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 Post subject: Inheriting 130k now what?
PostPosted: Thu Jun 07, 2012 2:14 pm 

Joined: Thu Jun 07, 2012 1:40 pm
Posts: 1
My mom passed away and I inheritied her IRA of which my portion as a beneficiary is 130k. My wife and I make a combined 60k a yr and live pretty much paycheck to paycheck. We have a rental property worth 150k and owe 60k on it. We are upside down on our home about 50k. Our cars are payed for and we have 14k in cc debt. We have two children headed to college within 3 yrs but have that somewhat taken care of with prepaid accounts. We have a total of 25k in an IRA. I would like to invest 100k with moderate risk tolerance. We are both 48 yrs old. If anyone could give me some good suggestions I would greatly appreciate it.


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 Post subject: Re: Inheriting 130k now what?
PostPosted: Thu Jun 07, 2012 2:43 pm 

Joined: Mon Feb 04, 2008 7:35 am
Posts: 1148
Location: Maryland
Sorry to hear about your mother's passing, but she sure did leave you with a nice gift.

What are you doing with the other 30k? Paying the credit card, I hope. Don't forget that you have to pay taxes, so are you taking out some for that?

Does your mom want some of the money to go to the kids' college, or she left them a separate amount?

When you say paycheck to paycheck, does that mean you don't have an emergency fund and you're barely making ends meet? I live paycheck to paycheck too, but I have a budget for everything, so a little more explanation is needed here. Maybe you should keep the money in the bank for a while and figure out WHY you're living paycheck to paycheck. Know what I mean?

I think you should not rush into investing until you are clear on your financials/goals, etc..Otherwise, your gift will be gone pretty soon, and you'll be paying the piper.


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 Post subject: Re: Inheriting 130k now what?
PostPosted: Fri Jun 08, 2012 4:44 am 

Joined: Tue Mar 11, 2008 12:19 pm
Posts: 1776
Location: Ottawa, Canada
First thing, right off the top, pay off that $14k in credit card debt immediately. Next, I'd pay down your own mortgage to get yourselves back into a positive-equity situation. I'd put the rest in an IRA (if you have room) and invest it in low-fee index funds.

But whatever else you do, pay off that credit card completely and immediately. That should be your top priority.


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 Post subject: Re: Inheriting 130k now what?
PostPosted: Fri Jun 08, 2012 4:55 am 

Joined: Tue Sep 20, 2011 2:20 am
Posts: 196
Obviously it would be good to pay off debts, but BE VERY CAREFUL and be prepared to handle the tax situation on this assets with precision.

I advise you consult a lawyer or tax consultant who will tell you how to best handle these assets so uncle sam doesn't hang you out to dry when tax time comes.


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 Post subject: Re: Inheriting 130k now what?
PostPosted: Fri Jun 08, 2012 6:46 am 

Joined: Fri Mar 16, 2012 7:33 am
Posts: 107
Stop! Whatever you do, don't pay down your upside down mortgage!

Not a good idea. As long as you ate current on the loan, the bank doesn't care if you are upside down. Yes, pay down the credit cards.

How does inherreting an Ira work? Can you make withdrawals without paying a penalty?


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 Post subject: Re: Inheriting 130k now what?
PostPosted: Fri Jun 08, 2012 7:35 am 

Joined: Fri May 04, 2012 2:23 pm
Posts: 810
I would work my way through the chart below first and then consult a professional.

Image

http://i.mktw.net/_newsimages/pdf/ira-distribution-lowchart.pdf

I would also look at Ed Slott's website (cleverly named IRAhelp.com) and Fairmark.com.

You'll have to first see how you will tap this money, then you can decide what to do with it. There are time limits in which you must start taking RMD's, and if you take the whole kit and caboodle all in one swipe, you may end up with a big tax bill. Start studying up!

I also can't help but comment, if you live paycheck to paycheck, now may be a good time to get yourself together. Otherwise, this may all be for naught!

