to do just that.

Depending on the bond type, it’s going to be well worth your while to get the paperwork filled out so you can cash those bonds in. They should be matured by now, meaning that as soon as you get the paperwork in, you’ll have the cash!

Q6: Using bonuses
I am by no means a financial guru, but pride myself in reading finance books when the opportunity presents itself. I carry no debt, I religiously abid by the 7-10% of my credit limit rule since I was first issued a credit card, and have multiple months of living expenses available in a savings account in case of emergency. My question for you, however, has nothing really to do with me. This past holiday season as I was visiting with my parents, my father informed me that he received a $31k bonus from work this year. He works in medicine, and this bonus is roughly equivalent to a third of his annual salary. When asked what he was going to do with this money, he informed me he was putting it towards investments for my parent’s future. Although I didn’t say anything out loud, I couldn’t help but wonder if the money would be better put towards paying off the remaining $100k of their mortgage. After taxes, his bonus could pay off nearly 1/5th of their remaining debt. Every book I’ve read, including your website, has always pressed illuminating debt- especially large sum debt. In this post-holiday time for employed people, is it better to use bonuses for investments towards futures, petty cash, or paying off substantial debt such as a mortgage?

– Marc

When you get right down to it, this is really a matter of “six in one hand, half dozen in the other.” As long as you’re not spending the money frivolously, both debt repayment and investing are very positive personal finance moves. It’s like chiding someone for eating carrots instead of broccoli when they used to be gorging on hamdogs.

That being said, if you’re trying to choose between these options, there are a lot of things to look at. What are the interest rates on the debts? What are the rates of return on the investments (over a long history)? Is the investing going into a tax-deferred retirement account? A Roth IRA?

I think your father is making a good move here. Whether it’s the best move is hard to tell, but it is a good move. If you want to plant the idea of debt freedom in his head, drop a copy of The Total Money Makeover on him.

Q7: Depression and the reader mailbag
How do you not get depressed from the stories people write to you? Sometimes I get miserable just reading them, and of course you get many many more than you put in a reader mailbag. How do you deal with hearing about so much hardship?

– Colleen

Usually, reader mailbag emails make me feel good. While the people may be in a bad situation, they’re actively involved in them and seeking a solution to them. They’re actively involved in their finances and working for a better life. That’s awesome.

What makes me depressed is negativity. When people bash themselves, it’s bad. When people bash others, it’s worse. When people manipulate others for their own ends, it’s even worse.

I see plenty of that, and I try my best to avoid giving it breathing room. Still, there are times where I simply turn away from my computer when the negativity gets overwhelming for me. I go play with my kids or something like that.

Q8: Paying off credit cards efficiently
I am currently 24 years old and earn about $50,000 per year. I am currently about $15,000 in credit card debt and $15,000 in student loans. I have 3 credit cards, one with about $10,000 with a high interest rate that I am trying to pay off. The second card has about $4,000 and the last one has about $1,000. I try to pay $800 per month to the first card and about $200 to the second and $100 to the first. After taxes, I make about $2,800 per month and after these credit card payments, I pay $950 for rent and about $200 in student loan payments, which total up to $2,300. The rest of the $500 that is left, I use for groceries, transit and miscellanous spending. I am trying to pay off my credit cards as fast as possible. Is there a more efficient way to be doing this?

– Sarah

In terms of getting rid of your debt mountain as fast as you can, you’re using the right approach for the long term. However, it’s going to feel like you’re not making any real progress for a very long time if you’re focusing on the highest balance debt first, even if it’s the highest interest debt.

Another common method for paying down debt is to pay the smallest debt off first. The reason for this is so that you can feel the success of eliminating a debt much more quickly, though it usually puts you just a bit behind the overall pace of tackling your high interest debt first.

In terms of the math, you’re doing the right thing. However, if you feel defeated by it, there’s nothing wrong with spending a couple months throwing the extra payments at the smallest debt so that you have the thrill of seeing a debt vanish.

Q9: Paying for nursing care
The issue I really want your advice about is paying for nursing home care if it comes to that. I have told my father that I won’t consume my savings for that purpose, and that they’ll have to liquidate their assets and depend on Medicaid if they need nursing home placement, even though that will stop the income right when they need it the most. I feel guilty about that, but I’m 8 years away from retirement age myself and not in the place I should be even if I didn’t have this unexpected burden. I don’t want to get to the end of my life and run out of money because of his bad decisions. I’m hoping you’ll reassure me that protecting myself is a justified decision.

– Amy

I don’t think you’re necessarily wrong in doing this.

