Need some financial advice

[librarymom]

Please don't quote and I will delete later. I am not sure exactly what I should be doing here.  I have no financial plan really. I recently received an inheritance (50K) and a rental property half interest with my sister.  (worth about $225,000, rented out at $1325 per month)  Trying to sort of figure things out.  Here is some relevant info.  We are pretty financially secure/high earners and high savers but are in no way debt free and we aren't big spenders (at least compared to others with similar income - our kids go to public school/I cook on a budget/don't feel the need for fancy cars and we don't eat out much.  Do you think I need to go to a planner and set some goals?  I don't really have any.  Our jobs are secure. We feel content.  I work for a public school system and my husband is a partner at a small law firm. 

Right now our retirement is pretty good because of my strong pension, I think (40 years old).  Should we be saving more?

81K in Roth (incomed out now) - I think I need to figure out how to do a backdoor Roth.  Is that something I can figure out myself?

149K in 401K/403B
fully vested pension for me 40% of my salary when I retire (current base salary 103K)

House - worth about $750K, current mortgage $423K, mortgage amount $2900 but we have always paid more - will live here for a long time until we move to a smaller/cheaper place.

Our only other debt is car and student loans which we have been paying forever but they are at 2.1% so I don't necessarily want to pay them off but maybe we should just so they aren't there anymore?

Husband student loan $7100 @2.1% - payment 201 p/month
Me student loan $24000 @2.3% - payment 283 per month

1 Car loan (2019 Toyota Tacoma) - balance 10,350 @ 3.15  - payment - nothing until Jun 2021 because I am ahead in payments but I have been paying $500 per month.  I was thinking maybe I should pay this off?  Would you? It feels a little weird because even though we have been married for 15 years and have completely combined finances the inheritance is because my mom passed away and it just seems odd. 

my car paid off 2010 Honda CRV 145K miles.  Runs well.  Probably need to replace soon but honestly am not really wanting a new car right now.  It is fine for me.  When it dies I would like to buy a lightly used small SUV, maybe an upgrade from the CRV.  I drive my cars for a long time (obviously lol).

Savings

10K efund
64K *savings account that includes the inheritance
5K general
77K non-retirement investment accounts

529s - 2 kids (13,10) (my dad also has 529s for the kids and he has put $75 p/month in them since they were born) 
13 y/o 28K
10 y/0 25K 

Should I up the 529 contributions?

Right now this is what I have auto going to savings

13 yo 529 - $200
10 yo 529 - $125
Gen Savings - $425
Into that non-retirement investment account - $125
Additional amount to other savings account- $452.50 

401K/403B come out of our checks - not sure of the amount

Does anyone have any advice for me?  

[shakinros]

I don’t have advice (I have sooooo much less money than you that I wouldn’t know where to begin) but didn’t want to read without commenting. I’m sorry about your mom.

[librarymom]

Jul 5, 2020 20:45:07 GMT -5 shakinros said:

I don’t have advice (I have sooooo much less money than you that I wouldn’t know where to begin) but didn’t want to read without commenting. I’m sorry about your mom.

Yes - I totally understand. Thank you.  It has been so rough. We were very close. We have always been super thrifty- my husband didn't grow up with much and I was comfortable but we married young and didn't have any money then. As our incomes sort of grew our lifestyle didn't increase (except our house) and even in our neighborhood I think our neighbors think we are super poor since we don't have some of the fancy stuff they have, lol, and we know we are very privileged.  So we kind of started saving but we have no real purpose or direction so I guess I am trying to figure this out. 

[sadlebred]

It might be worth visiting a fee only financial planner to get a better general sense of your investment direction. Make sure they are a fiduciary, so they have your interests in mind only. Fee only assures they won't be trying to sell you something they make commission on. This is a good website to start with:

www.napfa.org/find-an-advisor#

I am so sorry for your loss!

[librarymom]

Thanks!  I just looked up that site and there are quite a few in my zip code.

[minzy]

I’m so sorry about your loss.

If you’re looking for direction, and it seems like you had a strong relationship with your mom, what do you think she would have wanted you to prioritize? Maybe that type of thinking can help you decide.

My mom also left me an inheritance (though I was a teenager), and I used it on my education. It was where I needed the money at the time and it seemed like a wise choice. (I also followed in her footsteps and got the same professional degree she did, so I know she would have found value in my choice.) If she had died now, when we are much more secure and don’t have debt, I would probably be saving it for my kids so they could have something from their grandma. In your shoes I would probably knock out some of my debt, maybe some of your student loans and a portion of your mortgage(?), and earmark some for your kids. Condolences again.

[wildrice]

I'm sorry about your mom.

