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Message
I've been given $100K from an estate - Pay down mortgage, get new car, other?
Posted on 5/4/16 at 10:02 am
Posted on 5/4/16 at 10:02 am
What should I do with this money? I have about $265K left in principle on my mortgage (recently refinanced 30 year fixed). Should I pay down my principle with it all? Put it in a college savings account for my 2 kids? I am also going to need a new car soon, so should I use it for that? I could go a little longer without getting a car, so that's no big deal. Should I invest it in something else?
What's the best plan of action here?
What's the best plan of action here?
12
Posted on 5/4/16 at 10:09 am to Green Grass Miracle
Do you have any other debts? I would pay those off\down before the mortgage. Interest rates on cars are still very low. I just bought a new Tundra and they had a 0% for 60 months deal. Put some cash on the car but I wouldn't pay cash for all of it if you can qualify for the top rates. Max out you and your wife's Roth if you haven't done so already. If you live in LA the 529 START program is a good college savings plan and you get a tax savings from the state. You can put in $4800 per child per year.
Posted on 5/4/16 at 10:12 am to Green Grass Miracle
You don't mention the rate on your mortgage...if it's below 4%, I wouldn't dump a bunch of money on it.
How old are the kids? If still quite young, a college savings account is a good thing....though I wouldn't dump all of it there....you didn't mention your retirement situation. Don't preferentially fund their education over your retirement. Max out whatever tax-advantaged retirement options are available to you & your spouse for the next several years.
If you need a new car, find a super low financing deal & do that. Your cash can be working for you while you pay next to nothing to use someone else's money to buy the car.
Set aside a specific amount for joy: take the family rafting down the Grand Canyon, or tour Yosemite, or take a road trip to Key West in a convertible, or a week in Paris (not as expensive as you might think in an apartment). Money & things aren't as important as experiences. Enjoy some of it immediately! Tomorrows aren't promised to anyone.
How old are the kids? If still quite young, a college savings account is a good thing....though I wouldn't dump all of it there....you didn't mention your retirement situation. Don't preferentially fund their education over your retirement. Max out whatever tax-advantaged retirement options are available to you & your spouse for the next several years.
If you need a new car, find a super low financing deal & do that. Your cash can be working for you while you pay next to nothing to use someone else's money to buy the car.
Set aside a specific amount for joy: take the family rafting down the Grand Canyon, or tour Yosemite, or take a road trip to Key West in a convertible, or a week in Paris (not as expensive as you might think in an apartment). Money & things aren't as important as experiences. Enjoy some of it immediately! Tomorrows aren't promised to anyone.
Posted on 5/4/16 at 10:14 am to Green Grass Miracle
well its really up to you.
I would (in this order)
a) pay down any debt other than mortgage
b) establish a 6 month safety net if you don't have one
c) fully fund retirement accounts for 2016 - 401k/Roth for you and your wife
d) save for the car
e) save for the kids college
f) Pay down the mortgage
g) strippers and blow.
I would (in this order)
a) pay down any debt other than mortgage
b) establish a 6 month safety net if you don't have one
c) fully fund retirement accounts for 2016 - 401k/Roth for you and your wife
d) save for the car
e) save for the kids college
f) Pay down the mortgage
g) strippers and blow.
Posted on 5/4/16 at 10:17 am to hungryone
I don't have any other debts.
My mortgage rate is 3.75
Credit scores are excellent.
Kids are less than 3 years.
Retirement - I'm 34 and have about 100k divided up between 401K, Roth IRA, and mutual funds. I'm also paying into a pension that pays well if I stick with my job, so I feel pretty good about our retirement.
Thanks for the sound advice!
My mortgage rate is 3.75
Credit scores are excellent.
Kids are less than 3 years.
Retirement - I'm 34 and have about 100k divided up between 401K, Roth IRA, and mutual funds. I'm also paying into a pension that pays well if I stick with my job, so I feel pretty good about our retirement.
Thanks for the sound advice!
Posted on 5/4/16 at 10:23 am to Green Grass Miracle
Only thing I would add is 'where do you wish to be 20, 30 years from now' and go from there
Posted on 5/4/16 at 10:25 am to Green Grass Miracle
quote:
I don't have any other debts.
My mortgage rate is 3.75
Credit scores are excellent.
Kids are less than 3 years.
Retirement - I'm 34 and have about 100k divided up between 401K, Roth IRA, and mutual funds. I'm also paying into a pension that pays well if I stick with my job, so I feel pretty good about our retirement.
Thanks for the sound advice!
Sounds like you're in a healthy financial situation. Don't rule out a nice little vacation with your family. Those experiences now could be well worth it.
Posted on 5/4/16 at 10:25 am to wfallstiger
quote:
Only thing I would add is 'where do you wish to be 20, 30 years from now' and go from there
I'd like to be retired at age 60.
Posted on 5/4/16 at 10:28 am to Green Grass Miracle
Very good, start there and work your way toward now, as you have seemingly done... 
Posted on 5/4/16 at 10:32 am to Green Grass Miracle
quote:
I'd like to be retired at age 60.
An admirable goal....but don't forget to live today. If I had a dollar for every person I know who saved for retirement & planned to travel then, but ended up too sick, too burdened by caring for others, or too fearful/set in their ways to actually seize the opportunities afforded by retirement's free time, I could retire myself tomorrow.
