re: Pay off house or invest Pt. 2

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To your question; I would refi the current primary mortgage to a better rate and pay nothing extra on it. 4% isn’t terrible but you can get below 3%, for now, which would free up a little cash flow each month.

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He said he may be moving back closer to family. I'm not sure I would refi just to move in 6 months.

Very sorry for your loss.

As was already posted here, take a bit of time before making any substantial moves, you need time to mourn.

Good luck moving forward, take good care of your youngin'.

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I’m not a financial advisor, but a few things to consider. Depending on how long ago your wife passed, you are probably grieving her loss. It sounds like you have a pretty good grasp on things and aren’t going to be making emotional decisions.

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People I have known in similar circumstances have been advised by more than one professional to change nothing for one year after such a tragic event. If the finances are in decent shape, just keep paying the bills, trying to heal some, and dont do anything for a year.

Sell the rental, refi your home. 4% is way too high.

Sorry for your loss. It’s hard to imagine what you’re going through.

Sell the rental immediately. You do not want the headache that comes with renters.

Pay off the $10K of debt.

Refi your primary home if you plan to be there more than 18 months.

Max out all 401K, 529’s, etc.

Make smart financial and personal decisions. By this, I mean nothing risky or dangerous.

Stick the rest of the money in a Vanguard S&P 500 ETF and keep $50K in an interest acct.

Focus right now on simplifying your life. There’s plenty of time for other choices later.

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Too few understand the role individual behavior plays in personal finances.

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+1

I am of the camp who would rather invest than pay extra on a low mortgage interest mortgage. I understand my risk tolerance and behavior having been through 2 major crashes (2000 and 2007). I don't count 2020 as it recovered so fast where the other two took several years to recover. Though seeing your portfolio drop mid 6 figures is a good gut check lol.

However, when you get a large sum of money that lets you pay off the mortgage entirely that is very different than paying extra to a mortgage for 15-20 years.

My advice to the OP would be to immediately sell the second house and refinance the primary house. Then I'd wait at least a month before making any decisions on the money (alot of people say a year). You could still pay off the house, have a decent chunk left to invest and can max your 401k/Roth IRA/529/HSA going forward.

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My wife died of cancer

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frick, that’s hard to read. Hang in there, man.



A lot of echo, but:
1) if wife was working or primary caregiver to the child and childcare costs are going up, it’s possible that a home that’s 2x gross income is a little on the “lean” side for what you’re left with. If what’s left in this scenario feels lean, I do think I would pay off the home more aggressively rather than “scale down.” It’s entirely possible that you don’t feel “lean” in that home- and not paying it down aggressively could make a ton of sense. I would think your debt: assets/income could justify a refi for a substantially lower rate, but if you’re up and leaving in the next year or so, probably not worth it. There’s far too much nuance on the family situation to get into in this format. But it sounds like you have some support.

2) kill the debt. It’s tiny. It doesn’t matter what it is. Get rid of it at this point.

3) swapping cars- no big deal. Not a great or terrible move, assuming you’re not buying a 911, Escalade, etc.
from a cursory view, you could probably justify even a very expensive car if that’s what you really wanted to do, but if you’re talking about anything reasonable, no need to really wait to pull the trigger. If you’re talking high-end stuff, maybe wait and let things settle.


4) you seem really conflicted on the rental and staying where you’re at. I, personally, don’t want to be a landlord. Not next door. Not an hour away, not a coast away. If you want to be a landlord and work from home and are either minimally handy or know a good HVAC, plumber, and/or handyman, I would set myself a shift deadline-maybe 12-18m to try it out. If you hate it, sell it. If I had 25% of a house paid off, reliable income, and a “safety net “ worth more than primary residence, I would consider 2nd residence either a luxury or an investment, not a safety net. In this case, it doesn’t sound like a luxury, it doesn’t sound like you want a 2nd home/camp, and it doesn’t necessarily sound like you want it as an investment. I would err toward getting out of it, but there’s no denying that people who own real estate tend to do well by owning it and renting it.

5) you say 401K/IRA are on the low side. If you took distributions, I would make the math work to max them out the rest of your career. If you took loans, I’d pay them back today. And then I would max 401k contributing the rest of my career. At your income, you could argue that 401k is all you need and you could forego IRA contributions. This could be reasonable ($19,500 is roughly 20%, and with a “late start” you would rather err closer to 20% than the more conventional 15% that Dave Ramsey and many others recommend. Much more than that probably won’t change your life as much. If you have it in excess, I’d go ahead and do it, but if you currently have no IRA, I’d probably simplify and just do a big taxable account and contribute annually like I would to an IRA (maybe will take some flack, but with a taxable already in the multi-100K range, the lifetime tax benefit you’ll see from a Roth IRA may not really be worth the extra layer of complexity to you. Make no mistake- you’ll pay less tax with a Roth. But the steps, additional brokerage, additional filing, the savings aren’t going to be anything life-changing for you. If you already have an IRA, particularly a Roth, I’d do it. Even with a non-deductible or mixed one, you’ll certainly have given less money to Uncle Sam by contributing that way. But the effort:reward will not be particularly high)


6) sounds like you’re giving advice on insurance but didn’t happen to mention life. Should seem obvious that you have some sort of life insurance policy in place, and you seem way too smart and conservative not to. But a term-life on you, if you don’t have it, + a will would be pretty critical things to not wait another 6 months to put in place.


7) zero idea how I’d break down “fun” money out of this. I think your taking a great trip with the kid is wonderful and beyond within reason. I would probably make sure to set aside some sort of vacation or me/kid fund in the budget going forward, even if I had to somewhat rely on a portion of the remaining benefit to do it (of course, after at minimum budgeting for a maximum 401k contribution starting today, if possible)





Dumb message board, don’t know you from Adam, but I hope you’re doing ok.

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Sorry for your loss.

Giving everything you put out there, I would sell the secondary home, pay off other debt, max ROTH, and pay off the primary. Now that you don't have a house note, I would also start maxing my 401k, IRAs, and 529 (or UTMA).

Paying off the house goes against the grain of what is "normal", but I see the fact that you may need to make other adjustments in your life as you are now a single family household. That could result in a lower salary. If you do not have that cash flow demand, it may be much easier to take that cut to have more time to spend with your child. Especially if you end up moving closer to your family.

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This. Financial security and peace of mind is worth more than the potential for higher future value.

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My wife passed away recently

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I don't know how recent is recent, but give yourself time to grieve, go through succession, and think about what you want for you and your child.

It may not be about making the best investments, but rather doing what allows you to be there for your child the most.