Suggestions Please

[MickeyMom:)]

If you were to come into 100K right now in todays economy what would you do with it? There is no debt (only mortgage) and applying it towards the mortagage is not an option. We are debating here amongst friends and are trying to help steer someone in the right direction in order to see it grow as much as possible......This is a young family in their 30's with 3 children. Just a little info incase you need it....I knew to come here, you savy people would give me GREAT advice to pass along.....

 

[luvmarypoppins]

I would probably divide it between

1. An amount of accessible cash

2. Funds for college education for the 3 children

3. Tax free municipal bonds, which should pay about 5%, good for the taxes and the principle stays there

 

[puffkin]

Well, I know you said no mortgage, but that is exactly what I would do. That would basically pay off our house! We too are younger (i'll be 30 in a few weeks) and we both have lost our jobs. I have been doing temp work and DH and I are both looking, looking, looking. WE both also have part time retail jobs to make ends meet. Insurance is a killer for us (DH is a Type 1 diabetic so we need good insurance), so we will have to jump on the first full time opportunity that comes along with benefits, regardless of the salary. We are looking at taking at least a 40% paycut, if not more.

We never thought we would be in this situation. It has just gone from bad to worse and we never lived an overly extravagent life. We enjoyed a few extras but we have always lived a fairly modest life and contributed to 401k's etc. It has been almost a year now with no end in sight and we are starting to get to the point of financial crisis. Our living expenses are very reasonable, but if we didn't have that mortgage we would be just fine for a long time and could take some of that money we were saving each month and put it away towards savings/retirement/college fund.

 

[ceecee]

Consult several financial advisors, most banks and credit unions offer this free! No need to pay for it, some people insist they get better treatment if they do pay, but that is not always true.
First, I would pay off the mortgage!

 

[cjlvsccm]

If you were to come into 100K right now in todays economy what would you do with it? There is no debt (only mortgage) and applying it towards the mortagage is not an option. We are debating here amongst friends and are trying to help steer someone in the right direction in order to see it grow as much as possible......This is a young family in their 30's with 3 children. Just a little info incase you need it....I knew to come here, you savy people would give me GREAT advice to pass along.....

Hi MickeyMom!

I faced exactly this just recently... after losing my sister in Sept , found out I got the major portion of her life insurance. I believe my sister wanted me to help take care of her only grandchild, my great-nephew (noted in my signature on the June 09 trip).

Instead of putting any in a gov't education fund (most have been losing money around here), we split some into a 60-mo CD, some in a 24-mo CD, and some left in a Money Market fund at our Credit Union. That way if he needs anything big for school trips, band instruments, new laptop, before he is college age, I will have the liquidity to help.

And if by chance he doesn't want to go to college (it's possible, not everyone is cut out for college!), I can hold on to it until it can help him with down-payment on a house. This is why I want to keep control, and not just put it in a trust for him... also because trust income can sometimes eliminate eligibility for certain grants or other college financial aid.

edited: Plus, if he grows up to be an ungrateful jerk, I don't have to give any of it to him!

And the portion of that money that is not set aside for DN, we put in our MM account as emergency funds... if either of us lose our job, we'll need the cash on hand to live on.

I wouldn't think of paying off a mortgage, unless it was underwater or otherwise was a struggle to make the payments, especially if that is the only debt in the equation.

Just my 2cents! Hope it works out well with your friends!!

 

[mistysue]

I wouldn't do funds specific to college in case children decide not to go.

Some I would put into a high interest savings (around $25,000) to pay the taxes on the $100K. That sudden boost in income will raise your tax liability on EVERYTHING and take away deductions and credits you usually get and if any is less it is just some extra savings.

I would spend about $5,000 on just going out and buying things to get it out of my system.

I might take a thousand and start playing around with stocks because I've always wanted to.

The rest would be divided between our IRA's and various short term and long term investments.

It really depends on the person, some people could invest in themselves and start a business that would do more for their future.

 

[mrsklamc]

I hope you or they aren't buying the baloney about it being worth it to keep the mortgage for a tax deduction. SO not worth it.

 

[runwad]

I would start socking it away in a roth ira every year. Taxes are going to do nothing but go up...every year between the two of them they can max out their roths and put 10k in a year. Thats what I"ve been doing with an inheritance I got but it was 1/2 that so I'm halfway there into getting it all in a Roth ira. I also put 2k each into my kid's 529 plans because I'm in ohio and we get a tax break for doing so. I'd be looking into any tax advantage plans that I could.

 

[wdwfan16]

Well, I know you said no mortgage, but that is exactly what I would do. That would basically pay off our house! We too are younger (i'll be 30 in a few weeks) and we both have lost our jobs. I have been doing temp work and DH and I are both looking, looking, looking. WE both also have part time retail jobs to make ends meet. Insurance is a killer for us (DH is a Type 1 diabetic so we need good insurance), so we will have to jump on the first full time opportunity that comes along with benefits, regardless of the salary. We are looking at taking at least a 40% paycut, if not more.

We never thought we would be in this situation. It has just gone from bad to worse and we never lived an overly extravagent life. We enjoyed a few extras but we have always lived a fairly modest life and contributed to 401k's etc. It has been almost a year now with no end in sight and we are starting to get to the point of financial crisis. Our living expenses are very reasonable, but if we didn't have that mortgage we would be just fine for a long time and could take some of that money we were saving each month and put it away towards savings/retirement/college fund.

