All you rich folks - looks like I'm (almost) one of you. What should we do?

[Anonymous]

Anonymous wrote:Assuming you've refi'd recently and have a nice low mortgage interest rate, I'd lean to investing over paying off the mortgage (especially if you might want to move somewhere a little bigger).

The big gap in your finances seems to be your retirement savings. $120k in your late 30s is on the low side (though of course, still ahead of many people). I'd beef up your savings there as much as possible.

Interesting. (OP here). I thought it was pretty good, but that might be because I was looking at the proportion of it that is mine. My husband hasn't done so well at retirement savings, largely because he hasn't worked places with appropriate plans or 401k matches. About $100k is mine. We will put some more into retirement (I just maxed out 401k, husband will put some into IRA) but I'm also not too concerned about that point. We don't live lavishly and without housing costs we won't need a lot to get by once the kids are grown (remember our combined income is $85k and we live well now). (Also, by the time we retire there will be more inheritances from the remaining parents (not as wealthy but some valuable property) unless they live past 100 or so. I know it's not generally factored in to retirement plans, but it was my dad that bought it up!)

Our mortgage is 3.875. I'm inclined to pay down at least some of it, though.

[Anonymous]

Why are you only doing $5k in college this year, can't you deduct $12k? 3k per kid, per adult.

[Anonymous]

You should both be maxing out 401ks

[Anonymous]

I thought this rule of thumb from Fidelity was helpful:

"Fidelity recommends that in order to reach the eight times salary goal by age 67, workers should have saved around one times their salary at age 35, three times their salary at age 45, and five times their salary at age 55."

Read more: http://www.foxbusiness.com/personal-finance/2012/09/14/fidelity-this-is-how-much-need-to-save-for-retirement/#ixzz2CnwfyBEr

[Anonymous]

Don't rush into anything. Many people in a situation like yours feel pressured to make big decisions before they've had a chance to process how life will be different. It takes time & reflection to understand how you can make the most of your inheritance. By all means, speak to a Financial Advisor to make sure that you have no vulnerabilities (e.g., lack of insurance) but don't allow others to pressure you to "put that money to work".

[Anonymous]

Anonymous wrote:I'm going to go against the grain and say go ahead and pay off your mortgage. Not having a mortgage is a delightful feeling. If the stock market crashes, you still have your home, if you lose your job, you still have your home. It's not the "clever" financial decision, but the piece of mind it brings has some value.

No, not really. That's just about the dumbest advice anyone can give you, OP. Real estate is a leveraged investment for a reason.

Don't tie up this cash in an illiquid investment like your house.

Stupid. Jesus, people are so stupid when it comes to money.

[Anonymous]

Anonymous wrote:You should both be maxing out 401ks

That is not a helpful contribution to this discussion. And if you don't know why, just stay out of it from now on.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I'm going to go against the grain and say go ahead and pay off your mortgage. Not having a mortgage is a delightful feeling. If the stock market crashes, you still have your home, if you lose your job, you still have your home. It's not the "clever" financial decision, but the piece of mind it brings has some value.

No, not really. That's just about the dumbest advice anyone can give you, OP. Real estate is a leveraged investment for a reason.

Don't tie up this cash in an illiquid investment like your house.

Stupid. Jesus, people are so stupid when it comes to money.

This is the kind of genius that brought on the foreclosure crisis. Your house is not just an investment, it's where you live. If you can't pay into your 401k, you can't retire as early, if you can't pay your mortgage, you're homeless. That's a big difference.

[Anonymous]

A financial advisor is going to take an inventory of your financial status and will want to know what your goals are re: retirement, college, etc. Choose one carefully -- talk to friends, research online, etc. If they ask why, and you don't want to mention the inheritance, just say you want to get a check up to see that you are on the right track. The advisor will then help you work out options to meet your goals.

Using one that is fee only is good for something like your situation e.g., a "check in" re: your current status and how to allocate the inheritance. Then you might want to check back with them every few years to see how you're doing. I met with someone from one of the big well known companies (they charge a % of your account with them) and it was very helpful, and he ran my current numbers through some software that projected where I would be when I retired which confirmed I was doing ok. I wanted someone who was fee only, but he ended up basically giving me some free advice so I am hoping he will let me come back every few years to check in. I think he is hoping to take me on formally as a client once I inherit (or hoping to get my parents as clients).

[Anonymous]

Discuss paying off your mortgage with the financial adviser. Ours recommended that we pay off our mortgage. It all depends on the particularities of your situation.

[Anonymous]

Anonymous wrote:Why are you only doing $5k in college this year, can't you deduct $12k? 3k per kid, per adult.

In DC it's $4k per adult. We're doing $8k total in two 529s, one for each kid. Have already invested the rest for this year. And also have another 20k set aside for the kids.

[Anonymous]

Anonymous wrote:I thought this rule of thumb from Fidelity was helpful:

"Fidelity recommends that in order to reach the eight times salary goal by age 67, workers should have saved around one times their salary at age 35, three times their salary at age 45, and five times their salary at age 55."

Read more: http://www.foxbusiness.com/personal-finance/2012/09/14/fidelity-this-is-how-much-need-to-save-for-retirement/#ixzz2CnwfyBEr

Thanks. By that reckoning we're pretty much on track if we continue to save at the same rate. By 45 we'll have three times salary without taking account of the inheritance.

[Anonymous]

WHEEEE!

Sorry for your spouses loss.

[Anonymous]

Anonymous wrote:I'm going to go against the grain and say go ahead and pay off your mortgage. Not having a mortgage is a delightful feeling. If the stock market crashes, you still have your home, if you lose your job, you still have your home. It's not the "clever" financial decision, but the piece of mind it brings has some value.

I agree paying off the home is great. Why keep a mortgage just for the tax deduction. It's like spending money to save in taxes. But at your income level taxes are not such a problem. I would blend the advice above - dont make any sudden moves, but instead put more away each month in retirement plans, college savings, and your mortgage, automtically each month. Just don't buy a new car or do anything that would waste it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I'm going to go against the grain and say go ahead and pay off your mortgage. Not having a mortgage is a delightful feeling. If the stock market crashes, you still have your home, if you lose your job, you still have your home. It's not the "clever" financial decision, but the piece of mind it brings has some value.

No, not really. That's just about the dumbest advice anyone can give you, OP. Real estate is a leveraged investment for a reason.

Don't tie up this cash in an illiquid investment like your house.

Stupid. Jesus, people are so stupid when it comes to money.

Be wary of advisors that call a house a "leveraged investment." My mother was so happy to know her house was paid off at the time my father died and she had to live on the little she got from his pension and social security.