A big part of decisions like this have to do with the relationship you have with your parents, your own moral values (often based on what you learned from your parents), and the culture you grew up in. There is no inherent right or wrong in such a choice.

My only comment is that if you feel guilty about your choice, then you should probably do some more soul-searching within yourself about your issue. I cannot absolve your guilt.

Q10: Handling a small debt load
I’m 48 years old, married and one teenage son and have found myself in $12,000 of debt (car, veterinary bills, etc.). My simple question (ok…maybe it’s not that simple) is: is it smarter to work at building up my emergency fund or paying off my debt faster than I currently am (it used to be $18,000 so am making some progress, albeit slow)?

Just curious on your thoughts.
– Kelly

My usual recommendation is to first have a small emergency fund – typically $1,000. Once you have that, focus on paying off your debts. If you have an emergency, pay for it out of the emergency fund, then focus your next few months on building that emergency fund back up.

The idea is that it’s very important to break your routine of using debt to pay for everything in your life, particularly emergencies. It’s a crutch that just keeps burdening down your future. An emergency fund helps to break that crutch.

I think you’re making good progress, even if that debt reduction took a while. With each step you take, it’ll become an easier journey.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag. However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

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  1. Patty says:

    My brother & sister in laws recently made a cross country trip with 3 kids of similar age. They, 2 strollers, 3 car seats & 8 pieces of lugage survived the trip but said they relied on the kindness of strangers. One tip is to have a bag for the kids (games & snacks) but don’t expect the kid to carry/pull the bag the entire time. Look into the rental options at your destination (rental car company car seat, strollers…hotel had roll away crib). If you are going to see friends or family perhaps they can get some kid items from neighbors or at goodwill/yard sales before you fly and donate afterwards. This could be cheaper than the checked item fees some airlines charge.

    Ellen could look into refinancing as an option to get lower payments without wiping out her retirement savings.

  2. JJ says:

    Q3, incidentally, is a perfect example of why it’s so important to be adequately insured if you have people depending on your income.

  3. valleycat1 says:

    Q4 – I’d say age is a factor here. If Justin is young/just starting out, then paying off debt first works. But if he’s older, getting more $ into retirement accounts sooner rather than later might pencil out better in the long run, as it would have more time to grow. An alternative, if his ING account has a decent balance as his emergency fund, he might redirect some of that $ toward retirement or debt repayment.

    Q8 – Trent’s right – watching even a smaller debt disappear quickly is a great feeling. Even a small incremental increase in that payment can bring down the balance in a hurry.

    I just looked at one of my CC statements, and in their required disclosures, if I just make the minimum monthly payment it would take about 18 years to pay off completely (I know, the minimum payment declines with the remaining balance getting lower), but if I pay a fixed amount just $25 higher than this month’s minimum, it brings the payoff time to less than 3 years. (I’m paying it off much more quickly.) ALSO, one of my CCs just changed their calculation of minimum payments to 1% – which is nice, I guess, if one has a cash flow problem, but it just drags out the payoff & would exponentially increase the interest I’d pay.

  4. valleycat1 says:

    Airplane travel with kids – when mine was an infant/toddler, we flew fairly often. I quickly learned not to be among the first pre-boarders, as keeping an active toddler restrained & happy for an extra half hour (at least) was not worth it. Depending on how the kiddo was doing, the earliest I’d board would be as the last pre-boarders or when the first regular passenger group was called.

  5. Aaron says:

    Q2 and Trent’s comments,

    It’s not accurate to say that once you take your money out of a Roth, you can’t put it back. You can for up to 60 days. But Trent’s point is still important. If you think of your Roth as a savings account, it likely won’t be there for you for retirement.

  6. LeahGG says:

    Suggestions for corralling your kids: 1. Get a baby backpack. There’s one called Multifunction Infant Baby Cotton Carrier Backpack available on ebay. It’s a lot like the ergo, but for $27 instead of $100. You can put your 3-year-old in it in a pinch, and it’s easy to put the baby in it (on your front, of course) – it’s easier on your back than a baby bjorn.

    Use a stroller to contain the 3-year-old and a carrier to contain the baby. You can have the stroller right up to the gate and usually get it back before baggage claim. You can also hang a bag from it if it’s a 2-handled deal.

    The other option is to use the backpack for the 3-year-old and use a travel system/snap-n-go so that you’ll have a car seat for the baby.

    Offer serious rewards to your son for cooperating, and be sure to have drinks, even if it means buying overpriced ones at the airport. Trick no one seems to do: you can take *empty* bottles through security and fill them at the water fountain.

