Due Diligence Needed, If Retirement Depends on Inheritance, Selling Business

The first sentence in this article from Hometown Life, “Playing off charge card debt a major priority,” tells the entire story: “I…have never taken an active interest in my finances.” The person never had his business evaluated by a professional and learned at age 60 that his business had no resale value. In addition, he learned that his parents were supporting a sister and any inheritance he was anticipating would not be enough to live on.

Making matters worse, he has more than $80,000 in credit card debt on various cards at interest rates between 18% and 21%. With next to no equity in his home and a home equity loan and a mortgage this person has only one asset: an IRA worth around $100,000.

At some point in their lives, most people realize that they must be active participants in their financial lives. They need a budget to contain spending and a savings plan so they can enjoy their retirement and control of their credit card debt. It sounds like this man just got a wake-up call.

He wonders how to resolve his credit card debt but it seems there are a number of other issues that need to be addressed.

First, he should pay off his credit card debt. At 18% to 21% there is no investment he could make that would come near that rate. One way to do this is to increase his monthly payments. It may take many years to knock down such a large debt so another option is to use his IRA to pay off the money immediately.

Equally important is for him to commit to use the money he would have otherwise used to pay off credit card debt and invest that into a retirement fund. It doesn’t matter if he uses an IRA, a SEP or a Roth but he needs to be disciplined and start putting money away for his retirement.

Potential inheritances are troublesome for people who count their chickens before they hatch. Until the inheritance is safely in your own bank account, you cannot count on it. In a time where living expenses are high and people are living longer, fewer and fewer people are expecting to receive inheritances. Basing a lifestyle around an expected inheritance can only lead to financial disaster.

Preparing for retirement and taking an active role in managing your finances is a life-long task and part of our responsibility as adults. Another responsibility is to have an estate plan in place so even people who die in debt can be assured that what assets they do have will go to their heirs.

For more information about estate planning in Orlando, FL (and throughout the rest of Central Florida), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: Hometown Life (March 3, 2019) “Playing off charge card debt a major priority”