Very different situation that needs special advice.

[Tami1982]

I haven't went into much detail on this in my journals, and I'm going to only disclose what is necessary, but in 2006 I become totally and permanently disabled due to a number of conditions.  I was awarded SSDI.  I work off and on part time as my conditions allow.  I average $500 a month in income, but sometimes make more, sometimes nothing.  I cap at $1,000.  I am allowed this supplemental income while collecting SSDI.

Monthly income:
SSDI $825
Working: $500-1000. 

I'm going to be out of debt, other than my $59,000 - 3.125% mortgage (27 years remaining), in under a year.  My spending is low.  After my debt is paid, my monthly budget (including mortgage, and all living expenses) will be about $960.  If forced, I could likely get it under $850, maybe even to $800. I'm going to have anywhere from $365 - $865 leftover and I am trying to figure out what to do with it.

Emotionally, I would love to pay off the house, but financially it doesn't make sense.

A lot of the investment advice I have read won't apply to me.  Here are a few reasons why: My income is so low I never pay income taxes.  My mortgage interest doesn't even matter.  I can't deduct it. I basically never get to deduct anything - student loan interest either.  By the time I put in basics, I get EIC credit and it zeros out or goes $200 in my favor.  So the investment vehicles where people are trying to lower their tax bracket don't really apply to me.  For sake of argument - I will never make more than $12,000 a year.  Let's just go with that.

I don't work enough hours to qualify for a 401K through my work place.  I have been looking at IRA's and that seems to be the next step.  But it looks like I could max out the $5,500 contribution  (maybe/maybe not depending on health every year).  So where do I put my money after maxing out the Roth IRA  (I picked that over traditional as it seems to be the most flexible.)

Um, what else is pertinent? I have no savings.  I have no retirement.  I will own my 6 year old car shortly, and will have no debt other than rotating credit cards that I pay off every month starting next year.   

It's less about securing retirement, and more about securing my future so that when the time comes that I cannot work at all I can live off the income I have coming in. My whole goal has been to try and live under SSDI - planning for the worst. I'm trying to be responsible and resourceful with what little I have.  It was less expensive to buy my house than to go into fixed income housing/apartments (or section 8).  So I bought a house.  Due to a crazy sequence of events (too complicated to get into) the house, while old, has been completely redone.  It needs to be painted, but that's about it.   The only large expense that could happen would to be if the septic failed, but I do everything I can to limit use of water, and I don't even flush TP.  That can be $20,000 to replace so I am doing all I can to prevent a failure. 

I know my situation is a little different, and I want to thank you for your time in reading this.  I'm physically limited now, and it will only grow worse with time.  I'm trying to do what I can, while I can, to protect myself as I age.  I'm 32.

My other thoughts are considering putting a tiny house on the property to rent for income, or as a back up I could live in it and rent my house out (likely $800 a month - Mortgage $313.)  Income generated from real estate or investments is not considered working income and not subject to any limitations by SSA.

Thank you again.  I have learned so much from this forum, through advice and MMM blogging.  I never could have handled the last few years without the support and face punches of this community.  I never could have gotten my expenses so low without it. I'm so grateful.

Also of note: My parents have no money.  My net worth is more than theirs.  I will not inherit anything, nor do I have any other relatives that I am a beneficiary of.

[Argyle]

My first thought is that you need an emergency fund for when something comes up, because something always comes up.  I'd start by aiming small, maybe for three months' expenses, and then maybe work up to a $20,000 emergency fund — just in case the septic system goes.  Accumulating this may take a while, but the time goes by whether or not you're saving, right?

[ltt]

Is there the possibility that you might lose your SSDI if you make too much from outside investments?  I don't know what the rules are.

[bacchi]

Why do you need a Roth if you never make enough to pay any taxes? Would the Saver's Credit help your tax situation at all?

[Tami1982]

My first thought is that you need an emergency fund for when something comes up, because something always comes up.  I'd start by aiming small, maybe for three months' expenses, and then maybe work up to a $20,000 emergency fund — just in case the septic system goes.  Accumulating this may take a while, but the time goes by whether or not you're saving, right?

