My parents are 70 and 73 years old, and they are retired now. They have 250K of debt in the form of a home mortgage and an equity line. They have an additional ~40K of credit card debt. Between the two of them, they have 420K in traditional IRAs. They have about 5K (after taxes) per month coming in from social security and part-time work. They currently pay about 3K per month against the 250K house debt, and their monthly expenses are more than 2K with all of their health needs, etc. They are getting further and further into a financial hole, and even though they are making monthly payments on their debts, the debts only seem to be getting larger, and they don’t budget for things like income taxes, etc. and had an IRS levy put on their accounts recently because they hadn’t paid. So, its’ a mess and getting worse. and I am working with them to get out of it. For the first time, I think they will accept my help.
We are going to go to a NFCC certified credit counselor to get some advice, but I have spoken with them (the counseling service) on the phone and they tell me that they can get a plan in place in ONE, one-hour counseling session. I’m skeptical, but am willing to try since it’s free. Do you have an opinion of places like this? It seems like they are mostly working with people whose creditors are after them, which is not currently the case (it has been in the past). Also, when they listed the items I need to bring with me to the appointment, they only wanted information about income, creditor statements (unsecured debt only) and summary of living expenses. Wouldn’t they also need information about assets (i.e. IRAs, etc) and information about secured debt (the debt associated with the house) to really help us? What do you think?
Second, my parents have enough money in their IRAs to pay off their debts. Not much more. it seems drastic, but would it make any sense to completely pay off all (or at least a big chunk) of their debt by pulling the money out of the IRAS?
If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.My Retired Parents Had Their Account Levied by the IRS and Their Debts Are Getting Larger. - Sara by Steve Rhode