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I have earned income from my job in 2015. Don't I still have time to contribute for 2015? Also I earn income on my craft sales. And 2016 is hardly going to be a zero income year. I'm transitioning to full-time self employment.
If you have earned income then invest in Roth IRA, future gain will not be taxed. But I caution you that $72k is not a lot of money, and your age makes me even more cautious. You are young but not like you are in your 20s. If you were younger I would say put all in stocks 100%, but you are not and the stock market has 6-7 positive return already.
You sound over extended. Without knowing your debt levels for your car and mortgage it is impossible to give you accurate advice. If you are over extended as I suspect putting the cash in low risk assets in an IRA or 401k (by boosting your workplace contribution) is probably the best idea.
And actually, if he pays off the mortgage, since mortgage interest is front loaded, he will be saving/making more than 6.25 percent interest.
I don´t really know what ´front loaded' means in this context but mortgage interest is calculated on the unpaid principal each and every month. It may seem that it is front loaded because the payments at the beginning have so much more interest than the ones at the end but that is only because the principal balance is so much bigger.
Quote:
Originally Posted by KathrynAragon
He says he's receiving rent that pays the mortgage. He can put that rent into a retirement account.
If by 'retirement account´ you mean IRA, no she can´t. That is only available with earned income. Real estate income is considered unearned income like all dividends and interest, etc.
I am surprised that a Florida realtor is not showing interest in rental income. I have three rental units in the Ft Myers area which provides more problems than I'd like. One or two local rental units would be easier to deal with. Surely you know of local rental managers with sound reputations. Surely you know some landlords that would be happy to dispense sage advice about the local rental market. Successful people often love to help. The other side of the spectrum sometimes loves to steal.
Don't tell locals that you inherited money. I received an inheritance a few years ago. Suddenly almost everybody, and their brother, started robbing me. So bad that I currently feel nestled in a nation of predominantly thieves.
I was concerned about the decision to purchase a new car considering your income. So I have doubts about your proclivity towards sound investing. Artists are known for being artistic....not sage investors.
Right now the idea of working until you die seems alright. I used to think "I'll just work into my 80's." Now I am 57 and working in my 70's no longer feels appealing at all.
Don't splurge. The money could be gone in a few months and leave you with rapidly depreciating toys that all require maintenance and yearly fees. Invest conservatively.
Thank you all for your opinions. Paying off the HELOC AND the mortgage would completely wipe out the inheritance so that's not going to happen, the heloc rate is rising, the mortgage is fixed. I'm content to leave the mortgage where it stands, since while the idea to try and refinance once the heloc is paid is a good one, I no longer have the income they may require, (I can look into that though), there is no reason I can't make additional payments of principal as my career progresses. It's not ideal, but for my comfort level, I can live with that. I do have 6 months savings, while I expect to earn most to cover my bills, I do want to have money for backup just in case.
Also, I don't think I want to pay off the car I just bought, its 20k, my first new (1 year used) car since I was 21, at a decent rate of around 3%. I do have the ability to make additional payments on that also, whether as principal to knock some months off the back end, or just pay 2-3 months in advance on good commission days so I have a breather. I'm currently paid through April for example.
The car, the heloc, the mortgage, and my business and personal checking accounts are all held at chase, which makes it very easy for me to toss extra payments at things as money comes in.
Yes, being a real estate investor is one of my interests. I do enjoy home renovation, and can see underneath filth for the potential. Longer term goals, have to get my feet wet in sales first. I have had tenants, good and bad, since 2008. My SO is also a realtor, though does primarily property management and rentals with a private firm. I want to start with a bigger name company for the training for sales, and other types of property like commercial, etc. I may then go with his company but I feel like I can learn more, faster, and find more opportunities by going with an established broker with a real office, at least to start, it will help me stay on track.
And actually, if he pays off the mortgage, since mortgage interest is front loaded, he will be saving/making more than 6.25 percent interest.
Uh, no. Paying down a 6.25% loan gives a 6.25% return (before tax) regardless of when in the amortization schedule it's done. It's true that the required monthly payment at the beginning is more interest than principal and this reverses toward the end of the loan term, but this in no way changes the fact that each dollar of reduced principal saves 6.25 cents per year* in interest payments (before tax).
*Actually it's a bit trickier when the interest is recalculated monthly. In this case the interest savings are compounded monthly, so after one year the savings are slightly more than 6.25% (before tax) of the paydown because you also have interest savings on the interest savings.
Quote:
Originally Posted by KathrynAragon
He says he's receiving rent that pays the mortgage. He can put that rent into a retirement account.
Actually to be precise, he can increase his investing by the former mortgage payment, which is unlikely to be exactly equal to the rent, but OK.
Thank you all for your opinions. Paying off the HELOC AND the mortgage would completely wipe out the inheritance so that's not going to happen, the heloc rate is rising, the mortgage is fixed. I'm content to leave the mortgage where it stands, since while the idea to try and refinance once the heloc is paid is a good one, I no longer have the income they may require, (I can look into that though), there is no reason I can't make additional payments of principal as my career progresses. It's not ideal, but for my comfort level, I can live with that. I do have 6 months savings, while I expect to earn most to cover my bills, I do want to have money for backup just in case.
Also, I don't think I want to pay off the car I just bought, its 20k, my first new (1 year used) car since I was 21, at a decent rate of around 3%. I do have the ability to make additional payments on that also, whether as principal to knock some months off the back end, or just pay 2-3 months in advance on good commission days so I have a breather. I'm currently paid through April for example.
The car, the heloc, the mortgage, and my business and personal checking accounts are all held at chase, which makes it very easy for me to toss extra payments at things as money comes in.
Yes, being a real estate investor is one of my interests. I do enjoy home renovation, and can see underneath filth for the potential. Longer term goals, have to get my feet wet in sales first. I have had tenants, good and bad, since 2008. My SO is also a realtor, though does primarily property management and rentals with a private firm. I want to start with a bigger name company for the training for sales, and other types of property like commercial, etc. I may then go with his company but I feel like I can learn more, faster, and find more opportunities by going with an established broker with a real office, at least to start, it will help me stay on track.
Its going to be an interesting year.
Why does it have to be all or nothing? You could pay off the HELOC and part of the mortgage, and still keep some liquid. This can still increase your chances of a decent refi. ( If you want, you could talk to a loan officer first.)
If you had a smaller mortgage, would you take out an equity loan at 6.25% just to have the money sit there? This is the question you should ask yourself.
Why does it have to be all or nothing? You could pay off the HELOC and part of the mortgage, and still keep some liquid. This can still increase your chances of a decent refi. ( If you want, you could talk to a loan officer first.)
If you had a smaller mortgage, would you take out an equity loan at 6.25% just to have the money sit there? This is the question you should ask yourself.
You sound over extended. Without knowing your debt levels for your car and mortgage it is impossible to give you accurate advice. If you are over extended as I suspect putting the cash in low risk assets in an IRA or 401k (by boosting your workplace contribution) is probably the best idea.
I am surprised that a Florida realtor is not showing interest in rental income. I have three rental units in the Ft Myers area which provides more problems than I'd like. One or two local rental units would be easier to deal with. Surely you know of local rental managers with sound reputations. Surely you know some landlords that would be happy to dispense sage advice about the local rental market. Successful people often love to help. The other side of the spectrum sometimes loves to steal.
Don't tell locals that you inherited money. I received an inheritance a few years ago. Suddenly almost everybody, and their brother, started robbing me. So bad that I currently feel nestled in a nation of predominantly thieves.
I was concerned about the decision to purchase a new car considering your income. So I have doubts about your proclivity towards sound investing. Artists are known for being artistic....not sage investors.
Right now the idea of working until you die seems alright. I used to think "I'll just work into my 80's." Now I am 57 and working in my 70's no longer feels appealing at all.
Don't splurge. The money could be gone in a few months and leave you with rapidly depreciating toys that all require maintenance and yearly fees. Invest conservatively.
Please refrain from denigrating me and other artists by your spouting of a stale sterotype. You also have no idea the hardship I have been through and are putting your own ideals into my world.
I have nothing against rental income, however I have not yet met the experts you think I may have. Nor am I interested in ending up with a money pit. All in good time. I merely have said that I want to fully educate myself, I have ruled out nothing in real estate. 70 is becoming the new retirement age. The good thing about real estate is you can go full force, or part time, or at your own leisure. Do I want to work to death? No, but I also don't know when that will be. I come from a line of long lived relatives. Do I want to have the ability to take a 3 week European vacation without having to have it approved by my boss? Why yes I do.
My mind stays continually active. If not actively working a business I would not be sitting around watching TV.
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