Author Topic: 57, $190k income  (Read 4579 times)

dude

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57, $190k income
« on: August 11, 2016, 06:11:45 AM »
This caught my eye on Scott Burns' blog today, figured this was the place to share it:

Q. My wife recently inherited $200,000 and we are struggling with how to best use the money. First, let me tell you our financial status. My wife is 60 (not working) and I am 57. I make about $190,000 a year. I have an IRA valued at $230,000 and my current 401(k) is worth about $180,000.

Our home is mortgaged for $170,000 at 3.75 percent interest and it is worth about $375,000. Our cars are also financed for about $40,000 at interest rates of 3 to 4 percent. We also have about $13,000 in credit card debt at 6 percent interest.

My financial advisor at Wells Fargo is saying we should open a separate IRA for my wife to invest in Black Rock. My wife and I want to make best use of this windfall. Please help. ---R.G., Houston, TX

A. Thatís a good suggestion from your advisor, but you need to look well beyond a spousal IRA. Also, with your income at $190,000, the spousal IRA contribution wonít be tax deductible since your income exceeds the Modified Adjusted Gross Income (MAGI) limit of $118,000. You need to increase your retirement assets quickly, which means saving more.

The inheritance, kept in tax-efficient investments in a taxable account, can be a major help in lining up your total retirement assets with your longer-term retirement income needs.

Before the inheritance, your savings were just a bit over 2 years of gross income. Now they are more than 3 years. Fortunately, youíve still got time to eliminate your debt and build your IRA and 401(k) plans assets to a larger multiple of your earned income.

Hopefully, your advisor will see the importance of investing this money in low-cost index funds, and of some amount of diversification. With that done you can focus on paying off your debt. While $13,000 in credit card debt is small compared to your income, thereís just no reason to have any credit card debt at all. You should be just racking up the credit card travel miles and paying no interest.

slugline

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Re: 57, $190k income
« Reply #1 on: August 11, 2016, 07:34:17 AM »
I really, really want to be generous with my benefit-of-the-doubt and believe that ths letter writer has only very recently achieved this level of income.

Nederstash

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Re: 57, $190k income
« Reply #2 on: August 11, 2016, 09:02:33 AM »
This caught my eye on Scott Burns' blog today, figured this was the place to share it:

Q. My wife recently inherited $200,000 and we are struggling with how to best use the money. First, let me tell you our financial status. My wife is 60 (not working) and I am 57. I make about $190,000 a year. I have an IRA valued at $230,000 and my current 401(k) is worth about $180,000.

Our home is mortgaged for $170,000 at 3.75 percent interest and it is worth about $375,000. Our cars are also financed for about $40,000 at interest rates of 3 to 4 percent. We also have about $13,000 in credit card debt at 6 percent interest.

Eliminate the credit card and car debts immediately, then hit yourself in the face for being a dumbass. Given their age and limited retirement funds, I'd say pay off the house and use the generous income to load up the retirement funds. Then hit yourself in the face again.

bacchi

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Re: 57, $190k income
« Reply #3 on: August 11, 2016, 10:32:01 AM »
Living on social security is going to be a bitter pill for this couple.

Classical_Liberal

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Re: 57, $190k income
« Reply #4 on: August 11, 2016, 10:41:44 AM »
Wow, sadly this is "normal".

In this world a 190K houshold income is not "normal", even at the end of a career.

Zoot

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Re: 57, $190k income
« Reply #5 on: August 11, 2016, 11:14:47 AM »
I'm sure many of us could make similar statements, but here's my version:

At 49, I'm 8 years younger than him, with an annual salary of about 40% of his, and yet my net worth is 150% of his.

While I'm worthy of a few face-punches myself for some sub-optimal financial decisions, it still boggles my mind.  This guy could have retired years ago making bank like that.

Tjat

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Re: 57, $190k income
« Reply #6 on: August 11, 2016, 02:06:30 PM »
The pathetic this is that the LW doesn't seem to think there's anything wrong with their insane debt load. Even the "Expert" gave his comment about the credit card debt as an afterthought.

johndoe

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Re: 57, $190k income
« Reply #7 on: August 11, 2016, 10:16:18 PM »
I must be looking at something wrong...isn't his NW something like $572k?  Isn't this about 3 times the average net worth of a household of his age?  While it would seem they have a spending problem we have no way of knowing how long he's had such a high salary.

Kenbo

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Re: 57, $190k income
« Reply #8 on: August 11, 2016, 11:03:40 PM »
Without the exact details I can understand the argument that maybe he didn't always make that much but with the details provided I believe this isn't the case.  In my opinion I believe they fell into the category of spending the majority of their income.

Socmonkey

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Re: 57, $190k income
« Reply #9 on: August 12, 2016, 01:34:41 AM »
I must be looking at something wrong...isn't his NW something like $572k?  Isn't this about 3 times the average net worth of a household of his age?  While it would seem they have a spending problem we have no way of knowing how long he's had such a high salary.

You forgot to add in the $200k inheritance. That brings the net worth up to $762k. If he keeps that level of salary and they buckle down on spending for the next 10 years and invest the vast majority they will be fine and retire at the "normal" age.

neil

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Re: 57, $190k income
« Reply #10 on: August 12, 2016, 05:39:21 PM »
I must be looking at something wrong...

If you read between the lines, they probably have no emergency fund.  Accounting for taxes and some retirement savings, a conservative number for their expenses is about 100K.  Their retirement plus inheritance is only providing a sustainable income of about 25K.  Too much of NW is tied into the house and they still carry a mortgage.  Poor accumulation of wealth unless the income has been wildly unstable.

Are they doomed?  No.  But it didn't have to be this way either.

MgoSam

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Re: 57, $190k income
« Reply #11 on: August 15, 2016, 11:25:51 AM »

Are they doomed?  No.  But it didn't have to be this way either.

The thing with couples like this one is that if they do have a sudden tragedy or of if anything happens to them, they will tell everyone, "WELL IT WAS SO UNFORESEEN..," whereas if they had been better stewards of their responses they would be better able to ride out any storms.

MoneyCat

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Re: 57, $190k income
« Reply #12 on: August 15, 2016, 11:30:40 AM »
Hope the memories of their expensive vacations, luxury cars, flashy designer clothes, etc. keep them warm while they are retired to a trailer park in Florida.