Credit scores: Advice to a college student
Credit scores: If they're high enough, you can get a good credit card. Question No. 2 in this reader mailbag.
(Page 5 of 6)
Q8: Retirement advice for dad
Background: My dad lives in San Diego and is 63. He recently retired from the Coast Guard and after splitting it with my mom, his ex-wife, gets a monthly payment of $1000. He also got a one-time payment of about $25k because he delayed retiring for 3 years and it piled up. He plans on retiring from his current job at age 66 to get maximum Social Security benefits, which we think will be about $1000 per month. His current job retirement will give him about $1000 per month too, but we’re unsure if he has to split that with my mom. I think he has about $85k in a (government?) Thrift Savings plan offered by his employer, the VA, which he still contributes to but not sure about matching. Finally, I think he has about $15k in liquid savings. Luckily, he’s good at discussing these things with me!
The Simple Dollar is a blog for those of us who need both cents and sense: people fighting debt and bad spending habits while building a financially secure future and still affording a latte or two. Our busy lives are crazy enough without having to compare five hundred mutual funds – we just want simple ways to manage our finances and save a little money.
Subscribe Today to the Monitor
He needs to get some major dental work done over the next 2 years that will cost between $6,000-$8,000. It might go down a bit due to new insurance though. He does not own any property and pays rent of about $800 per month. He owns his car but takes the bus to work at least 2-3 times per week. Dad thinks he will drive his current clunker until it breaks down completely and then buy another used car with cash. He has minimal normal bills like cable, internet and utilities. He also travels about twice a year to visit family, maybe $750 in airfare. He has a secured credit card b/c he sometimes forgets to pay bills and will not listen to my talk of automatic payments. He is on my cell plan and I pay it. He’ll probably move to the east coast when he fully retires and applies for Social Security, maybe near me in Raleigh, NC, to save money and be closer to family. Also, his side of the family usually lives into their 90s and he seems to be on that track. I think his credit score is probably good, although I can’t be sure due to bill payment forgetfulness. Although thrifty, he has problems managing money.
What should his next step be? What should he do with the monthly Coast Guard payment for the next 2.5 years? The Coast Guard windfall? Any changes to his savings plans? Final resting place plans? Long-term care plans? He would like to give some money to an education savings plan for my 18 month old niece too. Any advice is greatly appreciated.
I think he’s doing pretty well other than the bill forgetfulness.
The best things he could do for his own future would be to just bank as much as he can until retirement into something stable – even a savings account would work. He should also really work on that bill paying forgetfulness, perhaps entrusting someone else to handle such bills for him. This will be important when he moves, because many rental managers look at a person’s credit rating before deciding whether to rent to them.
The only thing that really concerns me are the hints of forgetfulness, and that’s something that his pride may prevent you from helping with.
Q9: Charged-off debts
I fall into the “young professional” category of having a negative net worth since I owe more in student loans than I currently have in assets. My question is about charged off accounts/debt on my credit report…these charged off debts are credit cards amounting to less than $5k and medical bills amounting to at least $5k with misc accounts here and there for smaller amounts.
Should I add those to my debt list and try to pay them off if, once paid, they are not removed from my credit report? Or, should I leave them unpaid and wait for them to fall off my report once the 7 year mark is reached? Most of the debt has about 2-3 years left to “fall off”. I rarely hear personal finance advice about old charged-off accounts/debt so I would appreciate your advice.