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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?
Your retirement is already set with a mortgage.
Paying off the house gives you that much MORE disposable cash to use for vacations or for investments.
I say pay off the house and with the leftover money open a brokerage firm account and start investing.
Buy what you know and understand.
Fidelity has a wonderful site for learning about investing.
I'm sure the other big ones also have that but I'm only familiar with Fidelity because I have my accounts there.
Is it possible that they no real portfolio to have experience with? Consider the data and how many have at least 200k in their portfolio to have to plan for?
I suspect you are right. Lots of people never invest. Plenty of employees even opt out of matching 401k funds from their employer. Since they have never invested, they are overly concerned that they will lose their money. Those of us who have invested have seen the good times and the bad. We also know that the value of maintaining investments even when there are scary bad times.
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 had no debts except for our car loan
With my pension and our combined social security... we would have enough to live on, even with our current mortgage payment.
And/or what would you advise?
For the next 4-5 years, continue along as you have been doing.
Keep paying the mortgage and even the car loan.
Stash the inheritance in quality mutual funds ... growing and earning some income.
WHEN you're ready to actually retire and to buy that smaller home... do so.
SELL the current home and use SOME OF that money to BUY the new house (no mortgage).
Add the rest of the sale proceeds to the investment account(s).
For the next 4-5 years, continue along as you have been doing.
Keep paying the mortgage and even the car loan.
Stash the inheritance in quality mutual funds ... growing and earning some income.
WHEN you're ready to actually retire and to buy that smaller home... do so.
SELL the current home and use SOME OF that money to BUY the new house (no mortgage).
Add the rest of the sale proceeds to the investment account(s).
Oh yeah, and take a few trips too.
Bada Bing! Not the only plan but a good one. Similar to what people who that from investment returns might do.
I basically agree with the often stated opinion here that quality low cost mutual funds are the way to go. For those who become more interested in following the market closely, I think is can also be fun and profitable to invest in a few single equities. I sure have no regrets for buying Microsoft and Autozone back in the day, as well as Google after that! Trading equities very cheap now.
I was at the drive through ATM the other day. Ahead of me was an older gentleman making a withdraw. He pulled away but left his receipt. Knowing what to expect I could not help but look at the balance. Sure enough he had $89,000 in a passbook savings account. It's a shame so many are so uneducated and downright ignorant about the basics of money management. There is no doubt in my mind that this old guy is keeping it there out of fear, as he drives away in his 15 year old beat up car. It's really sad to see.
I was at the drive through ATM the other day. Ahead of me was an older gentleman making a withdraw. He pulled away but left his receipt. Knowing what to expect I could not help but look at the balance. Sure enough he had $89,000 in a passbook savings account. It's a shame so many are so uneducated and downright ignorant about the basics of money management. There is no doubt in my mind that this old guy is keeping it there out of fear, as he drives away in his 15 year old beat up car. It's really sad to see.
What if he had a million dollar or more investment portfolio and that was a FDIC insured cash position. Liquid and safe and he is still frugal after all these years
I was at the drive through ATM the other day. Ahead of me was an older gentleman making a withdraw. He pulled away but left his receipt. Knowing what to expect I could not help but look at the balance. Sure enough he had $89,000 in a passbook savings account. It's a shame so many are so uneducated and downright ignorant about the basics of money management. There is no doubt in my mind that this old guy is keeping it there out of fear, as he drives away in his 15 year old beat up car. It's really sad to see.
You're supposed to keep 6 months of liquid funds.
I do.
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