Cashing in assetts -- need advice.

[Longhorn]

Since my cancer diagnosis, my husband and I have been talking about ways to downsize so that we can spend more time together. He has been working his butt off trying to pay off a large business debt that he acquired in some of the bad economic times we suffered early in this Bush administration. We'd like to pay off a big chunk of that debt so that he could then focus on paying off the rest. It would be an economic relief for both of us. (Our kids are grown -- it's just the two of us and five dogs. :))

Our choices are to sell our house and rent or buy something less expensive, get a cash-out refinance (we can't get a second mortgage because we did a 15-year cash-out refinance -- in 2003 and Texas law doesn't allow a second mortgage after you've done that), or sell some of our mutual funds that are in a traditional IRA, a Roth IRA, and a SIMPLE IRA, all at Schwab. We're talking about netting about $80,000 in each of these scenarios.

We really like our house and while it's too big for us, it will be paid for in ten years. Also, the idea of putting it on the market, selling, shopping, packing and moving are not our idea of a fun way to spend the next several months. We just think selling is too "nucular" for us right now.

The refinance would be expensive since we have a 5.25% loan and I believe the rates are higher than that now. We could go back to a 30-year mortgage which would help offset the higher payment due to interest and the cash-out but some of that would be mitigated by the higher tax deduction. Still, the higher payment would be lower than the total of the payments my husband is making on his business debt (and that interest is also tax deductible as a business expense.) We're the only two shareholders of his S-Corp.

Finally, we can sell the mutual funds in our IRAs. I understand that there is a 10-percent penalty in addition to the income tax that would be due. Plus I believe all of these investments were "no-load" so we'll pay the commission when we sell. When I put in an order to sell, I get whatever price it sells for at the end of that day so it isn't easy to time it just right (though we do have a small amount that is actual stock ownership rather than a mutual fund, so I guess I could put in an order not to sell below a particular price.) I've never done anything like this before -- I don't know if I should sell over a longer period of time in order to maybe catch some of the days that the market is up? All of my mutual funds were up Friday but it seems like they always go down after a day of going up. :)

Our plan before the diagnosis was for him to keep working hard (he's a remodeling contractor and still has plenty of work) and keep chipping away at the debt. It would be paid off in about two years. Not to be morbid but we honestly don't know how much time we have left together. We also don't know if I'll be able to work as much and while I don't make nearly as much as he does, it does make a difference.

I guess I should find a decent tax accountant or financial adviser who isn't trying to sell me something but I appreciate any advice y'all have! Thanks! :hi:

[Droopy]

1. You hurt my brain

This is much too complicated for me I can tell you that much. So I'll just wish you luck and give you a kick.

[Longhorn]

3. It hurts my brain, too!

Thanks, though! :hi:

[trof]

2. Your house sounds like your largest asset.

You'd pay no penalty or capitol gains or income tax.
I'd guess the rental market is pretty soft right now, so you might find something that would cost less than mortgage payments.

Good luck.

[Longhorn]

4. That's true

but selling is the least attractive of our options from a quality-of-life point of view.

Thanks! :hi:

[Tuesday Afternoon]

5. I think that your answer is in your next to last paragraph.

Just hold on to what you have and, appreciate every moment. You like your house and with the real estate market the way it is, I would not be in a hurry to sell any way. :hug:

[Longhorn]

11. If you mean don't make any financial changes,

I could do that but it's the burden on my husband that I'm worried about. He wants to be there for me and he feels that he wouldn't be so preoccupied with his business if he didn't feel as much financial pressure. He says the assets we have won't mean much to him if they're only his to enjoy after I'm gone. This diagnosis does make us rethink living our lives as if it's a given that we have lots of time! :hug:

[Tuesday Afternoon]

13. Are you guys trying to figure out a way for him to quit work

altogether?
Is he working more than 40 hours a week now?

[Longhorn]

15. Since he's self-employed, he tends to work more like 50 to 60

hours per week. He'd like to be able to work a little less without feeling guilty about it. We talked some more this evening about ways that he can cut back and reduce his stress without necessarily reducing his income. I know all of this is very hard on him -- maybe even harder on him than it is on me. :(

[flvegan]

6. What's the interest on the "large business debt"?

[Longhorn]

8. It's split between several credit cards.

We try to move it around as the lower rates expire. Some of it is as low as 7 percent or so but there's also some in the mid-double digits. I don't think any of it is lower than the mortgage rate we could get but it would get paid off much faster than a mortgage, too.

We plan on getting an update (our daughter does our bookkeeping) in order to decide the best way to pay it off.

[flvegan]

10. Honestly, in your situation, it'd be worth the investment

to talk to a financial planner. Not a broker, not a investment analyst...a planner.

[Longhorn]

12. I think you're right.

I need to do some looking around and see who I can find. Thanks!

[TexasBushwhacker]

7. You don't have to pay the 10% if can prove health issues

and that certainly shouldn't be a problem! Be sure to look into how much rent you would pay if you went that scenario and plan on it going up 5 to 10% a year. It's likely that staying in your house is your best bet.

[Longhorn]

9. I thought that I could avoid the penalty

if we use the money to pay medical expenses in excess of 7.5% of our AGI, which, since I have health insurance, we probably won't do, or if I am disabled, but I would like to keep working in order to keep the health insurance. I guess that's one of the things I need to find out, huh?

Thanks! :hi:

[NMDemDist2]

14. you may want to ask over in the Economy forum

http://www.democraticunderground.com/discuss/duboard.php?az=show_topics&forum=114

[Longhorn]

16. I didn't know about this forum.

Thanks! :hug: