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Old 04-14-2015, 10:50 AM
 
6,605 posts, read 1,364,850 times
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This concerns a large cash inheritance that is now just sitting in a savings account. Before continuing, just a bit of personal info:

We are 60-ish and planning to retire in four years (five at most). Our dream is to buy a smaller home in another state. We have always been fairly average as far as savings and spending; and before receiving the inheritance, we had no debts except for our car loan and our 3.75% interest mortgage; and we were looking to basically trade one mortgage for another when we retired. (With my pension and our combined social security, we would have enough to live on, even with our current mortgage payment.)

Now with the inheritance, we are able to pay off the mortgage in full and start retirement entirely debt free (paying "cash" for the new home after our current home sells). However, the "fee-only" CFP we just consulted has advised us that we should continue with a mortgage, even into retirement, and except for paying off the car ($16K remaining on a 3.75% interest loan), that we should invest the inheritance money in stocks and bonds. However, we (and especially I) are very uncomfortable doing so, as we have always been "bird in the hand" type people and are definitely not risk takers.

Does anyone have any personal experience with this kind of situation? And/or what would you advise?

Last edited by katharsis; 04-14-2015 at 11:15 AM..
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Old 04-14-2015, 10:56 AM
 
Location: Jollyville, TX
3,851 posts, read 9,445,905 times
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I don't have any advice for you, but I'm in a similar situation - 2 years from retirement with a 3.99% mortgage and we just received a $200K windfall, enough to pay off our current mortgage. I am curious to see what others have to say.
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Old 04-14-2015, 11:05 AM
 
Location: Orlando
2,001 posts, read 2,640,314 times
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I think it comes down to whatever enables you to sleep at night. Yes, you might realize a financial gain by investing the money and continuing to make your mortgage payment each month, but if you're more comfortable without a mortgage (as I am) then thank the CFP for his or her advice and do what makes you happy.
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Old 04-14-2015, 11:12 AM
 
Location: SoCal desert
8,093 posts, read 13,238,618 times
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Quote:
Does anyone have any personal experience with this kind of situation? And/or what would you advise?
Yes, I do.
Do what you're comfortable with, and do not let others talk you into doing what you are not comfortable with.
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Old 04-14-2015, 11:22 AM
 
6,294 posts, read 4,740,348 times
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I understand and agree with the advice. I bought a retirement house and got as big a mortgage as possible even though I did not need it. I pay under 4% interest, gain a tax deduction and make 8-10% on the money I borrowed. I may not always make that much but it is highly likely that I will continue to average a return of 6-8% for a well diversified portfolio.

The current mortgage rate situation is absurd. Take advantage of it.
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Old 04-14-2015, 01:03 PM
 
29,784 posts, read 34,880,403 times
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Quote:
Originally Posted by whocares811 View Post
This concerns a large cash inheritance that is now just sitting in a savings account. Before continuing, just a bit of personal info:

We are 60-ish and planning to retire in four years (five at most). Our dream is to buy a smaller home in another state. We have always been fairly average as far as savings and spending; and before receiving the inheritance, we had no debts except for our car loan and our 3.75% interest mortgage; and we were looking to basically trade one mortgage for another when we retired. (With my pension and our combined social security, we would have enough to live on, even with our current mortgage payment.)

Now with the inheritance, we are able to pay off the mortgage in full and start retirement entirely debt free (paying "cash" for the new home after our current home sells). However, the "fee-only" CFP we just consulted has advised us that we should continue with a mortgage, even into retirement, and except for paying off the car ($16K remaining on a 3.75% interest loan), that we should invest the inheritance money in stocks and bonds. However, we (and especially I) are very uncomfortable doing so, as we have always been "bird in the hand" type people and are definitely not risk takers.

Does anyone have any personal experience with this kind of situation? And/or what would you advise?
Yes, there are a number of folks in the forum who have a similar situation. The difference is they saved the money and didn't get it via inheritance. The process of managing it all is the same and the choices the sames. You have pensions, SS and now a decent taxable account nest egg. Sound familiar? Others have this and along with a decent/sizable retirement account portfolio. Your adviser is giving you in my opinion good advice. Since you already noted your car loan and your mortgage are manageable with your fixed income (pensions/SS) cash flow why tie up what is now liquid and invested/saved? Just decide the allocation formula you want. Because of your investments concerns and age it will be tilted to bonds. I am at least 70% equity in both taxable and retirement accounts. and in my later 60's. Yes I sleep well at night.
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Old 04-14-2015, 01:13 PM
 
Location: Central Mexico and Central Florida
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We saved like squirrels and retired in 2003 at ages 50 and 51. We like NOT having a mortgage. We are not worried about running out of money, in fact we need to pick up our spending rate.

We did not receive any inheritances and don't intend to leave any money to anyone, other than to an orphanage in another country that we volunteered at when we lived there.

So for us, a stash of money sitting in a few banks is OK....no worries about fluctuations in any market.

YMMV
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Old 04-14-2015, 01:38 PM
 
Location: The Triad (NC)
28,508 posts, read 62,217,072 times
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Quote:
Originally Posted by whocares811 View Post
We are 60-ish and planning to retire in four years (five at most).
Our dream is to buy a smaller home in another state.

And/or what would you advise?
So long as you still have earned income... keep the mortgage going.
It's probably close to being paid off in any case.

WHEN that retirement time comes then sell the house.
Use some of that money (NOT all) for the smaller home you want.
Add the difference to your GROWTH and INCOME producing mutual funds.

Which is what you should be doing with MOST of that windfall.

Quote:
...the "fee-only" CFP we just consulted has advised us that we should continue with a mortgage,
even into retirement, and except for paying off the car ($16K remaining on a 3.75% interest loan),
that we should invest the inheritance money in stocks and bonds.
Pretty close.

Quote:
However, we (and especially I) are very uncomfortable doing so,
as we have always been "bird in the hand" type people and are definitely not risk takers.
Read up. Become educated. Not investing is the real risk.
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Old 04-14-2015, 01:40 PM
 
6,605 posts, read 1,364,850 times
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Thanks for all the advice so far. VERY much appreciated!
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Old 04-14-2015, 02:08 PM
 
Location: NNV
1,522 posts, read 978,321 times
Reputation: 3096
I think one of the questions I have is how large is your mortgage payment? And how much can/do you save if you pay off the mortgage right now.

I think you could pay the car off now, invest the rest in some sort of low risk/low fee arrangement and then pay the mortgage off when you retire. That way you would get a few extra dollars out of your investment and you could still sleep at night.

I am on the side of not having a mortgage when I retire (also in 4-5 years).
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