I inherited $ 240k from my parents. Do I pay for my $ 258k mortgage and do I give up my job?

I recently lost both my parents and inherited $ 240,000. Because of the life choices (divorce) and the life from salary to salary until recently, I have not saved much for retirement. I am 58 years old and make a decent life of $ 130,000 a year. I have saved around $ 100,000 for retirement with the exception of my parents' money. I owe $ 258,000 on my mortgage on a house worth $ 825,000.

I am not looking to retire for 65, but hope to shrink and perhaps to take a less stressful job for half the money if I can find one. I am really confused about what I have to do with my parents' money to set myself up for a solid pension. I don't know if I should invest it, pay off my mortgage, save aggressively or shrink to a smaller house and invest the proceeds.

I have never had money in the bank until the last few years and I don't know how to be smart with it. I am paralyzed by the choices and have a low risk tolerance. I am aware of how difficult it is to come by and do not want to do risky gambling. I currently have the most on a CD at 4% and the rest in a high -interest savings account. Finance lets me break out in hives.

What is the smartest step?

Nervous

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Stress is a job in the inside. It will not necessarily disappear into a part -time job that you pay less.

Your fear can be provoked by the seemingly overwhelming amount of choices you give yourself, instead of your inability to manage your finances. You have also lost your parents and you may not even realize how traumatizing and life -changing that is for you. We must avoid making life -changing decisions when we mourn. We want to start again, but sometimes maintaining the silent status quo is the best way ahead, and the most difficult way.

The smartest step is to make many small, considered movements over time, ideally with the advice of a financial adviser – a fiduciary who has to set your interests for yours, and not someone who wants to earn a committee and sell you a tribute of products that you do not understand. It starts at your house, and whether you have to shrink (yes, if you feel at ease) and what you pay off from your mortgage (yes again, if that is important to you). It will shorten the duration, remember, not, not reduce the monthly payment.

The $ 240,000 will not disappear. It has recently landed on your bank account and there is no bad fairy that says you have to invest or spend it within 30 days. Take your time; It does not burn a gap in the walls of the bank. You can make one decision at the same time. You have already reserved $ 100,000 for retirement, so your aversion to dealing with monetary matters is not matched by your aversion to saving.

There is no “good” answer to your questions. The decision to pay your mortgage early also depends on your timeline for freedom of debts by the time you reach the retirement age and your current interest rate. If you pay a fixed mortgage interest of 6.5%, it makes sense to pay off a little early, given the savings in interest. If you have an interest of 2.5%, you can feel more comfortable to pay off at least $ 100,000 of that loan.

Nora Yousif, a financial adviser from RBC Wealth Management in Boston, praises your performance so far. “Your instincts are perfect,” she said. “Savings, shrinking and investing are the name of the game here. Start maximizing your 401 (k) to help you rebuild your nestei, because you are in the last inning, so-on-speak, of your career, which means that you can leave no less than $ 31,000 a year.

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You still leave that with your $ 240,000 inheritance, and whatever you have when you sell your house and move to a smaller real estate. You could take at least half of that money and invest it in shares. If you have faith in the long -term future of US shares, you can also invest part of your inheritance in a fund traded by the stock market that follows the total market, the S&P 500 SPX or another diversified index (perhaps the Vanguard Total Stock Market ETF VTI).

Zoals ik deze lezer vertelde die zich afvroeg of ze een $ 61.000 forfaitair bedrag of $ 355 maandelijkse betaling voor het leven moesten accepteren, neem dan de $ 61.000, want als de aandelenmarkt gemiddeld 10% rendement per jaar per jaar (zoals het heeft gedaan voor de afgelopen drie decennia, als u de hobbelige met de soepel met de soepel hebt), verdient u geld op uw belangrijkste investering en ook op de jaarlijkse rendementen op uw Investment. Moreover, you need an income during the pension, which can last 30 years.

I have a remedy for excessively low risk tolerance and financial anxiety, and that is easy math. If you invest $ 100,000 in the S&P 500 with an annual return of 10%, you would finish around $ 672,750 after 20 years because of the magic of compiling. On the other hand, if you place $ 100,000 in a CD with an interest rate of 4%, you would have around $ 219,112. Bring your life goals in balance with your investment goals. Historically, the market is a win-win in the long term.

It is smart to have an emergency fund of six to 12 months and to make an effort to make money while you sleep. Five years after the pandemic, since the Federal Reserve weighs whether it is time to lower the interest rates and wonders whether the global socio-economic unrest and the trade war of President Donald Trump will push the US into an economic delay or recession, a cushion of money will give you more peace of mind.

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For safer ports, look for shorter-duration bonds with a maturity of less than five years; Treasury inflation-protected effects (tips), which were published by the American Treasury by inflation; And investment funds and listed funds. Morgan Stanley MS may quote benefits in “value-oriented and defensive sectors.” So-called defensive sectors include non-discretionary consumer goods, utilities and health care shares.

When you enter your 60s, Charles Schwab SCHW, the financial services company, says a portfolio with a “moderate” risk 60% shares, 35% bonds and 5% cash or cash investments. When you reach 70 to 79, it recommends that you switch to a “moderately conservative” portfolio of 40% shares, 50% bonds and 10% in cash or cash investments, while for 80 and higher a “conservative” mix of 20% shares, 50% bonds and 30% cash or cash or cash.

This will hopefully be obvious, but please do not buy any individual shares. Some index funds or ETFs with fixed interest pay monthly dividends, while dividend growth or high-income ETFs set your share exposure with the emphasis on dividend income. Deposits (CDS) certificates and online savings accounts with a high efficiency, which offer revenues of up to 4.5% and 4.4% respectively, are an option with a low risk.

There are important differences between savings accounts with high yields and CDs. With the High-Yield savings account, funds are more liquid, although recordings are limited to half a dozen per month. With CDs you connect to a certain period. Interest rates can also change with high-interest savings accounts-even after you have deposited your money on the basis of the Benchmarket rate of the FED. When you buy a CD, the rate does not change.

Less reward comes with less risk. “Although CDs are safe, they may not generate the kind of return you are looking for,” Yousif adds. With interest rates against 20-year-old highlights, there are many exciting options for fixed-income values ​​that are available. Given your risk profile, bonds can offer an attractive alternative if you are considering branching CDs. “However, she loves your plan to reduce and buy something for half the amount.” You pay your monthly mortgage payment to free your cash flow. “

Choices come with a lot of responsibility, but they are a new luxury that you can afford.

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