Our daughter needs financial help

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nickfrank
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Our daughter needs financial help

Post by nickfrank »

Our daughter needs help with her condo mortgage about 50K.

My wife and I would like to help from our retirement funds. Where would you suggest we take it? We are both over age 60.

IBonds purchased in 2001 and 2003

TIRA

ROTH IRA held over 5 yrs.

Thanks,

Nick
Last edited by nickfrank on Fri Mar 12, 2010 1:08 pm, edited 1 time in total.
tomd37
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Post by tomd37 »

I will give you my thoughts on your questions, but leave the details to more experienced people.

Interest from the cashing of I-bonds will be taxable income. The rates on the I-bonds could influence the decision to cash in these bonds.

Distribution from the traditional IRA will be taxable income, with the possibility of an additional 10% penalty if the person from whom's account the distribution is taken is under age 59.5 on the day of the distribution. You might advise us of the ages of the couple.

Distribution from the ROTH will not be taxable if you withdraw only the contributions to the ROTH, not any earnings. Distribution of earnings may be taxable under certain circumstances.

See comment in my first sentence at the top.
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ryuns
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Post by ryuns »

I'd hate to encourage anyone to take money out of a Roth, since they're such valuable retirement savings instruments. But those I bonds were probably purchased at crazy high fixed rates, right? Hm maybe not in 2003, but 2001 are probably 2%? That'd be hard to give up. Those rates aren't coming back any time soon.
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Kuckie
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Post by Kuckie »

Be sure that you have enough in your accounts to fund your own retirement, which may last upward of 30 years. Most financial planners recommend that you take care of your own retirement first, even though it may seem selfish. You don't want to be a burden on your daughter in later years.

The last account you should ever tap is the Roth IRA. Tapping the traditional IRA after age 60 depends on your tax bracket and the investments that you hold, in comparison with Savings Bonds. Both are taxable. Old savings bonds pay high interest in comparison with today's bonds. So run the numbers before you decide.

I Bonds issued in 2001 pay 6.5% interest per year
I Bonds issued in 2003 pay 4.6%

You can check the calculations at http://www.treasurydirect.gov/BC/SBCPrice
Last edited by Kuckie on Fri Mar 12, 2010 6:21 pm, edited 3 times in total.
Gekko
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Post by Gekko »

IMO don't jeopardize your own retirement to bailout your daughter's poor decisions.

good luck.
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Post by rwwoods »

I agree with Gekko. Your financial future comes first.
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Christine_NM
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Post by Christine_NM »

Hi Nick -

I think I am echoing the previous replies when I say that your retirement money (TIRA, Roth) is just that, not money that you saved up for your daughter's condo.

It would be nice to have an extra $50k in a savings account so that you didn't have to cash in the ibonds, but if you don't have it and you still want to help, then IMHO you have to cash in the ibonds.

OTOH, if you really were counting on the ibonds as part of retirement, then you may not have the savings to spare at the moment.

If you were to gift some or all the allowable $13,000 per year to her it would be easier on your budget and she would be better off as soon as she learned not to spend it.

Edit: I wasn't echoing the reply that said your daughter made poor decisions! That was not there when I posted. Women have a tough time at first with low salaries and mortgages -- I should know. A bit of gifting ($10,000/ year) really made the difference for me between debt and no-debt.
Last edited by Christine_NM on Fri Mar 12, 2010 6:29 pm, edited 1 time in total.
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kpanghmc
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Post by kpanghmc »

Gekko wrote:IMO don't jeopardize your own retirement to bailout your daughter's poor decisions.

good luck.
Don't assume that just because someone is in financial trouble, that it's due to their poor decisions. The OP didn't state why his daughter needed the assistance, which means it could have been anything ranging from irresponsible spending habits to medical bills / divorce / being robbed / etc.

Furthermore, the OP also didn't state whether the $50k would drastically affect his retirement.

Put it this way, would you be as critical of the OP's decision is he had $100 million saved for retirement and his daughter needed the $50k for her condo because she's still too weak recovering from a recent fight with cancer to go back to work?

The OP asked a straightforward question: where should he pull money out from. I think it would be best if we avoid passing judgment on why he's doing so.
Last edited by kpanghmc on Fri Mar 12, 2010 6:28 pm, edited 1 time in total.
Kevin
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Re: Our daughter needs financial help

Post by expat »

NICKFRANK wrote:Our daughter needs help with her condo mortgage about 50K.
Why exactly does she need 50K??
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serbeer
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Post by serbeer »

would you be as critical of the OP's decision is he had $100 million saved for retirement and his daughter needed the $50k for her condo because she's still too weak recovering from a recent fight with cancer to go back to work?
Of course not! Now you made me cry...
Gekko
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Post by Gekko »

kpanghmc wrote:
Gekko wrote:IMO don't jeopardize your own retirement to bailout your daughter's poor decisions.

good luck.
Don't assume that just because someone is in financial trouble, that it's due to their poor decisions. The OP didn't state why his daughter needed the assistance, which means it could have been anything ranging from irresponsible spending habits to medical bills / divorce / being robbed / etc.