I just have a hard time imagining sticking $20,000 to sit in a savings account with like zero interest.  It will take 5-7 years to get that much, and it could be compounding interest in the meantime.  I do plan on having roughly $3,000 up in case of car repairs or that sort of thing. 

Sewer is coming into the area, so if it does break down, I should be able to hook up for little/ no cost.  It was inspected/pumped less than 3 years ago and had no issues at that time.  There are grants and things available should it occur.

Is there the possibility that you might lose your SSDI if you make too much from outside investments?  I don't know what the rules are.

The only income that counts is working income.  I could win the lottery and still collect.  I was told this by an SSA rep.  Ethically, I wouldn't.  But the only income that counts is what you earn through working.  I've been discouraged by my family from working, because often it takes a toll and I have to take time off, and become ill, but the social isolation is abhorrent.

[Tami1982]

Why do you need a Roth if you never make enough to pay any taxes? Would the Saver's Credit help your tax situation at all?

Saver's credit won't help as they won't pay out on it. I don't necessarily need a Roth in terms of taxes.  I just need an investment vehicle and I don't know where to put my money.  The traditional vehicles don't seem to work for my situation.  I've been doing research and coming up short. 

[MDM]

By the time I put in basics, I get EIC credit and it zeros out or goes $200 in my favor.  So the investment vehicles where people are trying to lower their tax bracket don't really apply to me.  For sake of argument - I will never make more than $12,000 a year.  Let's just go with that.

I don't work enough hours to qualify for a 401K through my work place.  I have been looking at IRA's and that seems to be the next step.  But it looks like I could max out the $5,500 contribution  (maybe/maybe not depending on health every year).  So where do I put my money after maxing out the Roth IRA  (I picked that over traditional as it seems to be the most flexible.)

Um, what else is pertinent? I have no savings.

You could start with the Roth IRA.  That may help some with taxes due to the Saver's Credit (even though the SC is non-refundable), and at least will move you from "no savings" to "some savings."

[whiskeyjack]

If taxes are not, and are never going to be a factor, you can just open a regular taxable investment account with Vanguard (or whatever low cost brokerage you like).   In your situation I might do that until you reached at least $20k and not worry about it being in a retirement account at all.      If in several years you are lucky enough to start pulling in enough income from investments that it matters for your taxes, then you can worry about opening an IRA and in the meantime it's 100% accessible to you if you decide to build the rental unit.

[swick]

How big is your house? Would it be possible to even rent out a room for the meantime? It could make a huge difference to how much you could save. Or do you have a garage or basement or shed on the property you could rent out as storage space? Or a side yard or driveway you could rent out to someone who might need parking?

[deborah]

A tiny house on the property sounds like an excellent idea. You could ensure everything in it really worked for you, and it would bring in extra income. It seems to me that index funds would be your best bet - maybe talk to Vanguard about your situation, as you don't need anything that is tax exempt.

Being Australian rather than from the US, I don't know your system, but here there are a number of people who do planning for people with disabilities. Normally they work with people who get a pay out, working out where to put it. I know that both here and in Canada there are special accounts you can set up in your situation - it might be worth contacting the government disability area to see if there are. However, I'm sure you have already looked, and this forum has really opened my eyes about how few safety nets there are in the US.

[seattlecyclone]

I think you should definitely put money in a Roth IRA after your debt is gone. The saver's credit should help make it so that your taxes are zero before the EITC is applied. Even if you can't get the full amount of that credit, it should help in any year where your income is higher than the standard deduction and personal exemption.

You can always withdraw your contributions from the Roth IRA for any reason, tax-free and penalty-free. Also, any withdrawals you make from the account after you have had a Roth IRA for five years count as "qualified distributions" if the withdrawal is made for disability-related reasons, which means the withdrawal will be tax-free and penalty-free just like if you were 59½.