In general, what sticks out to me are your kids' savings and your retirement. I think both are better than most people, but you could probably do even better if you wanted to. 28k is not going to be enough to pay for college in 5 years, KWIM? You probably need at least double that per kid, and much more if they plan to go to a private school or out of state public school, you plan to pay for living expenses, etc.

I think your retirement is fine, but personally if I were figuring out what to do with extra money I'd probably increase savings for that. Depending on what you mean by "high earners" it looks like you don't have double your salaries saved, which is about the target for age 40. The pension is helpful, but at only 40% of your salary, that's going to be a huge lifestyle cut unless you can supplement at least the other 60% of both your incomes with other retirement savings. I would guess that you are not quite on track for that, though if your mortgage is paid off and you aren't supporting kids, obviously your expenses would be less.

I know now is not the right time for this, but I've always thought that if I got an inheritance I'd take a big trip somewhere, kind of in celebration of the person's life (I assume this would be from grandparents or my parents, all people who love travel). So maybe in your shoes I'd try to think of something meaningful to buy or do that would honor your mom's life and (if possible) something you shared with her. I think since you are not struggling, paying off debt would be my last choice since it's so boring (different story if you were drowning in debt and this was a lifeline).

[numbers]

I'm sorry for your loss.

In your shoes, I would wipe out the 2 student loans + 1 car loan, and keep the remaining amount of the inheritance in savings.

I'd then increase all of the monthly savings amounts.

[madringal]

Jul 6, 2020 10:20:42 GMT -5 numbers said:

I'm sorry for your loss.

In your shoes, I would wipe out the 2 student loans + 1 car loan, and keep the remaining amount of the inheritance in savings.

I'd then increase all of the monthly savings amounts.

I would do exactly this.

[sakura]

I’m sorry for your loss.
What are your plans for the inherited rental property? If you’re keeping it, I’d earmark some cash for future repairs. How much monthly net income will you get after property taxes and insurance? I personally would probably plan sell it because owning a rental property with family sounds like too much potential for messiness and risk that I’d like to avoid, unless it has sentimental value.

[macmars45]

Jul 6, 2020 11:52:21 GMT -5 madringal said:

Jul 6, 2020 10:20:42 GMT -5 numbers said:

I'm sorry for your loss.

In your shoes, I would wipe out the 2 student loans + 1 car loan, and keep the remaining amount of the inheritance in savings.

I'd then increase all of the monthly savings amounts.

I would do exactly this.

Sits here.

I felt much better once we paid off H's SLs and our car loan (granted we have much less money).

[imojoebunny]

Sorry about your mother. In your shoes, I would likely sell the rental, unless is convenient to you, and you don't mind managing it, and invest the money separately from your other assets, after paying off your student loan. The idea being that you could use the investments in the future to assist your kids with college, or for some future purchase such as retirement travel or a second home, or whatever you choose in the future, while keeping it seperated, just in case. Once co-mingled, at least in my state, it becomes joint property, in the event of divorce. You are still benefiting your family, by increasing your investment savings, and ending the student loan payment, but doing it in a way that benefits you long term, if something happens in your marriage. In normal times, I would suggest using a bit of it for something fun for your family, like a vacation, but in Covid, I am not sure what that would be. If you do pay off the car loan, be sure to save what you had been paying each month, so that when the next car is needed, you will have money for it, and be used to making that payment, not expanding your lifestyle because you temporarily don't have a car payment, if that makes sense.

[Poppy]

I mean, it is hard to tell you what to do with the money if you don't have concrete goals. But at the end of the day, a financial planner cannot tell you what your priorities are either.

You have indicated feeling weird about "sharing" the money with your H. I would explore that further. (Please note that I am not judging at all - I inherited some money from my dad and kept it separate. I feel comfortable giving it to my kids so I have used it to fund their 529s and hold the rest in investments in my name that may end up theirs. Ultimately this benefits my H indirectly because "our" money is not being used for the kids' college and thus we have more for other uses, but it's an emotional comfort to me.) It's definitely something to carefully consider as some decisions about conmingling cannot be undone.

Otherwise, how do you envision the end of your working careers - would you like to retire early or reduce your hours at the end of your career? Would you like to pay a larger share of your kids' college or future expenses? Do you have any other dreams that you might want to pursue (travel, philanthropic, etc)?

[awkwardpenguin]

I'm so sorry for your loss. I would probably set aside the money in your own name only (inheritances are sole property of the inheritor, even if you're married) and see what feels right in six months or a year. There's no rush to decide what to do with it.