I would only put it toward the mortgage if it would payoff the entire mortgage.


I would invest it. Vanguard has great fund options. An easy one would be the index funds or the targeted funds. This will allow them to us it for an EF in the future, for the kids college or for retirement.

ROTH option - Many experts are telling people to not chose this option. Congress has tossed around removing the tax free stuff. Congress is also considering taxing 401Ks too.

Will the $100K be taxable income?

 

[Eeyore's Wife]

First, I would have a fully stocked emergency fund with six months worth of expenses. It changes the world when you have some security and safety.

Second, I would pay off the house, if they want the tax deduction, they can just make contributions to charitable organizations for the amount they want to deduct and get the "monkey" of a mortgage off of their backs.

Third, I would fully fund the Roth IRA until the money has been fully utelized.

 

[MickeyMom:)]

From what I was told, I don't believe this is considered taxable income. It was a gift from a parent, not an inheretence. What does anyone here know about the stocks that pay dividends? CD's are horribly low. What is the benefit from putting the money in a Roth IRA instead of somewhere else where it will grow? Please be gentle these are honest questions that demonstrate my level of comprehension!

 

[ceecee]

I believe there is a "gift" limit, like $11,000 or $22,000 for a couple per year that is not subjected to taxes.

 

[hipchickie]

IIRC, a gift over $13K will be taxed (per person - so if it is both parents the amount is raised to $26K untaxed) , an inheritance for that same amt. would not be taxed

 

[runwad]

I would only put it toward the mortgage if it would payoff the entire mortgage.


I would invest it. Vanguard has great fund options. An easy one would be the index funds or the targeted funds. This will allow them to us it for an EF in the future, for the kids college or for retirement.

ROTH option - Many experts are telling people to not chose this option. Congress has tossed around removing the tax free stuff. Congress is also considering taxing 401Ks too.
Will the $100K be taxable income?

Really? I never knew that, that would stink..I'd hope they'd grandfather people in so that only new money would be taxed...geez

OP a Roth IRA doesn't get taxed upon withdraw of funds as a regular IRA does. Also no minimum monthly distribution is needed to be taken when you turn 70 1/2 as you have to with a regular ira(have to start spending it). Plus a roth can be left to heirs and they can let it keep growing without having to withdraw the funds all tax free(unless the above poster is correct and this changes). Oh and another reason I like the Roth you can withdraw your contributions once they've been in for 5 years all without penalties and interest...with a regular Ira you can't start withdrawing till 59 1/2. I'm sure someone else will explain it all better than I.

 

[andrews_dad]

My "investments" would include ... 2 weeks in Diz, 3 weeks in Hawaii, 2 weeks in an over-water bungalow in Tahiti while the kids were off in some awesome adventure summer camp, a couple of weeks on an upscale African Safari, a month touring Europe, Diz Land, Diz Paris, a Diz Cruise (or two), Adventures by Diz trips (maybe 5 or so), Galapagos, and ... what? What do you mean I've blown my $100K windfall and now OWE credit card money debt???

 

[MickeyMom:)]

I believe the "lifttime Gift" max as of 2009 is 1mil. Is this correct? They have to file a Gift Tax Return, but that is only for the sake of keeping tally on the life time gift, but no taxes are due.....I got the following off a website on gift tax rules....They were also told by their accountant that they would not have to pay taxes on this gift.

Any amount you use out of your lifetime gift tax exclusion counts against the estate tax exclusion, which is $2,000,000 as of 2008 and $3,500,000 as of 2009. This means that if you use $250,000 of the limit by making gifts during your lifetime, you have reduced by $250,000 the amount that can pass through your estate free of the estate tax. So you shouldn't ignore your lifetime limit even if you feel certain that your lifetime gifts will never add up to that amount. It pays to plan your gifts around the annual exclusion amount and the exclusions for educational and medical expenses wherever possible.

 

[MaryKLady]

I hope you or they aren't buying the baloney about it being worth it to keep the mortgage for a tax deduction. SO not worth it.

Ditto. I'd pay off my house.

 

[MaryKLady]

My "investments" would include ... 2 weeks in Diz, 3 weeks in Hawaii, 2 weeks in an over-water bungalow in Tahiti while the kids were off in some awesome adventure summer camp, a couple of weeks on an upscale African Safari, a month touring Europe, Diz Land, Diz Paris, a Diz Cruise (or two), Adventures by Diz trips (maybe 5 or so), Galapagos, and ... what? What do you mean I've blown my $100K windfall and now OWE credit card money debt???

 

[MickeyMom:)]

Mine too.....I wouldn't even be wondering where to put my money.....There'd be no question!!

 

[wdwfan16]

Really? I never knew that, that would stink..I'd hope they'd grandfather people in so that only new money would be taxed...gee.

It does stink. Congress sees $$$ in those ROTHs and 401Ks that they do not have their hands on. They want money and need money.

Today the head of the AFL-CIO went to the President to push for a transaction tax on every stock, bond or mutual fund bought or sold. No amount per transaction was listed but the AFL-CIO is talking about $10 Billion in new taxes per year. Guess who wants the President to pass the money to his group!!