The tiny house idea does have some appeal, but the nature of your disability might determine whether it's actually a good idea. If you build one, you will be responsible for maintenance on two houses. Are you able to take care of that on your own right now? Would you be able to in ten years? 20? The more of the work that you have to outsource, the less profitable your rental house will be, and the more likely you would be better off simply investing in mutual funds. That's something you'll have to think about, given your own situation and how you see your disability progressing over time.

A cash savings account with a couple thousand dollars would probably be a good idea, just in case you have some medical bills or something that one month of SSDI won't cover. You can take money from your Roth in that situation, but once it comes out it can't go back in, so you should try to avoid that unless it's necessary.

If you build up a solid cash cushion in a savings account, max out a Roth IRA, and still have more to save, might as well open up a taxable brokerage account with Vanguard. At your income level, the taxation in the account should be minimal.

One thing to note is that if your investment income rises above a certain level ($3,350 this year), you become ineligible for the EITC. Rental income counts toward this limit. That's why I recommend using a Roth IRA instead of a taxable investment account to start. The more of your savings you have in the IRA, the longer before you might hit that investment income limit.

[Financial.Velociraptor]

Tami1982,

You are the sort of badass that rarely gets mention.  You have my respect!

Since there is no benefit to the mortgage interest, I'd pay that off.  That rate is low but for a low income person it represents a material drain.  Three and a quarter percent return is "good" for "cash return" in the current environment.

You mention a 'tiny house'.  Could you live in tiny house and rent out the larger house?  The larger house might fetch a better rent multiple. 

Can you get insurance on the septic?

Are you making the most of Obamacare (talk to the counselors - Planned Parenthood used to do the counseling in state of TX)?  It has helped me out a great deal as I was previously uninsurable in FIRE.  You probably qualify for Medicaid but there may be additional benefits that are not widely published.

[starguru]

I don't have any financial advice but I pray (which I rarely do) that you can find some relief from whatever afflicts you.  You are young; maybe science will offer some help in the future.

[caliq]

I think a Roth still makes sense in a situation where you owe 0 income tax.  My husband is disabled and I'm still in college, so we ended up in that situation for 2014.  Unfortunately we didn't end up with anything extra, but the theoretical discussion on the best place to put extra led me to the impression that a Roth IRA is absolutely the best place to put any extra.  It is limited to earned income, though, but based on your 12k/yr income, you shouldn't have a problem with that. 

[Tami1982]

If taxes are not, and are never going to be a factor, you can just open a regular taxable investment account with Vanguard (or whatever low cost brokerage you like).   In your situation I might do that until you reached at least $20k and not worry about it being in a retirement account at all.      If in several years you are lucky enough to start pulling in enough income from investments that it matters for your taxes, then you can worry about opening an IRA and in the meantime it's 100% accessible to you if you decide to build the rental unit.

I'm laughing at myself.  For some reason, in my brain, 401K's and Roths were the only way to access investing.  BLONDE
moment.

How big is your house? Would it be possible to even rent out a room for the meantime? It could make a huge difference to how much you could save. Or do you have a garage or basement or shed on the property you could rent out as storage space? Or a side yard or driveway you could rent out to someone who might need parking?

I have a 500sq ft home, so renting out a room really isn't possible.  I don't have a garage or basement.  I do have a shed, but it has my mower and yard stuff/dog stuff out there.  I only have one carport and I park there.  There is one spot on the property that I could put a tiny house (200 sq ft).  Other than that, the rest of the property is dog yard and drain field. 

I have been trying to help make my house pay for itself by watching dogs here and there, but it's not big bucks or frequent by any means.

A tiny house on the property sounds like an excellent idea. You could ensure everything in it really worked for you, and it would bring in extra income. It seems to me that index funds would be your best bet - maybe talk to Vanguard about your situation, as you don't need anything that is tax exempt.

Being Australian rather than from the US, I don't know your system, but here there are a number of people who do planning for people with disabilities. Normally they work with people who get a pay out, working out where to put it. I know that both here and in Canada there are special accounts you can set up in your situation - it might be worth contacting the government disability area to see if there are. However, I'm sure you have already looked, and this forum has really opened my eyes about how few safety nets there are in the US.

