Ken, I think that you are totally misunderstanding my point of view. First of all, I never got the impression that Cube's dad owned his house fee and clear. She said that he said, Âbut the house and car insurance snuck up on meÂ. I took that to mean house payment, although, it could have meant homeowner's insurance, or real estate taxes. I don't know. But I assumed that he did not own the house free and clear. Also, I could care less about the inheritance. I don't care if I inheret a dime from my relatives, and I guess that I make the presumption that others don't care either. My concern is what is best for Cube and her dad. Sure, she could continue to supplement his income, and write IOUs, but that really is not what's best, because Cube is planning for a layoff, and the money simply will not be there for her to give to her dad. You can't give what you don't have. The RM is a possible alternative, but I don't think it's best for Cube's dad, mainly because, as you said, he may have another 20 years of living to do. That RM is gonna come due eventually. Or, he will tap it out, and then, how will he pay for his living expenses? As stated above, my opinion was not based on the fact that the RM would prevent Cube from obtaining an inheritance. My point was, the best way for Cube to help her dad out of this situation, which she feels a moral obligation to do, is to help him to not spend more than he earns. I'm sorry that you feel that that would be "treating him like a child." But, I disagree. My grandfather does not feel like he is treated like a child. My mother does not insist that he hand his money over for safe keeping. He willingly gives it to her and asks her to hold it (because he is well aware that he is not good with money,) so that if his cars breaks down and cannot be fixed, he can purchase a new one. And, I'm not talking about huge sums. Currently, my Mom is holding $3000 for my grandpa, and that is his entire net worth. In the case of my family, this is not an inheritance issue, it's a looking out for one another issue. No one has $3000 to give to grandpa, but my mom can help him be prepared in case an emergency pops up and he needs money. Perhaps the term "allowance" makes you think of a child. But many adults put themselves on an allowance. It's just the amount of money that they have to spend each week (or month) after they have met all other financial obligations. Call it something else if you like. And, I never called anyone "money stupid." I don't like the term "stupid." But, I would not equate someone who is not good with money with someone who has different money priorites either. Someone who has different money priorities is not necessarily someone who cannot meet all of their financial obligations. Do you see the distinction? I think Anita's last paragraph is a very good suggestion, IF it's even possible for Cube's dad to downsize.

Hi stinkbone, When I first read your message, I thought, "Oh, no ... running a mortgage for 10 years without agreeing formally to pay off a penny of the principal?"! Dave doesn't mind people running a fairly substantial mortgage without their getting their shirt-tails tied into knots to pay them off ... if one uses the freed-up money to invest into worth-while assets. But ... when one considers that a mortgage is an agreement to pay off a (usually large) loan making level rates of payment from the first month to the last, one knows that in the early years, when the loan is large, the amount of interest payable annually is large ... meaning that one pays peanuts on the basic principal during the whole of that first year. In the later years, a very large component of the regular payment goes to pay off principal, as the amount of interest payable on that residual amount owing is quite small - but the borrower has been paying the same amount each time. We've often been told that if one can make one extra payment annually (specifying that it's to be used totally to pay down principal) it'll probably make a larger payment of the principal that the total amount paid off on principal through all the rest of the year (or close to it). That will result in the loan being paid off much earlier than according to the original plan. If you make that official plan, I hope that you'll make a deal with yourself to make that extra payment annually, or more if possible, even if it's not required. If you get someone to run down the effect that'll make in the date that your mortgage'll be paid off, you'll be surprised, I'm sure ... and substantially motivated to carry it out, if at all possible. The people who pay bi-weekly are actually making that 13th month payment in each year, contractually. What plans do you have in place to deal with an emergency? Unexpected illness, if not covered by medical insurance (and few offer coverage of the entire amount, and certainly not up-front ... but medical people like to get paid now, not in half a year ... with you recovering the amount from your insurance company, later). Blowing the engine or tranny of your car? Replacing a furnace ... it may make you sweat (sorry ... "perspire") to do without an air conditioner for a while until you can afford a repair or a replacement ... but you'd get more uncomfortable than that, doing without a furnace (without regard to tearing holes in walls to replace split parts of water pipes after freezing). Will you be able to get a HELOC from your financial institution? For sure? I'll bet not ... if you've been put on lay-off (especially if permanent). And at what rate? I suggest that, even if it means cutting expenses to just the bare essentials for a couple of years (or more), that you make a strong effort to set aside the value of a fourteenth month of mortgage payment each year, to invest as a safety net for use in emergency. I've recommended to many that they try to have 3 - 6 mos. worth of income in case theirs stops, for whatever reason, so that they'd still be able to manage financially. I've told a number of people, as they became more familiar with the ins and outs of capable financial management, that often I don't have such myself. But I have a fairly guaranteed income, being as I'm on three pensions plus required annual withdrawal from a tax-deferred retirement plan, and live on less than that income ... automatic, until I depart this earth. Even if I didn't, I have some equity and mutual fund assets and have had certificates issued ($35 - 50. per asset in stocks, usually fee-free for mutual funds) that I have lodged as collateral backing a Letter of Credit at my bank (which sits unused, most of the time, with no inactivity fee levied) which I can draw on in case of an emergency. So I use credit card to pay for the emergency needs, then draw on the LOC in time to pay off the total owing on the credit card ... as I dislike paying their high interest rates ... I'd rather pay at a lower rate on the amount borrowed on the Line of Credit. Then, as I have surplus income (and I cut expenses to the bone, in such cases) to pay that loan off in full, as quickly as possible, partly due to interest not being deductible. After that, to put the amount that I was paying interest into my pocket. Where I'd keep it for a short while, then use it to buy more assets. I agree with Dave somewhat, however ... in that I will, however use a different Letter of Credit (due to the interest being deductible) to use to buy assets, sometimes agreeing to pay interest only, and some principal if and when it suits me. As I believed, back when I would have to pay 6.25% interest, that I could borrow to invest at nearly nil net cost ... ... so it should be true in spades, now that I can borrow for 4.75%. What's better than putting your money into the bank? Long term ... it's buying a piece of the bank! For reasons that I've outlined elsewhere in these fora. Good wishes for making a deal that you'll be happy with in 10 and 20 years. Learn how money works ... an interesting hobby ... **that pays well**!! ole joyful

