What to do with 100K?
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Anonymous
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I don't come to this place often, but since 99% of people on here are worth millions, I figured that I might ask for some guidance for a poor old guy like myself.
This is the situation. I'm a late 40's person whose spouse has been stricken with a serious illness. At the same time, I will soon be getting some money from a property sale that should be around 100K. As my spouse is ill and not able to work, I am the sole provider in the household and unless something dramatic happens, I will be the sole provider from this point forward. I make under 100K/year. Sorry, no STEM or MBA degree for me. I also work in a tumultuous industry (but it's fun), so I am very inclined to pay off my mortgage, but would have to dip into some other accounts to do that. I know that the prudent thing to do would be to break this money up into various areas. I've been thinking something along the lines of a large 13th mortgage payment, money market, blue chip stocks, IRA, college fund (one child), and some home repairs which really need to be addressed. As much as would I like to put all this money into investment vehicles, with the situation in my home life being as tenuous as it is, my instinct is eliminate all (or as much as I can) debt that we have. Right now, the only household debt is the mortgage, but paying that off would eat up savings and emergency funds. I'm emotionally torn as to which way to handle this situation, so some non-partisan insights would be appreciated. Oh, I don't have much in the way of free time to spend on DCUM, so it might take a while for me to respond back. (fyi) |
Anonymous
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Is your income sufficient to pay your mortgage and monthly bills, now that your wife cannot work? If yes, then you should use the money to take care of the necessary home repairs, pad the 529, and invest the bulk of it.
If you cannot cover your monthly nut on one income, use the money to either recast your mortgage or downsize to a cheaper house. Sinking it into your mortgage is not going to help you if your tumultuous job leaves you unemployed for a stretch of time. |
Anonymous
how much emergency funds do you have? given your spouse's situation, i'd put it there. |
Anonymous
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It isn't clear if your income is enough to sustain the household and your present lifestyle. That is really the most important issue. If so, then do nothing differently. If not, and you need to tap the $100k so meet your monthly obligations, that requires a completely different approach.
Your inclination to pay down debt is natural, but it may be the least advisable approach. Look at it this way - if your mortgage payment is $2,000 a month, you could use that $100k to make your mortgage payment for more than four years! If you pay off the mortgage, sure, your $2,000 monthly obligation goes away, but so did your emergency fund for a basic car repair or medical bill. |
Anonymous
| all in VTSAX |
Anonymous
| I’m guessing you are the wife. I’d put it in your emergency fund. |
Anonymous
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Hi OP,
I'm sorry about your spouse. I hope you have time to take care of yourself too - I know that caring for an ill spouse can be both physically and emotionally draining. Congrats on your windfall! It's hard to offer advice without knowing more details. Do you already have a 6-month emergency fund? Your age & how much in retirement now? Can your spouse get Social Security disability? Do you have good health insurance that helps with medical expenses? How old is your child? Do you have enough deductions that you itemize (Schedule A) on your taxes? What's the interest rate on your mortgage? How many years left on it? Just from the info you've provided, I'd say the home repairs are a priority. I'm not usually a fan of paying off mortgages because of the tax benefits and bc for most people the interest rate is relatively low. Many CDs are paying over 2% now and rates continue to go up - Ally Bank has top rates and is very easy to get accounts online. If you invest in stocks you have to think of that as longterm money that you don't need for several years. Yes, the market's been going up, but consider where you'd be if the bottom drops out. |
Anonymous
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OP here and answering some of the questions.
No, I am not the wife and the emergency fund is about 30K. We can live on my current salary, but it doesn't leave much leftover for saving or general life expenses. I'd look for another job, but we need the healthcare and benefits. I already have index funds through various 401K plans. Retirement is a mix of accounts and funds at around 500K. I am fairly certain that we don't qualify for any social security. Child is 7th grader. 15 years left on mortgage. 4.25%. After this sale, there won't be much left in the way of schedule A deductions. |
Anonymous
| I would pay off (a chunk) of the mortgage b/c then you will have that extra money every month for "general expenses" and/or to have a bit more fun/enjoy the present a bit more (and each month with a lower mortgage payment you will have this ability/extra dollars to spend). |
Anonymous
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Look at the information about getting SS disability and list of impairments - https://www.ssa.gov/disability/professionals/bluebook/AdultListings.htm
For example, my sister has depression/bipolar disorder and receives disability payments. You're doing well on the retirement! A Roth IRA, if you don't already have one, would be good. And if you don't already have a 529 for your child then look into that. Do the needed home repairs. You can pay down the mortgage to shorten the duration if you want, but I wouldn't touch the emergency fund to do it. |
Anonymous
| And look into getting a TERM life insurance policy for yourself, if you don't already have one. |
Anonymous
This is my thought as well. Is the illness new? I'd keep the money liquid as an emergency fund boost. Maybe max out retirement if you're not already doing that. I'd worry a bit less about 529 or directed college savings. Do you mind sharing the nature of the illness? Might you need to make some accommodation for her to remain in the home, like wheelchair accessibility and such? Will you need home care for her? |
Anonymous
Terrible advice. Paying off a chunk of your mortgage reduces your balance and reduces the number of months remaining but your monthly payment remains unchanged. |
Anonymous
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"Look at the information about getting SS disability and list of impairments - https://www.ssa.gov/disability/professionals/bluebook/AdultListings.htm
For example, my sister has depression/bipolar disorder and receives disability payments." +1 In the worst case, even if your wife isn't eligible for disability, your child would be. |