There seem to be two options, renting the tiny house through Air BNB type situation, or exchange student situation ($650 a month), or moving into it myself and renting the main house for I'm thinking about $800.  I'm not sure which is best.  If I live in tiny house I can't watch dogs anymore (and it would be hard with my two dogs) but in an emergency I could do it if I had access to the yard. To be honest, I'd rather keep living in my house and try renting the small house to a student, or air bnb type situation. 

I received one pay out of $7,500 when I was awarded disability and I paid off my car with it.  So there really wasn't much planning/management to do.  I'm just expected to live off the $825 indefinitely. Sadly, that was smashed and I ended up with a car loan.  Thankfully, I've put everything I can towards it and hope it will be gone in the next few months.

[Tami1982]

I like the tiny house idea.  Does zoning allow for it in your area?  I would definitely be looking at that as an option over the coming years. 

Anything under 200 sq ft doesn't require a permit, so a tiny house would be just fine:)

Although your interest rate is low, I still think you might also want to think about aggressively paying down your mortgage once you have the other debt paid off and an emergency fund established.  Having debt, any kind of debt, even low interest "good" debt like a mortgage, can be stressful.  And that has an impact on your health.  Perhaps the tiny house idea can help you get to this. 

This is very true.  The anxiety and worry about wondering what will happen/could I lose my house/where would I live is burdensome.

Well done on working through all of this and getting to a point of financial stability.  Really hard for many people to do even with significant support (financial, emotional and practical) from family and friends. 

Thank you for the support. I sincerely appreciate it.  I got a lot of flack for being cheap and even gross for things (like giving up TP and washing cotton wipes instead) but I make so little that I have to get creative to save and I don't see the point or feel secure in just spending all the money every month and counting on SSDI to continue.  I also know how lucky I am.  I received it will little fight, while others fight years to get it.  It's insurance, we pay into it, if we need it, it's supposed to pay out.  I don't know where I would be if it hadn't when I ended up needed it. When I started reading MMM, making changes, it threatened people.  They got angry at me even.  Somehow feeling that my investing/possibly making more than SSDI was wrong, or that I shouldn't be able to profit (through investments) with the money.  I'm just trying to do create some security and the best with what I have. 

The tiny house idea does have some appeal, but the nature of your disability might determine whether it's actually a good idea. If you build one, you will be responsible for maintenance on two houses. Are you able to take care of that on your own right now? Would you be able to in ten years? 20? The more of the work that you have to outsource, the less profitable your rental house will be, and the more likely you would be better off simply investing in mutual funds. That's something you'll have to think about, given your own situation and how you see your disability progressing over time.

That's food for thought.  I can do some things and while my family can't help financially my dad and brother do help around the house with things I cannot do, and this would be asking for or outsourcing for help periodically. 

One thing to note is that if your investment income rises above a certain level ($3,350 this year), you become ineligible for the EITC. Rental income counts toward this limit. That's why I recommend using a Roth IRA instead of a taxable investment account to start. The more of your savings you have in the IRA, the longer before you might hit that investment income limit.

Good info!  Thank you for sharing.  I'm trying to figure it all out ahead of time so I'm not surprised.  I don't want to get to the end of the year and find I did stuff all wrong.  I so appreciate every one taking the time to write responses.  I'm so grateful.

[Tami1982]

Tami1982,

You are the sort of badass that rarely gets mention.  You have my respect!

Since there is no benefit to the mortgage interest, I'd pay that off.  That rate is low but for a low income person it represents a material drain.  Three and a quarter percent return is "good" for "cash return" in the current environment.

You mention a 'tiny house'.  Could you live in tiny house and rent out the larger house?  The larger house might fetch a better rent multiple. 

Can you get insurance on the septic?

Are you making the most of Obamacare (talk to the counselors - Planned Parenthood used to do the counseling in state of TX)?  It has helped me out a great deal as I was previously uninsurable in FIRE.  You probably qualify for Medicaid but there may be additional benefits that are not widely published.