Furthermore, the OP also didn't state whether the $50k would drastically affect his retirement.

Put it this way, would you be as critical of the OP's decision is he had $100 million saved for retirement and his daughter needed the $50k for her condo because she's still too weak recovering from a recent fight with cancer to go back to work?

The OP asked a straightforward question: where should he pull money out from. I think it would be best if we avoid passing judgment on why he's doing so.
get off your high horse. i am simply warning the OP not to jeopardize his retirement. whether he is or not - he can make his own decision based on his own personal financial situation.

and when i read that an adult child needs a $50,000 lump sum because of financial trouble with a condo i will assume bad financial decisions - especially given the excesses we've seen with real estate over the last few years. feel free to call me presumptuous - i don't care.
gkaplan
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Post by gkaplan »

get off your high horse. i am simply warning the OP not to jeopardize his retirement. whether he is or not - he can make his own decision based on his own personal financial situation.
Well, it seems that you don't want him to make his own decision. You want him to make your decision.
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kpanghmc
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Post by kpanghmc »

Gekko wrote:
kpanghmc wrote:
Gekko wrote:IMO don't jeopardize your own retirement to bailout your daughter's poor decisions.

good luck.
Don't assume that just because someone is in financial trouble, that it's due to their poor decisions. The OP didn't state why his daughter needed the assistance, which means it could have been anything ranging from irresponsible spending habits to medical bills / divorce / being robbed / etc.

Furthermore, the OP also didn't state whether the $50k would drastically affect his retirement.

Put it this way, would you be as critical of the OP's decision is he had $100 million saved for retirement and his daughter needed the $50k for her condo because she's still too weak recovering from a recent fight with cancer to go back to work?

The OP asked a straightforward question: where should he pull money out from. I think it would be best if we avoid passing judgment on why he's doing so.
get off your high horse. i am simply warning the OP not to jeopardize his retirement. whether he is or not - he can make his own decision based on his own personal financial situation.

and when i read that an adult child needs a $50,000 lump sum because of financial trouble with a condo i will assume bad financial decisions - especially given the excesses we've seen with real estate over the last few years. feel free to call me presumptuous - i don't care.
Ok, I will. I can think of a few other things to call you now as well, but presumptuous still makes the list.
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Post by leonard »

kpanghmc wrote:The OP asked a straightforward question: where should he pull money out from. I think it would be best if we avoid passing judgment on why he's doing so.
Virtually any time an OP suggests pulling money from a tax advantaged account, someone on this forum questions that assumption. I think that should continue, as some have not necessarily thought through the implications.
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Post by ohiost90 »

to answer the OP, i would take out of Roth and then rebalance.

However, first, I would make sure I and my Daughter had looked at all possible ways out of needing 50k. Selling all her possessions, refi, short sale, and foreclosure.
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kpanghmc
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Post by kpanghmc »

leonard wrote:
kpanghmc wrote:The OP asked a straightforward question: where should he pull money out from. I think it would be best if we avoid passing judgment on why he's doing so.
Virtually any time an OP suggests pulling money from a tax advantaged account, someone on this forum questions that assumption. I think that should continue, as some have not necessarily thought through the implications.
There's a big difference between warning an OP about the dangers of taking money out of tax-sheltered accounts and warning an OP about the dangers of taking money out of tax-sheltered accounts to bailout their daughter's poor decisions. The former I have no problem with as it's perfectly reasonable to warn the OP about the financial consequences of withdrawing from tax-advantaged accounts. The latter however, focuses on passing judgment on the OP's daughter and framing that as the crux of the argument against taking money out of a tax-advantaged account.
Last edited by kpanghmc on Fri Mar 12, 2010 8:08 pm, edited 2 times in total.
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Post by rustymutt »

Gekko wrote:IMO don't jeopardize your own retirement to bailout your daughter's poor decisions.

good luck.
I must agree with this post. I don't believe your retirement nest egg should be raided to help out a child. She needs to get a second job, or just sale the condo and rent somewhere. Our kids have to learn by their own mistakes, and if we continue to bail them out every time, they never learn.

That said, if you want to then by all means consult a CPA, or tax professional. It's your money.
Last edited by rustymutt on Fri Mar 12, 2010 8:04 pm, edited 1 time in total.
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Babakhani
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Post by Babakhani »

does she not qualify for mortgage modification? make sure you exhaust all options before tapping retirement. It may mean that she could find a part time job if she finds one. One of the problems is that we don't have enough details and that leads to people making assumptions. If you can provide more info, I think you would get better advice.
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Re: Our daughter needs financial help

Post by tibbitts »

NICKFRANK wrote:Our daughter needs help with her condo mortgage about 50K.

My wife and I would like to help from our retirement funds. Where would you suggest we take it? We are both over age 60.

