Home Equity Loan

Beth's father has $250,000 in mutual funds, and Dave thinks that he'll have to be careful if he pays off the house with half of it.

QUESTION: Beth’s father has $250,000 in mutual funds and is retired. He has a home equity loan of $135,000. She’s telling him to use the money to pay that off. Does Dave agree? It’s a tight fit, Dave says.

ANSWER: That’s borderline … it’s not much of a nest egg that we’re leaving him with. He needs more like a half million. I would go with your advice, but he has to be very, very, very careful not to go into debt and not to overspend and start tearing into this nest egg. If they shoot this goose, they are going to have a problem. But they can pay the loan off.