So many good thoughts here!  If I absolutely had to, I could make it work in a tiny house, but it would be hard with my dogs.  I've been doing research and it seems that some people do Air BNB and make bank on renting tiny houses because people like the novelty.  Or the local college does exchange students and masters students and the rent is $650 a month.  I think I could get $700-$800 for my house.  I'm not sure, I'm guessing.  It's a small house (500sq ft) but has a huge yard.  It's hard to find places with yards and that allow dogs.

I've never heard of septic insurance!  I will look into it.   As for medical - I'm in a weird situation. I became disabled while still under my parents insurance.  So as long as my mom works for the company she works for, I receive benefits under her with Medicare as my secondary coverage.  She's been very kind, because it does cost her a couple hundred dollars a month to keep me on, but it is a great policy and I go to the doctor a lot and have a lot of procedures done that Medicare would not cover.  We talked about her dropping me, but w/o her coverage I'd have to get a secondary coverage which would cost just as much, if not more than what she pays and not cover as much.  With her insurance as primary I can get the tests/procedures done that medicare limits.

I don't have any financial advice but I pray (which I rarely do) that you can find some relief from whatever afflicts you.  You are young; maybe science will offer some help in the future.

Thank you very much for your kind words.  I sincerely appreciate it.  I find it hard to believe myself, but often time I get anger from people.  "Must be nice."  That sort of thing - I'm sure many of you have gotten it when you buckle down/choose not to spend money on things.  I get it because I don't work full time because I can't.   I tend to go ballistic.  I would trade all the shit I go through, and the things I have given up (children, likely marriage) and go to work full time for them if I could/if it was needed.   

If I could say one thing, it would be that just because you can't see something - doesn't mean it isn't there.  I have multiple health issues and most of them are invisible.  It's easy for people to understand a wheelchair.  Not so much other issues. Or to understand that if I do too much I aggravate them all.  "You look fine to me."  "You just don't want to try." "You've got it easy."  I hear all this on the regular, but my conditions will get worse as I age, I will deteriorate further and pushing too hard just results in months of rehab to get back to an okay level of activity.  I know I sound defensive, but I've been attacked so much.  To have support is a change, and I'm grateful for it.

[whiskeyjack]

You are the sort of badass that rarely gets mention.  You have my respect!

Just wanted to +1 this, I think you're kicking ass and taking names.

From talking to people new into landlording, it sounds like it's less overall stress and work to have solid long-term tenants than it would be to do something like AirBnB where you have constant turnover & need to clean up between guests.   I suppose that hinges on having *good* tenants.    I personally think living in a tiny house for a year or two would be really fun - I can see that being a way to attract some fun people.

[neil]

In your situation, a taxable account has some interesting benefits.

If you have unrealized gains, you can consider realizing them intentionally.   At the end of the year, assess your tax situation and test if capital gains will result in a tax bill.   (Fed is likely to be zero but state may not be.)  Make sure to consider any benefit or subsidy that might be affected by AGI.  By doing this, you increase your tax basis and therefore get the tax free growth you desire.

You will need a low fee approach to make it work.  Vanguard doesn't charge for their funds if you sign up for an account there. But there are other options as well.

If there was a good chance your tax rate might go up, roth becones a consideration.  But your tax situation seems clear.

[deborah]

It sounds like indexed funds are the best choice for you. They will give returns without the problems that you would have with a tiny house, and with renters. You could diversify into a tiny house (or some other investment) once you had a reasonable amount in your fund.

[MDM]

If there was a good chance your tax rate might go up, roth becomes a consideration.  But your tax situation seems clear.

Maybe.  If we assume OP stays below the 15% bracket max, and tax laws regarding Roths and Long Term Capital Gains & Qualifying Dividends (LTCGs & QDs) don't change, we have
  Taxable: Allows tax loss harvesting (TLH); allows immediate tax-free access to entire asset
  Roth:      Allows Saver's Credit; allows immediate tax-free access only to contributions

Gut feel says Saver's Credit would more often be more valuable than TLH but I'd take data or a well-posed statistical look over gut feel, if anyone has those.  In the near term, not much difference between contributions and total account so the tax-free access would be close to a wash.