*PS, it is a PITA to attach a graphic here. Also, I had looked up many good resources for the OP, but I am only limited to one URL per post? I understand this is probably to limit spamming, but can a gal get a little leniency here?

_________________
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


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 Post subject: Re: Inheriting 130k now what?
PostPosted: Mon Jun 11, 2012 12:53 pm 

Joined: Wed Nov 12, 2008 9:47 am
Posts: 172
Location: FL
Be very thankful for such an amazing gift ;)


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 Post subject: Re: Inheriting 130k now what?
PostPosted: Tue Jun 12, 2012 6:06 am 
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Joined: Thu May 17, 2012 10:05 am
Posts: 1107
scott1021 wrote:
My mom passed away and I inheritied her IRA of which my portion as a beneficiary is 130k. My wife and I make a combined 60k a yr and live pretty much paycheck to paycheck. We have a rental property worth 150k and owe 60k on it. We are upside down on our home about 50k. Our cars are payed for and we have 14k in cc debt... We have a total of 25k in an IRA. I would like to invest 100k with moderate risk tolerance. We are both 48 yrs old. If anyone could give me some good suggestions I would greatly appreciate it.


Some good advice from the previous posters.

Personally, if the money is available, I would pay off a chunk of your home (50k?), your rental property (60k?), and CC debt (14k). Then I would take all those monthly payments you would've made and invest that money for retirement going forward.

scott1021 wrote:
We have two children headed to college within 3 yrs but have that somewhat taken care of with prepaid accounts.


I would also discuss what university/degree your children would want to pursue. Education can be very expensive. Especially out of state tuition and private schools. I might even encourage them to attend community college the first two years of their degree program to get the basics out of the way. It really depends on how much you've saved and what their interests are...

Just my two cents. ;)

_________________
~ Eagle


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 Post subject: Re: Inheriting 130k now what?
PostPosted: Tue Jun 12, 2012 3:45 pm 
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Joined: Wed Sep 23, 2009 9:01 am
Posts: 5394
kombat wrote:
First thing, right off the top, pay off that $14k in credit card debt immediately. Next, I'd pay down your own mortgage to get yourselves back into a positive-equity situation. I'd put the rest in an IRA (if you have room) and invest it in low-fee index funds.

But whatever else you do, pay off that credit card completely and immediately. That should be your top priority.


I think I'd agree with the first part, paying off the credit card. I would wait at least a few months to pay on the mortgage though. Having the cash in the bank puts you in the same (actually better) equity position as burying it in the loan. I'm not saying that paying down the loan isn't a good idea - I just think you should think about it and educate yourself a bit before making any major decisions.


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 Post subject: Re: Inheriting 130k now what?
PostPosted: Sat Jun 16, 2012 10:33 am 

Joined: Sat Jun 16, 2012 8:06 am
Posts: 98
If you don't like working through that very good graphic posted above, here's the basics:

1) You can take the RMD (Required Minimum Distribution) to lessen the hurt of paying taxes. Vanguard's website has a quickie summary of your options, and it's worth the read. You shouldn't take a lump sum distribution unless you are prepared for the possible consequences, which means consulting a tax advisor and possibly even a fiduciary financial advisor. Google "inheriting IRA non-spouse" and it'll come up.

2) you also MUST title this account properly. It is your legal responsibility to get it right, not the financial institution's responsibility. It cannot be rolled over (into your own IRA) without you paying income taxes on the whole amount. You can change which financial institution holds the funds, but the account should have its title changed no matter what. See http://www.retirementwatch.com/IRASample1.cfm

HTH! Me, I'd pay off the credit card debt and consider the rest a jump on retirement savings. Your kids can get a loan for education, but nobody gives you a loan to retire, LOL. I would worry a lot less about 'being underwater' on RE loans as long as you can make the payments – been there, done that, and you have time to outwait the down markets.


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