Money
Adding Up Assets Before Retiring

Q: I am a recently widowed teacher who plans to retire in four years at age 55. I have approximately $60,000 left from my husband's life insurance policies, a mortgage of almost $1,900 per month for 16 years, and two PLUS loans, which will soon total $400 a month. I have a gasoline card that runs no more than $70 per month, a monthly personal loan of $105 (until August 2004), and a car lease of $378 (until June 2003). Should I retire as I have planned? What should I do with the insurance money?

A: You've provided lots of information, but it isn't enough for such a serious question. Your list of expenses totals over $2,850 per month, yet you give no sense of what your retirement income would be. The only asset you mention is the $60,000 in life insurance proceeds. Would you have only the teacher pension? Do you have 403 (b) money?

With no more information than you've provided, I would advise against retirement. Given today's life expectancies, you are probably at mid-life. That means you could spend half your life not working. What would you do with your time?

I suspect you want to make changes in your life, to begin anew. That makes a great deal of sense. But there are many options other than retirement.

If I'm wrong and retirement is truly your dream, then you must sit down and list all your prospective income and your expenses. Don't forget the cost of health care before you're eligible for Medicare and the cost of inflation. Will you be able to continue meeting expenses 10, 20, or 30 years down the road? Be sure your financial needs will be taken care of before making any decision.

What you do with the insurance money depends on what you ultimately plan to use it for. If you plan to invest for the long term, you might put it in a good balanced fund. Balanced funds invest in both the stock and bond market. If you are very risk averse or if you plan to tap into the money soon, you should probably put it into bank certificates of deposit or a money market fund.

Q: I consolidated my Stafford Loans (through Sallie Mae) a few years ago with an interest rate of 8.5 percent. Now that interest rates are so low, can I get a lower interest rate?

A: We've received so many questions about student loans that I began looking for some resources. Several Internet sites such as www.staffordloan.com provide information on the loans. I also found a Nolo Press book called Take Control of Your Student Loan Debt.

I'm not sure this has put me any closer to an answer for you, though. Both the online services and the book say that the direct loan consolidation program offers variable interest rates that never exceed 8.25 percent. The Nolo book adds that Sallie Mae will cut your interest rate by 0.25 percent if you authorize automatic payments from your checking account and will knock off 1 percent if you make your loan payments on time for 48 consecutive months. If your rate is 8.5 percent, call the lender and ask why.

Q: In the November column, you responded to a single mom who had been teaching for 28 years and wanted to know what to do with the money used for mortgage payments when she paid off her house. Why didn't you mention a 403 (b) (tax sheltered annuity) as a possible benefit? Or a Roth IRA? Omitting such opportunities seems like a significant oversight.

A: You're absolutely right. Writing financial advice for educators can be tricky because they are such a knowledgeable bunch. I focused on the teacher's question about buying a car and neglected to suggest the important vehicles you mention.

Mary Rowland is an author and contributor to several financial planning magazines. E-mail your personal finance questions to MoneyQuestions@neamb.com.

Thrifty Educator

This month's tips come from Kathleen Arola, a fifth-grade teacher in Phoenix, Arizona.

Festive Hall Passes
Looking for handy hall passes? Try Mardi Gras beaded necklaces in the colors of your local professional sports team. School colors could also be used. They can be worn around the neck or wrapped around the wrist.

Different colors can stand for different types of passes, and if necessary, little laminated labels can be stapled around each necklace.

Notes with an Edge
Instead of buying thank you cards for parent volunteers, holiday presents from children, or help from colleagues, write a note on a construction paper shape cut from the die cut machine.

To thank a child for a suncatcher with a hummingbird on it, write a message on a bird-shaped paper. To thank someone for doing a special deed, write on a star.

Use shapes for other notes as well. For example, to apologize for a misunderstanding, jot down a note on a turkey ("I'm sorry for being such a turkey!"). The possibilities are endless.

Heads Up From NEA Member Benefits

Thousands of NEA members and their families have used the NEA Home Financing Program® to obtain a new mortgage, refinance an existing mortgage, or take out a home equity loan. Now you can set your sights on being in your new home or make those long-awaited home improvements by summer. With the many options offered by NEA, there's sure to be a program that suits your needs!

Are you a renter dreaming of buying your first home? First-time buyers can take advantage of special low- and no-money down home loans that feature no maximum income restrictions. Plus, flexible credit guidelines can get you into a home sooner than you might think.

Thinking about refinancing? It's a popular option for homeowners who want to lower their monthly payments, reduce their mortgage term, or get cash out. Depending on how long you stay in your home, you could save a significant amount of money through interest rate and tax advantages.

Want to turn the equity in your home into real cash? With an NEA home equity loan, you'll get the money you need to make home improvements, consolidate debts, or purchase that new car or truck.

For information on a new mortgage, to get a free break-even analysis for refinancing purposes, or to find out how a home equity loan or line of credit can work for you, call the NEA Home Financing Program at 800/NEA-4-YOU (800/632-4968).