IBonds purchased in 2001 and 2003

TIRA

ROTH IRA held over 5 yrs.

Thanks,

Nick
I don't understand the "mortgage" and "50k" combination. Generally a mortgage implies a monthly payment, and generally that payment isn't $50k. So what you may have intended to post was that you need to withdraw $600/mo or something, with a potential maximum of $50k, and that might change some of the responses.

Paul
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kpanghmc
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Re: Our daughter needs financial help

Post by kpanghmc »

tibbitts wrote:
NICKFRANK wrote:Our daughter needs help with her condo mortgage about 50K.

My wife and I would like to help from our retirement funds. Where would you suggest we take it? We are both over age 60.

IBonds purchased in 2001 and 2003

TIRA

ROTH IRA held over 5 yrs.

Thanks,

Nick
I don't understand the "mortgage" and "50k" combination. Generally a mortgage implies a monthly payment, and generally that payment isn't $50k. So what you may have intended to post was that you need to withdraw $600/mo or something, with a potential maximum of $50k, and that might change some of the responses.

Paul
For what it's worth, I interpreted it to mean that she needed help with the downpayment.
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Post by JW-Retired »

NICKFRANK wrote: Our daughter needs help with her condo mortgage about 50K.
Yeah I think you need to explain this a little more to get intelligent answers. Is this 50K out of a your million or two in your retirement accounts or is this the last of your nest egg? The advice would be different. Is this $50K all at once in one year? There would be gift tax implications if so.

What's going on? We are all just guessing.
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Christine_NM
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Post by Christine_NM »

Babakhani wrote:does she not qualify for mortgage modification?
Just quoting this because it reminds me of "Are there no prisons? Are there no workhouses?" -- Dickens, A Christmas Carol

I too figured this was a down payment to buy a condo and she had already qualified for a mortgage. But it could be anything.

The trouble with those quick to criticize "adult children" trying to own a home is that they are equally critical of those who don't do this and blow their money on cars, clothes, watches, shoes, etc., and theoretically end up with no paid home for retirement. We all have our own experience but there's a lot of stereotypical judgment going on that makes financial planners look good.

Home equity is part of retirement assets. So the OP is considering is transferring part of his/her retirement savings to the daughter's retirement assets. This obviously should not be done unless the OP is really set for retirement, and somehow I think not or there would be other savings available for this and the question would not have been asked.
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Post by TRC »

I'm not sure of the cirumstances as to why this daughter needs money, but I'm currently reading Milloniar Next Door and I can't help but think of the term "Economic Outpatient Care".

"This term was coined in chapter five of The Millionaire Next Door by Thomas J. Stanley and William D. Danko. In the studies of millionaires done in the book, Stanley and Danko found that the children of those studied tended to have a lower net worth if the parents regularly gave them monetary gifts. Giving the adult children and grandchildren money tended to enable poor financial management and tended to foster resentment in the parents. The recipients of the Economic Outpatient Care tended to spend more than they could afford to under the assumption that the handouts would continue indefinitely. They also often greatly underestimated the exact amount of money their parents had actually given them.

The most common form of EOC these adult children received was Forgiveness Loans: money that was "loaned" to the children but was never repaid. 61% of affluent parents studied admitted to giving this form of EOC. The secondmost common form (59%), was helping the children buy their first home. Third place (43%) went to funding the grandchildrens' private school tuitions, followed closely in fourth place (32%) by funding childrens' graduate school tuitions.

Stanley and Danko found that those who recieved EOC tended to save less, carry more credit card debt, invest less, and often viewed their parents' wealth as being their wealth as well."
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OAG
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Post by OAG »

Is it possible you could get a HELOC and help daughter now with her repaying you in the future and helping with part of the payments now? I assume she is working and could eventually pay it back in full to you. Unless you have more than enough to finance your retirement you should really be careful.
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Post by TJAJ9 »

People should try to answer the question that was asked.

The OP is not asking "should I or should I not give my daughter money," he's simply asking for advice on which account to take the money from.

Nobody here knows their situation (parents or daughter). If the OP wanted other advice, I'm sure he would have asked -- otherwise it's none of our business.

To answer the OP's question, it's hard to give you a good answer without having more financial/account information.
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nickfrank
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Post by nickfrank »

Thank you all for your suggestions. Believe me my wife and I have been over all of your concerns in spades. I don't wish to discuss our daughter's private affairs on this site suffice to say that she needs to refinance her condo and the lending institutions will not lend her the balance she owes with her current income. She would have to reduce the loan by about 50K. Thats where we come in. I am fortunately still working at age 68 and will continue to do so Lord willing and we have sufficient retirement savings for us. The quandary is from where to take it.
The IBonds are paying attractive yields. The TIRA where most of our savings are take a tax hit on withdrawl as do the IBONDS on the earnings. That leaves the ROTH. I thought perhaps I was missing something in our analysis and appreciate your help.
Nick
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