GUIDANCE ON INVESTING AN INHERITANCE

[Polliwog]

Personally I think polliwog is earning a really good income for retirement (and not all of it fully taxable), those are very high SS payouts (it's not really news that SS is not that generous on payments). So it's a darn good retirement income even with those really rather modest when all is said and done housing costs. But if it's not enough it's not enough, maybe the inheritance makes it enough.

APN: Yes, I am thankful that I had some very good earning years as a paralegal. My inheritance is such a blessing and I thank my dear father for that. It has been a "game changer" for me.

Linda

[kib]

I just wanted to say that I don't consider your income small / insufficient, it's a good amount and I think $3,000 a month is plenty to live on; all I was trying to say was that income level might make it difficult to qualify for a mortgage, especially the older you get. So in other words, that if you have a mortgage, you might want to keep it. Sorry if some judgment was implied, I didn't mean it that way.

[Polliwog]

I just wanted to say that I don't consider your income small / insufficient, it's a good amount and I think $3,000 a month is plenty to live on; all I was trying to say was that income level might make it difficult to qualify for a mortgage, especially the older you get. So in other words, that if you have a mortgage, you might want to keep it. Sorry if some judgment was implied, I didn't mean it that way.

Oh, kib, I didn't take it that way at all. I value your insight and comments.

Linda

[Teacher Terry]

I think the combo of lowering your mortgage & keeping some $ for emergencies is the best choice. We have a paid-off home & have been frugal but now at age 60 we are going to spend $-travel, eat out, etc because you never know when you won't be able to do those things anymore. At age 70 spend-don't save-of course I don't mean go crazy but I would do some things that you have been wanting too. enjoy)

[Polliwog]

Teacher Terry - I agree with you. I will have a nice emergency fund as well as extra $$ for travel, entertainment, etc. Thanks for your advice. And good for you being able to enjoy the fruits of your labor.

Linda

[cx3]

If the only 2 options are pay down mortgage or invest, then I'm with the majority here with pay down the mortgage.

However, at age 70, I think estate planning should be a high consideration.

I know someone who owns a home next door to his mother. Mother and child arranged a house trade. Mother has a smaller house easier to maintain,child received larger house for his family. Win win for both parties right? Fast forward several years, mother is now in nursing home eating up assets quickly. Child is concerned about losing both houses because not enough time has elapsed since transaction to protect his home from his mother's nursing home expenses.

[razz]

[QUOTE=cx3;204713]If the only 2 options are pay down mortgage or invest, then I'm with the majority here with pay down the mortgage.

However, at age 70, I think estate planning should be a high consideration.

/QUOTE]

++++1
At age 71, I do not ask my children for financial advice or assistance in financial affairs as their knowledge and perspective is quite different from mine and they are very smart and capable people. I have told them everything that I am doing and they know that I am completely and capably charge of my affairs. I deal with my CFP and have everything in one site for estate planning and the accountant is aware of all my assets and has offered some input as well when we doing my tax return.

My kids are often surprised with how much they really didn't know so I am frankly horrified that anyone would rely on younger members of the family to handle their financial affairs. Keep them fully informed, absolutely, but my assets are my responsibility and my decision.

I do not intrude on my children's affairs either so it is a matter of mutual respect for boundaries and each other.

[ToomuchStuff]

[QUOTE=razz;204716]

My kids are often surprised with how much they really didn't know so I am frankly horrified that anyone would rely on younger members of the family to handle their financial affairs. Keep them fully informed, absolutely, but my assets are my responsibility and my decision.

I do not intrude on my children's affairs either so it is a matter of mutual respect for boundaries and each other.

Keeping informed does NOT mean giving up control. Control comes when one can no longer mentally handle the job of ones own, in case of illness, coma, etc.
BTDT and educating the kids about, and WHY you make decisions, helps lead the kids to being able to make the same decisions, IMHE.

[profnot]

Here's some info about a different kind of way to use a Home Equity Line of Credit to pay off your loan in less than half the number of years without paying any extra payments.


MORTGAGE ACCELERATORS
These systems are designed to pay down your mortgage and build equity faster, usually without paying any extra principal toward the loan.

The general premise is to have your mortgage in the form of a home equity line of credit (Heloc), preferably in the first position. All your paychecks are deposited directly into the home equity account. You only transfer money from the equity line to your checking account once or twice a month to pay bills and get cash for general expenses. Since interest is compounded on the daily principal balance of your equity line, you will pay far less interest over the life of the loan because your paycheck income sits in your equity line rather than your checking account.