I'd also probably think about if you and your sister want to be landlords or if you'd rather liquidate the rental property. If there's no mortgage on it the cash flow is probably decent, and rental properties can be a good investment, but I'd look at it as if you were making the investment yourself and decide if it's worth it.

Regardless of the inheritance, I think you should probably decide on some financial goals because they can help you focus on what is important to you and help you deploy your money in a way that supports your values. At your age and stage in life, I'd want feedback on retirement savings and college savings. It seems like you have room to save more there and may want to even with the pension figured in.

Most fee-only financial planners start with a comprehensive financial plan to give you a picture of where you are at and where you will be in the future. This often costs in the $1k-$3k range, and then additional planning is per hour. There are other models out there, but that is the most common. I think that could be really helpful for you given that you don't really know where you stand in terms of goals and plans for the future, but it is definitely an investment and I'd want to have specific questions and goals for the planning process going into it.

[ellipses84]

I’m sorry for your loss. I recommend you meet with a financial planner if you are looking for the best way to invest or want to understand where you are lacking in your investment accounts. I don’t think you need to do this right away and could put it in a low interest savings account until you decide in a year from now. If you want to do something right away, I’d put $10k each to the kids 529s. You don’t have many years until college so want that money to start making more money ASAP. Maybe put $10k to your own retirement, OR pay off the car and start moving that $500/month to another goal like retirement. Once $10k turns into $20k you’ll be glad you invested it and not feel like the money is lost. Use $1-5k to do or buy something meaningful, like a bucket list trip once Covid is over, or a piece of jewelry that reminds you of your mom.

[lemoncupcake]

I agree with the idea of thinking about the rental property first - do you want to keep it long term join with your sister? Are one of you interested in buying out the other and taking sole ownership? Or do you both want to sell long or short term?

If you’re going to keep it for a while, I would save at least half of the inheritance for home maintenance and repairs. That way if something happens you don’t need to use the joint assets with your husband.

[librarymom]

Thank you all so much for your responses and I appreciate what you all have to say. I went ahead and added 5K to each girl's 529 accounts as a first step and I know my mom would want that. To answer some questions about the property I think we want to keep it at least for right now - there is no mortgage and little maintenance - condo and fee covers any major repairs. After taxes, condo fees and reserve for repairs, it generates about $1000 per month so $500 for each of us. There is a repair account already set up for it at $4000 right now.

[mich1]

My $0.02.

I would not depend so much on your strong pension. You are needing to look 20+ years down the road and a lot can happen in this time. I got bit in the ass by a job that had a good pension, then my job went away with my lab. I had 14 years in the system, which was enough to be vested but not enough to collect any appreciable amount. Getting another job within the pension system was not going to happen in a few years as we were in the middle of a hiring freeze.

My solution (I was 40 at the time) was to take another job with a much better retirement and I withdrew all of my contributions to the pension. I am about 4 years from when I'd officially be able to collect upon it now, and by my calculations what I *should* receive from my IRA that I dumped those contributions into will replace about 3x of what I would have received from my pension. Pensions are not portable, and you can easily get stung.

JMHO

[BirdGirl]

I think you should talk to a FP. They can sit down with you and assess where you want to be in retirement and what you need to get there. To me you look underfunded in retirement and college. I would also ask whether you should set aside some of the money from your mom for college or if you are better paying off existing debt. They can hopefully walk you through financial aid implications for different scenarios too.

I’m very sorry about your mom.

[AmyRI]

I'm sorry for your loss.

Practically speaking, are you keeping the rental with your sister? Or are you planning to sell and you will have another $100k to divvy up?

When I inherited some money, we were also in decent financial shape already as you are. So I figured out what bothered me the most about our financial situation and applied the money there, since there was no one clear thing that needed to be handled. I also applied money first to things that were my personal financial burden (student loans and my car) and didn't worry about DH's car loan. We also spent a couple thousand on a last minute vacation to a really nice hotel that was normally more than I'd spend per night as a special thing to do as a family to bring a little light into our lives.

In your shoes, assuming 50k only, I would pay off your student loans and save the rest as an e-fund for the rental house.
If you sell the rental house, I'd:
(1) pay off your student loans,
(2) set aside the purchase price of a new vehicle in a separate savings account until you need it,
(3) pay off your DH's student loan
(4) pay off your DH's car loan,
(5) a trip your mom would have wanted you to take with your sister or your family (or both)
(6) some contribution to 529s (I personally wouldn't add more than another $10k to each of those right now)
(7) IRA contributions.
I'm not big on saving tons of money into 529s. We have them and contribute to them, but we prioritize our retirement savings over 529s.

If the inheritance money came from your mom's pre-tax retirement account, make sure you had enough taxes withheld. Otherwise save enough to pay that big bill next year.