Live today as you mean to go on. Don't kick the can of potential happiness down the road too far. The road ends.
Posted on 5/4/16 at 10:48 am to Green Grass Miracle
You could potentially have to pay a small amount of tax on this, if there was a passage of time between the death and the time you were placed in possession (i.e. given the money). The executor could send you a K-1 for the taxable income earned by the estate while it was open. It would be pro-rata based on the distributions. Again, this would be based on the taxable income of the estate, not the amount you were given.
Any income allocation may be very small and would be due with your 2016 taxes, so I would call the executor and ask if this is a possibility.
Beyond that, if your kids are only three, see if you can find a sitter for a few days and go on a nice trip with your spouse, toasting and praising the deceased.
Beyond that, I'd max out retirement, put 25K in college savings for each kid, beef up emergency fund, and anything left, I'd put into a retail index fund.
Any income allocation may be very small and would be due with your 2016 taxes, so I would call the executor and ask if this is a possibility.
Beyond that, if your kids are only three, see if you can find a sitter for a few days and go on a nice trip with your spouse, toasting and praising the deceased.
Beyond that, I'd max out retirement, put 25K in college savings for each kid, beef up emergency fund, and anything left, I'd put into a retail index fund.
Posted on 5/4/16 at 10:48 am to Hawkeye95
quote:
b) establish a 6 month safety net if you don't have one
What type of account would you use to put this $ in? I'd want to earn decent interest but not pay a hefty penalty if I need to use it.
Posted on 5/4/16 at 10:51 am to hungryone
Will most likely get push back, but I would pay down the house. Feel like there's some significant intangible value in owning your house 100%, or having little to no mortgage payments each month.
Posted on 5/4/16 at 10:54 am to Green Grass Miracle
quote:
b) establish a 6 month safety net if you don't have one
What type of account would you use to put this $ in? I'd want to earn decent interest but not pay a hefty penalty if I need to use it.
Any savings account that draws 1% interest.
Posted on 5/4/16 at 11:02 am to raw dog
quote:
Will most likely get push back, but I would pay down the house. Feel like there's some significant intangible value in owning your house 100%, or having little to no mortgage payments each month.
If he'd inherited a sum large enough to pay off the house outright & leave a decent cushion, I'd agree with you. But he would simply be cutting his mortgage in half, and unless he refinances, he's still got the same monthly payment in the immediate future. He'll just be paying off the loan more quickly. Even if he does dump the $100K on the loan & refi to a shorter term, he's still got a monthly mortgage payment.
Posted on 5/4/16 at 11:06 am to Green Grass Miracle
with $100k in your situation
I would
1) Give each kid $15 - $25k (depending on the number of kids)
2) Max out all retirement accounts
3) Put away some for emergency funds
4) Take family on awesome vacation
I would
1) Give each kid $15 - $25k (depending on the number of kids)
2) Max out all retirement accounts
3) Put away some for emergency funds
4) Take family on awesome vacation
Posted on 5/4/16 at 11:09 am to Salmon
quote:
If he'd inherited a sum large enough to pay off the house outright & leave a decent cushion, I'd agree with you. But he would simply be cutting his mortgage in half, and unless he refinances, he's still got the same monthly payment in the immediate future. He'll just be paying off the loan more quickly. Even if he does dump the $100K on the loan & refi to a shorter term, he's still got a monthly mortgage payment.
Refinance and pay a smaller monthly payment and/or at a smaller interest rate. Plus, now a bigger portion of these payments are going to principal. Just my two cents. Realize it might not be the most optimal choice if just looking at the numbers.
Posted on 5/4/16 at 11:13 am to Green Grass Miracle
Has anyone mentioned how lucky you are yet? 
Posted on 5/4/16 at 11:22 am to LSUfan20005
quote:
Has anyone mentioned how lucky you are yet?
Yeah on second thought, let it ride. Life's too short
Posted on 5/4/16 at 11:23 am to Green Grass Miracle
Good problem to have. I'd make sure I was maxing all tax advantaged retirement accounts (ROTHs and 401ks for you and your spouse) for the foreseeable future. If you can't afford that on your regular salary, now you can, so set aside some cash now so that your regular budget isn't affected by the increase in retirement contributions.
I'd then set up college savings accounts for each kid with 20k each, and commit to putting another 5k in each per year. Leave it in index funds and re-position to more bonds as the kids get closer to college.
By now I've probably spent 60-70k, but I've taken care of college and strengthened (maxed) my retirement. With the rest, I'd set aside 10k for a nice vacation (or 3) with the family, and leave the rest in a money market account as an emergency fund. No stress in paying your low interest mortgage, no stress in investing for retirement, no stress in college, and cash in the bank. Don't go blow it on a car. Congrats.
I'd then set up college savings accounts for each kid with 20k each, and commit to putting another 5k in each per year. Leave it in index funds and re-position to more bonds as the kids get closer to college.
By now I've probably spent 60-70k, but I've taken care of college and strengthened (maxed) my retirement. With the rest, I'd set aside 10k for a nice vacation (or 3) with the family, and leave the rest in a money market account as an emergency fund. No stress in paying your low interest mortgage, no stress in investing for retirement, no stress in college, and cash in the bank. Don't go blow it on a car. Congrats.
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