My wife and I are over 50 years old. We lost our home in 2008, declared bankruptcy and ended up buying another one. We will inherit $200K. How should we invest it?
My wife and I have struggled for years financially. She is disabled, and I am our main source of income. I am 59 years old and my wife is 58 years old.
During the housing crisis of 2008, things got worse and we lost our home. We lived for three years in an apartment trying to recover from this financial disaster.
In 2014, we were able to buy our current home, but we had to pay a sizable down payment and finance the balance through a private (individual) loan company with interest. 8%. The down payment was $50,000 (we worked hard to save it) and we funded $105,000.
Everything was going well until 2015, when I lost my job and we filed for bankruptcy. We paid our bankruptcy in full and were released in April of this year. This has prevented us from refinancing our home.
Since we have a private mortgage, we don’t put our house into bankruptcy and keep making payments. We have no other debt and have an annual household income of $98,500. I have been at my current job for six years and plan to retire here (God willing).
“‘Again, this is a blessing for my family. I want to make the right choice. I plan to work until I am 65 years old. ‘”
Thankfully, the home has appreciated in value, and it’s currently valued at $205,000. Unfortunately, our financial struggles continued to challenge us, and we only set aside $40,000 of our 401(k).
Recently, a close relative passed away leaving me and my siblings the entire estate, estimated at 1 million dollars. I have three sisters and one brother.
Once the estate stabilizes, we anticipate getting around $200,000 each. My uncle has worked, saved, and lived a frugal lifestyle for many years, and I want to cherish this gift and use it wisely.
The question now: Do I pay off my home ($82,000 left on mortgage) and invest the balance for retirement, or invest the entire amount and try to refinance the house? mine? I have been told that it can take two years to get refinanced after bankruptcy.
Again, this is a blessing for my family. I want to make the right choice. I plan to work until age 65 and will contribute the maximum allowable amount of my 401(k) over the next five years.
Happy, but confused
Your letter gives me hope.
I hope your thoughtfulness and composure in recounting these various financial crises helps inspire others to never give up, even when the odds seem to pile up. together. I admire your determination to keep going, keep saving, and start over. You and millions of Americans had to start all over again. Acclaim!
Here’s my catch: Pay off your mortgage, especially when you have an 8% interest rate loan (the sooner you get rid of that burden, the better); maximize your 401(k); and put at least Six months are for expenses in the emergency fund if you have any other unforeseen medical or financial events.
A note of caution for others: Your inheritance may be at risk if you receive it in advance. “The general consensus of the courts is that the amount the debtor receives from the POD account 180 days after filing for bankruptcy is not considered property of the estate,” according to the statement. Raise Swift.
To you, $40,000 is a modest amount in your 401(k) for your lifetime. But Lorraine Ell, CEO and senior financial advisor of Better Money Decisions, a financial consulting firm near Albuquerque, says, “It’s never too late to save for retirement. $200,000 was a fluke and he was right to respect the value of this gift.”
“‘The goal is to minimize your monthly expenses and maximize your annual retirement contributions.’”
Greg McBride, chief financial analyst at Bankrate.com, recommends setting up a Roth IRA for yourself and your spouse. Contribute up to $7,000 each – including a $1,000 contribution for each of you – this year and next. “In short, you will have $14,000 worth of Roth IRA each,” he said.
Do you have health insurance through your employer? Is a high-deductible plan with a Health Savings Account an option? “If so, you can set aside $7,300 plus $1,000 in additional contributions for 2022 that will grow and can be used tax-free for future healthcare costs,” McBride said. know more.
The goal is to minimize your monthly expenses, maximize your annual retirement contributions, and have a safe cash cushion. “Try to pay for your health care costs now – remember emergency funds are full – so the money in the HSA can grow and compound for use in your later years,” he said. ” he said.
Modest lifestyle in retirement
Ell also suggests working until age 67 to maximize your full Social Security benefits. “A paying home will allow you to not only save more in your retirement account… but also allow you to live a modest lifestyle in retirement. “Social Security benefits go a long way if you don’t have to pay the rent,” she said.
Setting goals is the fun part. “The remaining $120,000 needs to be invested in a joint taxable account; then every year, take some money and contribute to a Roth IRA,” she added. “That money will be available for five years for tax-free withdrawal, and growth, interest, and dividends will also be tax-free on withdrawal.”
Leonard C. Wright, CFP and now president of the American Institute of Certified Public Accountants, also recommends the benefits of active savings in your company’s 401(k) plan. “If the investments you’ve appreciated at 7% per year for the next 10 years, $120,000 plus $40,000 could grow to $320,000.”
“This is a great gift for when you need it – not to mention the impact of saving over the next 5 years with a more discretionary income. He adds, a financial plan will give you more peace of mind. “Your determination got you through! Vision, values and goals. I think you’re better off than you think you are. “
Continue to show the discipline and patience you’ve shown so far, while also keeping an eye on a humble, healthy – and happy retirement.
You can email The Moneyist with any financial and ethical questions regarding the coronavirus at firstname.lastname@example.org and follow Quentin Fottrell on Twitter.
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More movies by Quentin Fottrell:
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• ‘My uncle accessed my father’s bank account while he’s dying’: He also took the keys to his house, truck, wallet and identification. What can we do?
• I sold my house to move into my husband’s repair house. Now he won’t even put my name on the deed. What options do I have?
• ‘I’m a proud, unvaccinated Trump supporter. My two siblings haven’t spoken to me in a decade. Should I cut them off from my $7 million fortune? ‘
https://www.marketwatch.com/story/my-wife-and-i-lost-our-first-home-in-2008-declared-bankruptcy-and-finally-bought-another-home-we-will-inherit-200k-how-should-we-invest-it-11638460089?rss=1&siteid=rss My wife and I are over 50 years old. We lost our home in 2008, declared bankruptcy and ended up buying another one. We will inherit $200K. How should we invest it?