Bill, In order to take advantge of IRS Rule 72(t), which does permit early, penalty-free withdrawals, you will be required to take regularly scheduled distributions from the 401K for at least 5 years. If you retire at 55, that would mean until you are 60. There are three permitted ways of determining how large each distribution must be, the specifics of which are too complicated to go into here. However, Bankrate.com does have a calculator which you can use to figure out how much you would receive annually using each of the three methods. Plugging in your numbers as best I could, I calculated that your minimum annual distribution would be about $32,000 and your maximum about $44,500. That corresponds to a minimum monthly income of about $2670 and a max of about $3790. Note that you need to input the "applicable Federal midterm rate," which is 2.44% for March, 2011. Obviously, it will probably be different during the month your plan is implemented, should you go that route. So any results you get using the calculator will be somewhat rough, but at least will get you in the ballpark. The biggest red flag that hovers over 72Ts is that these early distributions, especially if you take the maximums, may result in you depleting your account during your lifetime. If I were doing this, I'd stick with the minimums. If you have any intention of doing this, you MUST find a professional tax advisor who is very experienced in setting up these plans. It's very easy to screw things up and leave you stuck with paying big tax penalties. Here is a link that might be useful: 72(t) distribution rates

"a variable vs an immediate annuity" I think jkom means a variable vs a FIXED annuity -- ie, an annuity that grows at a fixed interest rate and pays out a sum certain perdiocally (usually monthly) over either a fixed term of years or until the annuitant dies (a "life" annuity). A fixed annuity isn't usually considered an investment vehicle. It's most often used by retirees to secure a fixed and certain sream of income, similar to what a pension would provide. However, it's unlike a pension in that it's an insurance product purchased and funded by the individual. A fixed annuity can be either immediate (payments start immediately) or deferred to some date in the future. A variable annuity, which IS considered a type of investment, is also an insurance product. It returns a variable rate of interest tied in some fashion to the performance of, most typically, the equities market. Thus, it carries some risk, but the risk is hedged to some degree by a partial guarantee on returns. Thus, you won't lose your shirt as you might in the stock market, but you also can't expect to get the same level of returns as you would if you invested in stocks directly, or in indexed mutual funds whose performance is setup to mirror the performance of a stock index, such as the S&P 500. Variable annuities are usually VERY complicated. Dont buy one unless and until you completely understand all its features. They always carry the significant disadvantage of a considerable "load" -- the commissions paid to the sales agent through whom you buy it. Be aware that your financial advisor will be paid at least a part of this commission should you follow her advice. I'm not saying that's a reason by itself not to buy it, but it's certainly something to think about. From what I can tell, most of the online financial gurus aren't very enthusiastic about VAs, mostly because of the commissions, which reduce the amount of return on your investment. The guaranteed returns may sound good, but they're always calculated to be lower than the historical average rate of return of whatever index they are based on. The insurance companies, after all, are in the business of making money and over all they're pretty good at it. Personally, I wouldn't buy a variable annuity. I do intend, however, to invest some of our stash in fixed annuities for the DH and me once he finally is mostly retired. That should be about five years from now, when we all expect that annuity interest rates should be quite a bit higher than they are now.