    Be ready for TSA insanity, of course – so letting the kids travel in slip-on shoes or even socks-only is a good idea. (and they’ll probably make you take off the baby carrier while the child is asleep….) Oh, and take a laptop or a portable dvd player and show the kids a video (be sure to get over-ear headphones – not earbuds, and a splitter so they can both listen at the same time). On a 4-hour flight, my kids (1.5 and 3 at the time)were completely wild until we showed them an episode of dora. They both fell asleep within 15 minutes, and then the rest of the flight was calm and easy.

    Good luck!

  7. Jane says:

    Are small children also subject to the new security rules (full body scan or patdown)? I wouldn’t want either option for my 2 year old daughter.

  8. AK says:

    I’m pretty sure many airlines let you check baby items for free – car seats, strollers, packnplays – which is helpful though borrowing at your destination is still much easier. Bring lots of snacks and maybe some special treats they never get. Bring games and books – maybe new books for their trip. A portable dvd player is the best travel item ever. And, I’m not ashamed to say, I’ve given my kids tylenol (or the like) to help them sleep. Last time we traveled (one toddler, one infant) the security people were surprisingly nice and patient with us as we had to pull out our laptops, take off 3 pairs of shoes, show boarding passes for everyone, etc. I hope your traveling goes well!

  9. MegB says:

    Trent, I’m sure you’ll do fine with your kiddos because you know how to prepare. I would also suggest that you bring plenty of snacks for them, including some heavier ones that could substitute as a meal in case you can’t get to the food quickly enough. I traveled once with someone who had kids, and on a midday flight she did not bring anything substantial for them to eat. So, on a layover she was wandering through the airport trying to find food, and the choices were slim. She almost missed the connecting flight as a result. It was quite ridiculous.

  10. Petunia says:

    Q3 – I disagree with Trent’s response. In the first place, some very important information was not given.

    1. How old is this woman?
    2. Does she have any minor children?
    3. What is the source of her $2176 income? Is it SS benefits, or is she working?

    It is very hard to give advice without knowing the answers to these questions.

    Even so, I believe a much better strategy would be to pay down a chunk on the mortgage (from savings) and then either re-finance or re-cast. We don’t know what the home is worth or what interest rate she is paying on her mortgage. More information which would be useful before giving advice.

    If her monthly income is from SS, then she could make annual withdrawals from her IRA to fill up her 0% bracket and use that money to pay down her mortgage. We don’t know how big her 0% bracket is, because we don’t know if she is now filing single or qualifying widow.

    If I had 421k in my IRA and was in my 60s, I would be VERY hesitant to pull out a big chunk of it, permanently reducing my income. Here again, it would be good to know this person’s age.

  11. Nick says:

    Enjoy Seattle. Spend as much time as you can on the Waterfront and find the time to squeeze in a Ferry ride. I’d check out the Seattle Aquarium, and the Woodland Park Zoo. Your kids will love them.

  12. Amanda says:

    I’d follow the advice in @10 petunia of finding out how much reader pulls from IRA. The reader did say she was going to try to use a lot of her cash, which would be a good idea rather than paying a lot of tax on IRA. Pulling chunks from the IRA to pay down the loan seems smart.

    Personally, my husband has life insurance and I plan to pay off the mortgage. I know I’ll be in no shape to work much so we designed our life insurance amount based on paying off mortgage and leaving me an annual amount to supplement my income. Knowing this money is tax free makes the decision easier.

  13. jim says:

    Q3 Ellen,

    Please do NOT take out a large sum like $175k out of your IRA all at once. If you do that then you’ll get pushed up into a high tax bracket and owe taxes on the whole thing. If you pull all that out of the IRA at once then you’ll be paying marginal 25-33% tax rates on it. Right now with your income you’re in the 15% tax bracket. If you pull out a smaller amount from the IRA like $10k-$15k year by year then you’ll still only be paying 15% on it.

    Pull out $10-$15k a year = pay 15% taxes
    Pull out $175k right now = pay 25-33% taxes

    I think the choice is clear, pull out just enough each year to cover your expenses and pay the mortgage.

    Is the mortgage on your home a very high interest rate? If so then you could look into refinancing it for a lower % rate and lower payment.

    You say you’ll be forced to make withdrawals in 2.5 years so I’m working under the assumption you’re 67-68 years old.

    Q9 Amy : If putting your parents in a nursing home would put you in the poor house then you should not do that. You should not feel guilty about that. Your parents should certainly deplete their savings before anything else.

  14. jim says:

    As Petunia #10 pointed out, if the Ellen’s income is primarily Social Security then she may be able to pull out a chunk of IRA money free of income tax.

