What should we do with an inheritance?[ Edited ]
My husband's parents recently passed away. He will be getting a little more than $200,000. He hasn't prepared very well for retirement and is self employed. Would it be better to pay off our home which we owe $100,000 on or put it all into retirement? He is 57 yrs. old. Thank You!!
First off, let me say I'm sorry for your loss. Having lost my Dad a few years ago, I know that this is a difficult time for you both. The circumstances surrounding this windfall make it important for you guys to take your time and make a prudent decision. In other words, don't rush to any action. With as little as I know about your financial situation, my best advice is to seek advice. This would be an ideal time to seek out the counsel of a financial planner and weigh the benefits and drawbacks of different approaches. Here are some things to consider as you have that discussion:
Mortgage-free is beautiful. Some of the happiest retirees I've known have been those that have retired without a mortgage. Fewer financial obligations means more flexibility. Since you're still (I think) a ways from retirement, no mortgage will also mean more money available to put away for retirement in the coming years.
Self-employment retirement savings. There are a number of good retirement savings options that you and your husband can explore with a planner. Plans like a Simplified Employee Pension (SEP), Self-employed 401(k) and even traditional or Roth IRAs should provide plenty of options to play catch up. Speaking of catch-up, you should also be able to take advantage of catch up contributions that the IRS allows in various types of retirement savings plans.
See where you stand. Some solid financial planning today will give you both an idea of where you're at and what needs to be done before retirement. It sounds like you have a notion that there's work to be done, but there's no time like now to get a firm handle on what lies ahead. A good look at your total financial picture could reveal a number of opportunities in addition to paying off your mortgage or building your retirement savings. For example, eliminating other debts or building your emergency fund.
Again, my sympathies on your loss and best wishes moving forward. Consider giving one of our advisors a call at 800-771-9960 to begin to explore your options. Take care.