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How to smartly use a HELOC in retirement
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A home equity line of credit (HELOC) is a unique financial tool that comes with some of the features of a second mortgage and some of the features of a credit card. When you open a HELOC, you’re given a spending limit based on the equity in your home. You can then use your HELOC to cover any expense you’d like as long as your balance stays below your spending limit.
These lines of credit may prove to be invaluable for retirees. That’s because they provide a financial cushion that you can tap into at any time. Moreover, when you open a HELOC you don’t have to borrow the full amount of the credit line — you can simply borrow what you need when you need it.
Of course, if you’re a retiree, it’s important to be careful when using your assets — including your home’s equity. So, how do you smartly use a HELOC to help you in retirement?
Open a HELOC now give you a financial cushion in retirement.
How to smartly use a HELOC in retirement
First and foremost, it’s important to keep in mind that any money you borrow as part of your HELOC will need to be paid back at some point. That’s an important consideration because if you can’t pay the money back in your lifetime, your estate will likely absorb the expense — meaning you may leave less behind for your loved ones.
Nonetheless, there are plenty of circumstances in which a HELOC may be a smart move for a retiree. Some of the most common of these circumstances include:
Home repairs
Chances are that you’ve had to repair a few things around the house over the years. Roofs, air conditioners, plumbing and electrical systems only last so long. However, these and other repairs can be costly. According to Angi, you’ll pay an average of $9,224 to replace your roof. Other home repairs can be just as costly, if not moreso.
The problem is that retirees usually live on a fixed income. So, it can be difficult to come up with thousands of dollars to cover the cost of a home repair. A HELOC can help — and there’s an added incentive associated with taking this route.
When you use the money from your HELOC to repair or improve your home, the interest you pay on the loan may be tax deductible. So, when you use your HELOC for home repairs, you could reduce your overall tax burden.
Pay for your home repairs with a HELOC today.
Limit taxable events
Like many people, you may have invested in your retirement on a pre-tax basis. That means the taxes on these investments are deferred until you withdraw the money. As such, every time you pull money out of your 401(k) or IRA, with the exception of Roth alternatives, you’re creating a taxable event.
Of course, you plan for the general taxable events associated with withdrawing the money you need on a regular basis. However, if you have a reason to withdraw a lump sum, the income could push you into a higher tax bracket — significantly increasing your tax burden.
Rather than withdrawing a sum of money that could bump your tax bracket up, it may be a good idea to lean on your home equity. When you do, you can pay the money back over time, limiting the tax burden that comes with it by spreading the income out over several years.
Cover unexpected expenses
Unexpected expenses don’t stop the day you retire. Life is filled with unexpected events that can be costly before and during your golden years. Unfortunately, these unexpected expenses can be particularly detrimental to your budget in retirement.
After all, when you retire, chances are that you’ll be living on a fixed income. As you planned for retirement, you may have planned for inevitable expenses and created a safety net for emergencies. But when those emergencies are more costly than expected, that safety net may not be enough.
It’s during these times that a HELOC may be able to save the day. You could use a HELOC to access the money you need while absorbing the cost with small monthly payments over the course of multiple years.
Use a HELOC to cover unexpected expenses now.
The bottom line
A HELOC may prove to be a valuable tool in retirement. That is, as long as you’re smart about how you use it. A HELOC may come in handy when you need costly repairs to your home or you need to cover other expenses while limiting your taxable events. Explore how a home equity line of credit can create a financial cushion for your retirement.
NEW YORK — Former New York Gov. David Paterson and his stepson were attacked in New York City on Friday night, authorities said.
The incident occurred just before 9 p.m. on Second Avenue near East 96th Street on the Upper East Side, according to the New York City Police Department.
Police said officers were sent to the scene after an assault was reported. When officers arrived, police say they found a 20-year-old man suffering from facial injuries and a 70-year-old man who had head pain. Both victims were taken to a local hospital in stable condition.
In a statement, a spokesperson for the former governor said the two were attacked while “taking a walk around the block near their home by some individuals that had a previous interaction with his stepson.”
The spokesperson said that they were injured “but were able to fight off their attackers.”
Both were taken to Cornell Hospital “as a precaution,” he added.
Police said no arrests have been made and the investigation is ongoing.
The 70-year-old Paterson, a Democrat, served as governor from 2008 to 2010, stepping into the post after the resignation of Eliot Spitzer following his prostitution scandal. He made history at the time as the state’s first-ever Black and legally blind governor.
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A 17-year-old boy was critically injured and a person is in custody after a gunman opened fire on a SEPTA bus in North Philadelphia Friday evening, police said.
At around 6:15 p.m., Philadelphia police were notified about a shooting on a SEPTA bus traveling on Allegheny Avenue near 3rd and 4th streets in North Philadelphia, Inspector D F Pace told CBS News Philadelphia.
There were an estimated 30 people on the bus at the time of the shooting, Pace said, but only the 17-year-old boy was believed to have been shot. Investigators said they believe it was a targeted attack on the teenager and that he was shot in the back of the bus at close range.
According to Pace, the SEPTA bus driver alerted a control center about the shooting, which then relayed the message to Philadelphia police, who responded to the scene shortly.
Officers arrived at the scene and found at least one spent shell casing and blood on the bus, but no shooting victim, Pace said. Investigators later discovered the 17-year-old had been taken to Temple University Hospital where he is said to be in critical condition, according to police.
CBS Philadelphia
Through their preliminary investigation, police learned those involved in the SEPTA shooting may have fled in a silver-colored Kia.
Authorities then found a car matching the description of the Kia speeding in the area and a pursuit began, Pace said. Police got help from a PPD helicopter as they followed the Kia, which ended up crashing at 5th and Greenwood streets in East Mount Airy. Pace said the Kia crashed into a parked car.
The driver of the crashed car ran away but police were still able to take them into custody, Pace said.
Investigators believe there was a second person involved in the shooting who ran from the car before it crashed. Police said they believe this person escaped near Allegheny Avenue and 4th Street, leaving a coat behind.
According to Pace, police also found a gun and a group of spent shell casings believed to be involved in the shooting in the same area.
“It’s very possible that there may have been a shooting inside the bus and also shots fired from outside of the bus toward the bus,” Pace said, “We’re still trying to piece all that together at this time.”
This is an active investigation and police are reviewing surveillance footage from the SEPTA bus.