    There really aren’t enough details to give a perfect answer. But pulling a large sum out of the IRA all at once would incur a large tax bill in any case so that should be avoided.

  15. Carmen says:

    Regarding Q3, I fully concur with Petunia (#10). I would not trade in all that liquid savings into my non-liquid house. I would want to keep that cushion for myself and just try to lower my mortgage.

    Regarding plane travel with kids… I always found babies do much better than toddlers. A laptop with some movies and headphones are great for getting through the rough spots with a 3-yo. Also, some new “surprise” activities like crayons and a new coloring book introduced along the journey do wonders.

  16. Petunia says:

    You’re right Jim, she did say RMDs will start in 2.5 years, so must be aged 68 or so.

    If it were me, I would consider it time to begin making annual withdrawals for income. Using a 4% withdrawal rate, that is 16,840 annually. I would round down to 16k (investing costs). Make certain that your IRA is in low cost, quality investments and that you have a reasonable asset allocation. No less than 25% stocks, no more than 50%.

    If you draw you cash savings down to 50k, that gives you 69k to pay towards the mortgage. If you do a refinance and take a new 30 year fixed rate mortgage at 4.75%, your new payment is $584, plus taxes and insurance. (Assumed 6k for closing costs, so 112k is owed.)

    So your annual income is now 42k, your monthly PITI is now $904, and you have 50k in cash. You’re going to pay a little income tax, but not much. That is what I would do.

    Best of luck to the author of Question 3, whatever you decide.

  17. In response to the Roth IRA question, you responded: “Remember that once you withdraw contributions, you cannot put them back. You can only make new contributions up to the annual limit.”

    That’s true for previous years, but not the current tax year. For instance, if you make a $5,000 contribution for the 2011 tax year in January 2011, then withdraw it in June 2011 – you still have until April 15, 2012 to “put that money back.”

    However, overall I agree with your assessment of not using a Roth IRA as an emergency fund / savings account. The opportunity cost of removing money that can grow tax free for years to come is enormous!

  18. Des says:

    RE: Q3 – It shouldn’t be an all-or-nothing decision. If it were me, I would use $100k from savings to pay down the house, then refinance. If payments are $1300 on a $175k mortgage, there must be a substantial amount of time left on it (25 years or more) so this really won’t drag the repayment time out very far. This would bring the payment down to a reasonable level for the income without touching the retirement funds, and leaving an emergency fund in place.

  19. Steve says:

    @6 The question of whether or not you should pay off your mortgage early is hotly debated in the personal finance world. Realistically, either choice is quite reasonable. Some kinds of debt are worse than others (though that too, is debated) and a reasonably sized mortgage is one of the least bad kinds.

  20. STL Mom says:

    Nursing home care is really expensive. Most people can’t afford it for any length of time, so if you are not wealthy I wouldn’t feel guilty.
    The most important way to help your parents, should they need nursing home care, is to visit them frequently, attend meetings with the staff, and if possible take them out of the nursing home often to attend family events or just for lunch or a movie. That attention will benefit your parents much more than paying their bills.

  21. Steve in W MA says:


    My first advice is to do nothing for 3 months. Mark on your calendar (April) that you are going to be making a decision about the house/IRAS/savings issue.

    Others have brought up some good points. You have 120K in savings, plus an IRA worthj north of 400K, but you don’t specify what the IRA is invested in. You also don’t specify whether it is a Roth or a Traditional IRA. Is it in bank CDs? Treasuries? Stocks or stock mutual funds? Bonds?

    If it is largely in stocks, how much of the current value is capital gains?

    All of this is important when it comes to tax issues and without considering this info you can’t really answer the question “what is best for me to do.”

    It looks to me that you currently have enough income to pay for your monthly expenses without doing anything at all, (besides which, you have 120K in cash in the bank.) Spend a few months learning more about these financial issues and find a fee-only financial planner who can help educate you about your choices.

    OR spend a couple of hours a day working on different scenarios, then run them past a retirement planner, financial planner, or estate accountant.

    If you take about 100K out of savings and 75K out of your IRA to pay off the mortgage, you will be taxed.

    Once you’ve had time to sit with your changed circumstances and your future plans a bit, then revisit the decision about your house.

  22. Steve in W MA says:

    @q3, Don’t forget that there will be a 10% penalty on top of the taxes if your withdraw money from a traditional IRA before you are 59 1/2.

  23. Steve in W MA says:

    “If you take 100K out of savings and 75K out of your IRA to pay off the mortgage, and it is a traditional IRA, you will be taxed on that 75K at the 28% tax level for $21,000 in taxes. That’s equivalent to 2 years worth of mortgage interest.