Illustration of concept
Several years ago I managed a law firm. Money market rates were 10% or more and. Passbook savings accounts paid around 8% interest. Business checking paid around 4%
Rather than depositing client payments into our checking account, we deposited all client payments directly into a money market checking account. We only transferred money from the money market account to our regular business account twice a month to pay bills. We would have paid bills with checks directly from the money market account but the bank had a high per-check fee. So we wrote only two money market checks a month to fund our general business checking account. We earned a very nice amount of interest by having our deposits sit in the money market account until needed to pay bills.

Mortgage accelerator systems work on the same principal as in the illustration above. But instead of parking your paychecks where they will earn interest, you are parking them where you avoid incurring interest on your home loan. This makes sense because current rates for home equity lines of credit are around 7%-8% and money market accounts only pay around 3.5%. Even if you were able to secure an equity line a few years ago with a fixed interest rate of 5% or 6%, using a mortgage accelerator system still saves money.

You will find several companies trying to sell you software to help you optimize this method. $2K - $4K. Don't buy - not worth the fees. Just park all your income in the heloc and pay bills when due.

This is not a gimmick. This type of loan a powerful tool that must be used carefully. You must be very disciplined and in a positive cash flow situation for any accelerator to work properly. If you lack financial discipline, this type of loan can be disastrous.

Helpful videos
"Mortgage Equity Optimization" here:
http://www.moneyanswers.com/mortgages.html

https://www.youtube.com/watch?v=6pzzYUOhbOk

http://www.helocbasics.com/how-a-heloc-works/
Note the borrow and repayment period explanations.

btw - I get nothing by sending/posting this. No referrals, no fees, nada. Just trying to help.

[Weston]

Here's some info about a different kind of way to use a Home Equity Line of Credit to pay off your loan in less than half the number of years without paying any extra payments.


MORTGAGE ACCELERATORS
These systems are designed to pay down your mortgage and build equity faster, usually without paying any extra principal toward the loan.

The general premise is to have your mortgage in the form of a home equity line of credit (Heloc), preferably in the first position. All your paychecks are deposited directly into the home equity account. You only transfer money from the equity line to your checking account once or twice a month to pay bills and get cash for general expenses. Since interest is compounded on the daily principal balance of your equity line, you will pay far less interest over the life of the loan because your paycheck income sits in your equity line rather than your checking account.

Illustration of concept
Several years ago I managed a law firm. Money market rates were 10% or more and. Passbook savings accounts paid around 8% interest. Business checking paid around 4%
Rather than depositing client payments into our checking account, we deposited all client payments directly into a money market checking account. We only transferred money from the money market account to our regular business account twice a month to pay bills. We would have paid bills with checks directly from the money market account but the bank had a high per-check fee. So we wrote only two money market checks a month to fund our general business checking account. We earned a very nice amount of interest by having our deposits sit in the money market account until needed to pay bills.

Mortgage accelerator systems work on the same principal as in the illustration above. But instead of parking your paychecks where they will earn interest, you are parking them where you avoid incurring interest on your home loan. This makes sense because current rates for home equity lines of credit are around 7%-8% and money market accounts only pay around 3.5%. Even if you were able to secure an equity line a few years ago with a fixed interest rate of 5% or 6%, using a mortgage accelerator system still saves money.

You will find several companies trying to sell you software to help you optimize this method. $2K - $4K. Don't buy - not worth the fees. Just park all your income in the heloc and pay bills when due.

This is not a gimmick. This type of loan a powerful tool that must be used carefully. You must be very disciplined and in a positive cash flow situation for any accelerator to work properly. If you lack financial discipline, this type of loan can be disastrous.

Helpful videos
"Mortgage Equity Optimization" here:
http://www.moneyanswers.com/mortgages.html

https://www.youtube.com/watch?v=6pzzYUOhbOk

http://www.helocbasics.com/how-a-heloc-works/
Note the borrow and repayment period explanations.

btw - I get nothing by sending/posting this. No referrals, no fees, nada. Just trying to help.

For an excellent independent analysis of this type of approach by someone who actually did the math I would recommend Joshua Sheat's podcast at http://radicalpersonalfinance.com/13...-comp-program/.

You really have to pay attention while he does the math and applies logic to the premise but it is well worth giving it a careful listen before jumping in to something like this. His basic conclusion was that it was all smoke and mirrors with no real benefit.