Also guessing here: the likelihood that favorable LTCG & QD tax treatment will go away is higher than the likelihood that favorable Roth tax treatment will go away.  Again, happy to entertain reasoning why the opposite would be true.

[caliq]

I don't have any financial advice but I pray (which I rarely do) that you can find some relief from whatever afflicts you.  You are young; maybe science will offer some help in the future.

Thank you very much for your kind words.  I sincerely appreciate it.  I find it hard to believe myself, but often time I get anger from people.  "Must be nice."  That sort of thing - I'm sure many of you have gotten it when you buckle down/choose not to spend money on things.  I get it because I don't work full time because I can't.   I tend to go ballistic.  I would trade all the shit I go through, and the things I have given up (children, likely marriage) and go to work full time for them if I could/if it was needed.   

If I could say one thing, it would be that just because you can't see something - doesn't mean it isn't there.  I have multiple health issues and most of them are invisible.  It's easy for people to understand a wheelchair.  Not so much other issues. Or to understand that if I do too much I aggravate them all.  "You look fine to me."  "You just don't want to try." "You've got it easy."  I hear all this on the regular, but my conditions will get worse as I age, I will deteriorate further and pushing too hard just results in months of rehab to get back to an okay level of activity.  I know I sound defensive, but I've been attacked so much.  To have support is a change, and I'm grateful for it.

My husband also has an 'invisible disability' and gets the same crap, even from family members :/  It's very, very, very frustrating.

Have you heard of the Invisible Disabilities Association?  It's a non-profit, mainly dedicated to raising awareness to these exact issues, but they also have support groups, online and in person. 

http://invisibledisabilities.org/connect/invisible-disabilities-association-community-on-inspire/

[Tami1982]

My husband also has an 'invisible disability' and gets the same crap, even from family members :/  It's very, very, very frustrating.

Have you heard of the Invisible Disabilities Association?  It's a non-profit, mainly dedicated to raising awareness to these exact issues, but they also have support groups, online and in person. 

http://invisibledisabilities.org/connect/invisible-disabilities-association-community-on-inspire/

It's usually family and friends who are the worst.  They are frustrated because they've seen you do well at one point in your life, and think you are not doing all you are capable of.  It's often the people who believe they know us best who are our harshest critics.  My mom is one - she's so angry at her life, at working full time for 30+ years and having nothing to show for it because they spend all their money, she says stuff to me all the time out of some misbegotten jealousy.  I'll have a bunch of stuff going on one week, "I"m so busy!"  She'll scoff at me.  "I'm so tired."  "You don't know what tired is."  None of my feelings count because I don't work full time.   One time, I was so angry with her.  I started yelling about how you can have it.  You deal with all the health issues, and the being alone and the no children.  And she looked me right in the eye and said that, "kids aren't all they are cracked up to be."    Yeah.  My family is a pit of messed up.  It's a very strange dynamic, as we are super close compared to a lot of people I know, but that closeness comes from an almost cult like environment where family is all the matters, and don't trust other people as they only want to hurt you.  Family FAMILY FAMILY!   Blargh!


I had not heard of the group, thank you for sharing!  I will look into it:)



Thank you, everyone, for all your input.  I'm going to have to do more reading to make sure I understand how some of these concepts work and run fake numbers to create examples (that's how I learn).  I appreciate all the feedback and if there is a big something I am overlooking or haven't thought of, please share!

[Financial.Velociraptor]

I've never heard of septic insurance!

I've never heard of it either. But there is a pretty common thing known as a "Home Warranty" that covers major house systems and appliances.  You might be able to find one that includes septic.

[theoverlook]

Be careful with home warranties, I have yet to hear universal praise for any of the major home warranty companies.  It seems they put up stumbling blocks and fight, fight, fight any attempts to get payment out of them on claims.

[arebelspy]

Be careful with home warranties, I have yet to hear universal praise for any of the major home warranty companies.  It seems they put up stumbling blocks and fight, fight, fight any attempts to get payment out of them on claims.

That's every insurance company.  But definitely research online and find one with better reviews.