Opening the mailbag

ALTHOUGH DUE TO volume I can't personally answer all my mail, I occasionally pull together questions sent to me about recent columns. Here are my answers to readers on three topics I'm asked about frequently: student loans, veterans benefits and the size of an emergency fund for someone who is retired.

Q: I have no consumer debt, do not own a house and have about $24,000 of student-loan debt remaining. I make about $80,000 gross per year. I want to be totally debt-free before looking to purchase a house. Would you recommend paying off the debt first?

A: During a recent online discussion, I advised a new college graduate to aggressively pay down his student loans. When I give such advice, someone always second-guesses me. On Twitter, one person said: "Only pay down the loans expeditiously if the net interest rate exceeds your rate of investment return #duh."

What the folks in the keep-the-debt camp don't take into account is risk. I view debt from the prism of a potential job loss, illness or some other disruption in income. What if you lose the money you are investing that instead could have been used to retire your education loans?

You'd have to figure out how to keep making the loan payments when you don't even have enough money to cover your expenses for essentials such as food, utilities or transportation. But if you have no debt, you can more easily weather the economic storm.

So when I answer the questions about aggressively paying off student loans, I generally say a big fat yes. And it doesn't matter to me what interest rate you have. If you don't have income, even a zero percent loan is still debt you can't afford. If you pay off your student loans as quickly as you can, you are removing risk from your balance sheet. It's a great and sensible goal to be debt-free before buying a home. And, oh, what a feeling you will have in your new home with that burden off your shoulders.

Q: My sister and I are the caregivers for an elderly aunt whose husband, now deceased, served in the Marines. We understand there may be assistance available to her. Unfortunately, we have been unable to find any details of the benefit, including the specific qualifications and the process for applying. Could you please point me in the right direction?

A: The benefit you saw me mention in a recent column is called "Aid and Attendance" pension received through the Department of Veterans Affairs. It is meant to provide monthly financial assistance to help pay for long-term care assistance received at home, at a nursing home or in an assisted-living facility. Veterans who served during wartime can apply, as can surviving spouses. You have to meet certain medical and financial qualifications.

I found the most helpful materials about this program at veteranaid.org. You'll find a gold mine of information with advice, resources and links. You will want to read everything you can because the application process can be time consuming and it can takes months before an application is approved. But it's worth the effort. As of 2012, the A&A pension benefit provided up to $1,732 per month to a veteran, $1,113 per month to a surviving spouse or $2,054 per month to a couple, according to veteranaid.org.

Q: I am lucky - especially as a woman - to have an old-fashioned lifetime defined-benefit pension, which will pay about $50,000 each year (COLA included) and I will receive a higher-than-average Social Security payment. I will also have access to a moderately priced Medicare supplement or Medicare Advantage plan. My husband will have a modest defined-benefit pension of about $10,000 a year (no COLA) and has approximately $300,000 in a 401(k). He will also be receiving a higher-than-average Social Security benefit. Between our pensions and Social Security, we will have (mostly) inflation-protected lifetime payments. When we retire, our house will be paid for. I have about $100,000 in cash. I would like to put some of my cash into 529 plans for my five granddaughters. I would also like to pay cash for some home renovations and have a "life happens" fund. So do I even need an emergency fund?

A: The point of an emergency fund is having available cash for unplanned expenses or a disruption in your income. Be careful about spending down your cash reserves even for a good deed as helping grandchildren attend college. Even with your good pensions, you still should have an emergency fund for future cash needs you haven't anticipated.