Pay Dirt

The Possible Recession Terrifies Me. So Does My Potential Solution.

I just want to hide under a rock ‘til it’s over.

Hands open a check.
Photo illustration by Slate. Photo by Getty Images Plus and Spoon Graphics.

Pay Dirt is Slate’s money advice column. Have a question? Send it to Athena and Elizabeth here(It’s anonymous!)

Dear Pay Dirt,

I have to move my 401k because the company I formerly worked at was absorbed in a corporate merger, and they’re closing the accounts. I’m moving it from the company’s chosen investment bank to my own, where I also have a Roth IRA and a couple of brokerage accounts. I had the company’s bank cut a check to my bank and close out the account last Thursday, with plans to put it into a rollover IRA and figure out what to do with it later. Today I saw on Slate’s website that we’re officially in a bear market and the stock market is tanking.

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Watching my paltry, I’m-37-years-old-and-all-I-have-for-retirement-is-$15k account drop down to $13k before I cashed it out already hurt my heart, so there’s a (probably irrational?) part of me that wants to stash the check under my mattress rather than deposit it and watch its value continue to drop. I need to just grit my teeth, deposit the check into the rollover account and bear it, right?

—How Low Can It Go?

Dear How Low,

That sounds rough. No one wants to wake up and watch their portfolio crash, yet it’s happening to all of us. I would want to slip a check under my mattress too, but in my defense, that’s how my parents stashed their money. Oh, memories.

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We have two options, as I see it. You can roll over the 401k, and then make sure it’s being invested in a way that works for you. We can follow Warren Buffet’s advice and buy quality stocks that are currently being offered at lower-than-average prices. In some cases, these stocks have never been offered at these prices. Buffet also suggests holding forever, which means understanding that while the stocks you are purchasing now may continue to drop, they will eventually grow in time and you will get your investment back plus the dividends.

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Other fund managers suggest not jumping into the bear market in this way, and instead diversifying investments if you can. The reality is no one can predict the end of the bear market but other factors that have shown we are ready to bounce back in the past aren’t there yet. So this means the worst may be yet to come.

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My take? If you are okay with keeping this money invested in the 401k for the long term, go in and follow Buffett’s advice. If not, keep it out and find a lower-risk way to invest, such as a CD or bond.

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Dear Pay Dirt,

I am 58 years old and I need some advice regarding my sister. My mother lived in another country along with my sister, while I have lived in the U.S. for almost 40 years. I have been their sole financial support during this period. My mother passed away in 2019 and I have continued the same financial arrangement since then with my sister.

The issue is that I had purchased a home for them to live in that I now would like to sell. My sister has only worked once in her life, briefly, and the rest of her time was spent taking care of my mother, who had health issues for many years.

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Earlier this year I had a conversation with my sister regarding selling the home and she became upset. I explained to her that I am getting older and financially it was becoming more difficult to maintain her and the home. It would be easier to sell to be in a better position long term. She is aware that I am single, unmarried with no children, and her sole support for everything. She is very emotional about the issue and I feel very guilty as she took excellent care of our mother during her illness. I need some advice on how to go forward.

—Confused Sister

Dear Confused Sister,

My heart is going out to you around this situation. My dad is in a very similar boat and it’s been hard to watch over time. My grandmother passed last year and he is still financially taking care of his sister.

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It’s difficult because she may feel she’s given up her whole life to take care of your mother, and may not know where to start, and feels genuinely overwhelmed. But at the same time, you originally purchased the home and provided support under different circumstances. Your mother has been gone for three years, and you’ve continued to remain generous so there is that to definitely be acknowledged. You didn’t have to support them at all, yet you chose to, so don’t feel bad that you now need to focus on yourself and your financial health.

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Acknowledge her feelings about the current situation and apologize for not discussing what would happen with your financial support after your mother died, before now. Try to figure out a timeline of when she would be expected to be out of the house, so that you can sell it, and ask her what she needs from you to be able to accomplish this task. She may need to learn a new set of skills, help with finding housing, or to learn more about finances. Maybe you could even offer to pay for her rent for the first month or two.

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It is going to be hard for both of you but in the end, you are now doing her a favor. You cannot control when life ends, and if something were to happen to you tomorrow, she would need to know what to do. Now you can help her be able to do just that. Good luck.

