Question

A relative of mine is 60yo. Plans to retire from a laborious job in 5 years, has a 401k with his employer (unsure of amount) and a savings account with $2, 000. He is also a homeowner and has two mortgages and has other debts which he is working on paying down. He would like to keep $1, 500 in savings for an emergency and is considering putting the $500 in a Betterment or Vanguard account at a rate of 60% bonds and 40% stocks. The money was sitting in savings for an entire year and only earned $1 in interest. Is this a good idea so as to have a small bit of his money earn a higher interest rate? Thanks in advance

Answer 1

My first step would be to attempt to refinance all of the debt once rates reflect the new fed rate. We already had 15 year mortgages at 2. 875 so after this new . 5% fed drop, borrowing rates will be silly low. It may take some upfront cash to do so, so I wouldn't move any yet.  

Comments

At these low rates, if he can't pay off these mortgages by the time he wants to retire, I would stretch it out as long as possible.  

Answer 2

In my opinion, $2k isn't enough cash. Maybe help him with an on line HYSA, but to be 5 years from retirement with only $2k would scare me. High interest debt should come first though.  

Answer 3

401k with his employer ----- >(unsure of amount) <------

Comments

Better find out before talking about retiring

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@azarria94051 I meant I am unsure of how much he has in his 401k. He knows all of that and is aware it is decreasing because of the market, but I forgot to ask him how much.