Get With The Plan: June 8, 2008

Violet is trying to get on more solid financial footing. The 55-year-old Essex County woman has been separated from her husband for eight years, and her divorce should be final in two months. Her soon-to-be-ex has no assets, so financially, she’s on her own.

‘‘I own my home myself, and I am the only one on the deed and mortgage,’’ she says. ‘‘He transferred his share to me six years ago in lieu of his profit-sharing.’’

Violet, whose name has been changed, has set aside $20,000 in IRAs, $24,000 in mutual funds, $7,000 in CDs and $15,000 in savings. She also will be eligible for a pension when she retires, the monetary value of which will change depending on her retirement age.

The Star-Ledger asked Douglas Duerr, a certified financial planner, certified public accountant and personal financial specialist with Duerr & Duerr in Montville, to help Violet make the most of her resources so she can have a financially stable retirement.

‘‘She is trying to plan for retirement while managing her current day-to-day living expenses,’’ Duerr says. ‘‘She is doing the best she can with the resources that she has.’’

Duerr says there are several items that need to be modified as soon as possible in order for her to retire in a reasonable amount of time.

Violet would like to retire in seven years at age 62, but Duerr says this is not really feasible. She would be much better off to work until age 65. Here’s why:

Violet is eligible to receive a pension from her employer. Whether she works until age 62 or even 65, she will not be eligible for a full pension, because she will not have worked enough years at this employer. At age 62, considered early retirement by this employer, she’d receive $418 a month. If she waited until age 65, she would be eligible to receive $656 a month. Social Security will be another source of retirement money. At age 62, she’d receive $881 a month, but if she waits until age 65, it would increase to $1,283.

‘‘It is certainly in her best interest to work until age 65, since she would receive an additional $640 per month,’’ Duerr says. ‘‘This is a significant increase and will certainly improve her quality of life in retirement.’’

Even if Violet does work until age 65, Duerr says she may still need to consider working part time to supplement her pension and Social Security income.

Violet has great concerns about debt. She recently paid off $3,500 in credit card debt from her savings, and she will need a new car in a few years — even though she still has time on her current car loan. She may find the extra cash she needs by refinancing her mortgage, Duerr says.

Violet has a 25-year mortgage at a 6 percent interest rate, with a monthly payment, including real estate taxes, of $1,337. The car loan has about $7,000 remaining. Given the balances left on these two loans, Duerr says she should think about consolidating.

Duerr says Violet could probably get a traditional mortgage from several New Jersey banks that offer a lower interest rate to people who earn a moderate in- come. For example, Duerr found one offering a traditional 30-year mortgage at a rate of 5.75 percent, a quarter-point less than the current mortgage.

This move would lower her mortgage payment and free up additional money that she could set aside for a down payment on a new car.

Violet doesn’t have many investments, and while she needs to keep some funds on hand for an emergency, Duerr says she needs to consider investing some of this cash in other investments for greater growth.

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