    Of course, if it’s a Roth you won’t be taxed at all on it.

    One big thing you left out of your letter is (a) how much is your home worth and (b) what are your mortgage terms and what is the interest rate and how much of each payment is currently going to interest.

  24. deRuiter says:

    Dear Ellen, It may be that you can not afford to live in your house any longer due to reduced income at your husband’s death. If you are 68-70, there’s snow removal, lawn mowing, maintenance to the building, taxes, insurance, utilities. Since you owe such a large amount on such a modestly priced home, at your age, you might consider selling the house to stop the financial drain, buy a small condo or rent an apartment, to cut expenses and free yourself of maintenance chores. What’s the point of emptying your retirment money and paying excessive taxes to do so, to pay off part of your mortgage, and then own a house you can’t afford to own due to repairs, monthly expenses? You might consider renting a room in your house and using that money to prepay each month on the mortgage. Clean out the garage and empty it, rent that to someone to store a classic car and put that money towards prepaying the mortgage. In the spring run a yard sale and clean out all clutter from your house, use that money to prepay on your mortgage.

  25. Randy says:

    Re: Q 9 (Parent’s Nursing Home Care):
    Contact an Elder Care attorney ASAP (Google to locate one in your state). They are expert on the ins and outs of Medicaid, IRS rules, how to protect the healthy spouse’s assets if the other one must ‘spend down’ to qualify for Medicaid, what is excluded from Medicaid spend down rules (you will be surprised)! Run-of-the-mill attorneys don’t have this specialized knowledge – a co-worker spent $100K+ for an Aunt’s nursing home care rather than use Medicaid based on an attorney’s incorrect advice.

  26. Kandace@pantrydiva says:

    Q3 I agree with the person who suggested waiting three months to make a decision.

    Another option would be to draw out $1000 a month from the 119K in savings to help pay the mortgage. Perhaps with what you bring home, it could add $300-$500 a month toward the principal, reducing the length of repayment by years. That way you aren’t making such a stretch each month to get by and depleting your savings, and it gives you nearly ten years of assistance! And you can keep earning a tiny bit of interest and maintain an emergency fund.

    If you can pull out money in 2.5 years from other sources, it would certainly bridge that time period.

    Good luck. It must be a time of difficult transition for you.

  27. Diane says:

    For Q3, Ellen. Go to the library or bookstore and read the first chapter of Ric Edleman’s book, “Ordinary People, Extraordinary Wealth”. Great info there that speaks to your specific situation. Lots of other great suggestions by previous posters. Don’t make any prepayment decisions for at least three months is spot-on.

  28. Michelle says:

    Hello, I have a question for a future mail bag.

    I have been applying to grad schools for an MBA and only aiming at the top tier. I just found out I have been accepted to at least one! Still waiting on decisions from the others. My parents are less than thrilled. They think it is a mistake to quit my job in a bad economy and take out hefty student loans. I would probably need to take out around $150k in loans.

    I am 28 and single, currently make $65k/year living in AZ, have zero debt, $40k in cash savings (been specifically saving up for school) and $30k saved for retirement. I am bored in my current job and have a clear goal of what I want to do after school and will have the resources at a top program to make it happen (internships, study abroad, access to recruiters etc). Most likely an entry job in my field after leaving would pay around $95k. I believe it is worth the risk for a potentially more fulfilling and lucrative career later, plus the experience, but of course am concerned about having so much to pay off and not finding anything after graduation in 2013.

    Any advice on whether this is a good move financially?

  29. Steve in W Ma says:

    @#28, Michelle, I think you need to email Trent directly to get in the mail bag.

    However, I did want to say this: IF you have gotten into a top tier school for your MBA, it is very likely worth it. I would double check, and do due diligence on the figures given you by the prospective schools, but my impression is that successful top tier MBA graduates do do very well in job placings–and don’t discount the networking you’ll be doing while there.

  30. Barbara says:

    Hello, this response is to Amy asking about paying for her parents’ nursing home care. Amy, you must first look out for your own financial welfare. Do not risk your future or your retirement! Your parents made their own financial decisions, if they cannot afford to pay for nursing home care out of pocket, then they must spend down assets and rely on Medicaid…not on you. Its nice that you want to help them and hard not to feel guilty about saying NO, but you must consider your security first. Make sure you are funding your own retirement fully, have an emergency fund, pay your own bills…then if you have some left over maybe it can go for your parents’ support. They will have options to fund their nursing home care…you will not have options to fund your retirement if you have no savings left! You are not a bad person for wanting to look out for your own financial welfare first…its necessary!
    Good luck!

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