Helping my 80 yo dad. Does this make sense?
- Montant max
- 160k€
Long time lurker here and forums, first time poster. I (51M) recently started learning about my dad’s financial situation after helping my sister clean up her stuff for the last two years (mom is deceased, dad and sister live together). Over the years, it seems my parents racked up a ton of credit card debt. My dad still has about 90k in debt. He has like 20 credit cards with balances between 1 and 11k each with varying interest rates from 20-28%. I did not know any of this until about 2 months ago. He gets about 36k/yr SS and about 30k/yr from a pension. He also still does some (very) part time work and nets about $200/week after taxes (so for math let’s just say he gets 10k/yr from this). He has an IRA that only has about $160k in it. His expenses, other than credit card payments, are low enough that he could live on the SS and pension money, plus what my sister can contribute, with a decent cushion. It’s just that the debt is drowning him. I was thinking about having him pull a chunk of money from his IRA to pay off the highest interest credit cards. For example, he has one card with a 28.5% interest rate that has about $1700 on it. He has another card with a 28.2% rate with 11k. My thought is that if we keep his income under 100k, then his marginal tax bracket is 22% and he will save money in the long run and he can still take advantage of the extra senior deduction so he pays less tax overall. We can do this for the next 3 years to clear up some, but admittedly not all, of his debt. Does this strategy make sense? I just want to give him some cushion. Any other thoughts are appreciated.