Dear Pay Dirt,

I’m a 67-year-old single man who has been working as a book editor for 44 years. I would like to retire in January 2024, when I will be 69. However, I am worried about my mortgage, which at present has a balance of about $54,000. In retirement I will get social security, plus I have an IRA worth about $190,000, and through the university, I work for, I have sort of a pension, one of those TIAA-CREF things, also worth about $190,000. My monthly “income” after retirement will, of course, be less than I am taking home now. I intend to keep doing freelance work, but I can’t count on getting as much as I would like, or even any. I am more or less in good health.

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I also have about $22,000 in a savings account at a local bank, consisting of money Joe Biden sent me and payments for freelance editing. I know about the advice to have about 6 months’ worth of savings on hand, but I am thinking of taking a portion of the $22K and making a substantial dent in my mortgage balance. Do you think this is a good idea? Thank you.

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—I’m So Tired of Working

Dear I’m So Tired,

I don’t usually advocate liquidating your cash reserve to pay off your mortgage, but in your case, I’ll allow it. You are ready to be retired, and at this point in the game, you need to decrease your liabilities as much as possible. This includes your mortgage. A mortgage can be the biggest expense in your budget, so getting rid of it or lowering your payment will help substantially.

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You may, in the future, be bringing in less, but you still sound like you’re in a great place to be, especially with a pension coming through. I wish you the best in retirement and hope you can catch up on some much-needed rest.

Dear Pay Dirt,

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My parents struggled financially my entire childhood—however, after a huge financial setback about 10 years ago (when I graduated from high school), my mom decided to work full-time and go back to school full-time in her 40s. They’re now both making a lot of money, have pulled themselves out of debt, and are doing really well. I’m really proud of them. They also recently purchased a second home, with the plan to sell their first (the home I lived in during middle school/high school) because it’s completely falling apart and they didn’t want to deal with the repairs.

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My parents offered to sell the first house to me and my husband for about $50k less than it’s worth, to gift us equity. My husband and I are solidly upper-middle-class, but we live in an insanely expensive part of the country and would not be able to afford a home right now if they weren’t offering us such a generous deal. Between the equity and our own savings, we’ll be able to put down 20% on the house, and still have a comfortable nest egg. I’m really excited to be a homeowner!

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My question is—the house needs about $50,000 worth of work to make it functional, and I have about $20,000 of land and aesthetic improvements I’d like to do as well, which aren’t as urgent. What’s the best way to go about financing these improvements? We don’t have enough savings to pay for everything up front, but could get the most serious issues taken care of in cash, mainly re-piping the plumbing and mold remediation. I don’t really want to put everything on a credit card because of the high interest rate. Any suggestions?

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—New Homeowner

Dear New Homeowner,

How exciting! I can only imagine how sentimental it is to be able to buy your childhood home and fix it up for your new adult self so you can enjoy it with your husband. And there are ways you can finance home repairs without liquidating your savings.

You could consider two different loan options, one called a home improvement loan and the other called a HELOC (home equity line of credit). A home improvement loan is an unsecured loan provided by a lender that would allow you to finance major repairs and pay it back on an installment plan. With a HELOC loan, a lender looks at the equity in your home and provides a loan based on that. This is a secured loan—a HELOC loan can be considered a second mortgage, as a lien is placed on your home. So if some unforeseen circumstance happens and you develop an inability to pay it off, you’ll lose your collateral.

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I’m going to assume, due to the financial picture you described in your letter, that you have a great credit score, so I would try to get the home improvement loan first. These loans are typically smaller than the amount offered with a HELOC, but they will at least allow you to take care of the plumbing and mold. For other home improvement projects, I would also consider financing a credit card with a home improvement store. Many times, they offer zero interest for six months up to a year, which can allow you to work on the next stage of your house after the major improvements are done. Have fun!

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—Athena

More Advice from Slate

I’ve noticed that my 13-year-old stepdaughter, “Sally,” has been more distracted than normal the past several weeks, so I pulled her aside tonight after dinner to check in with her to make sure everything was all right. Sally became very emotional and described being anxious and depressed. Her anxiety mostly stems from concern for two of her friends. Both of them she described as “severely depressed,” and one of them cuts and has frequent suicidal thoughts. I asked Sally if she would be comfortable with me meeting with their moms or with their teacher or principal to pass on what she had told me. I even offered to communicate with an anonymous email. Sally was not comfortable with any of that (or with talking to them herself) and wanted to wait to see how things went. One of them has an unstable home life, and the other identifies as bisexual but feels she cannot tell her conservative family. I told Sally to make sure they knew they were always welcome in our home for as long as they needed. What else should I do? I don’t want to betray Sally’s trust, but I also want these girls to get the help they need.

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