Author Topic: I have $500,000 roughly from an inheritance. What would you do with it ?  (Read 8489 times)

planepoo

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I have a house to pay off still and its really close to $500,000. Should I pay it off or invest the money in the stock market ? Im new on here and its nice to meet you all.

Playing with Fire UK

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Re: I have $500,000 roughly from an inheritance. What would you do with it ?
« Reply #1 on: October 01, 2016, 12:41:41 AM »
This has been debated many times and there is no absolute right answer: it depends on how much a paid off house means to you. Ignore any advice that says one option is universally better than the other (you can search for more threads using a search engine, the website name and mortgage or invest; don't bother with the forum search, it isn't the best).

Do you have any high interest debts? Credit cards, car loan, student loan?

If you invest it, stick to index funds, not managed funds and if you need financial advice pay for it by the hour not as a percentage management fee.

If it was me I'd put as much as I could into tax advantaged accounts, buying Vanguard Lifestrategy 80; and the rest in taxed accounts, buying Vanguard Lifestrategy 60. Then I'd get myself over to Bogleheads and read up account asset allocations and ignore 95% of what they say about 'your number' or what constitutes an acceptable level of spending.

I'd get out my receipts and calculate what I spent and saved in the past year, and use this as a baseline for spending.

If you are still processing your feelings from the event that led to the inheritance, don't make any big decisions until you feel more balanced.

MDM

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Re: I have $500,000 roughly from an inheritance. What would you do with it ?
« Reply #2 on: October 01, 2016, 12:51:37 AM »
See Frequently Asked Questions under "Should I pay off my X% interest rate mortgage?" for some links on that topic.

Consider How To: Write a "Case Study" Topic if you want more suggestions tailored to your specific situation.

See also https://www.bogleheads.org/wiki/Managing_a_windfall.

planepoo

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Re: I have $500,000 roughly from an inheritance. What would you do with it ?
« Reply #3 on: October 01, 2016, 09:59:03 AM »
This has been debated many times and there is no absolute right answer: it depends on how much a paid off house means to you. Ignore any advice that says one option is universally better than the other (you can search for more threads using a search engine, the website name and mortgage or invest; don't bother with the forum search, it isn't the best).

Do you have any high interest debts? Credit cards, car loan, student loan?

If you invest it, stick to index funds, not managed funds and if you need financial advice pay for it by the hour not as a percentage management fee.

If it was me I'd put as much as I could into tax advantaged accounts, buying Vanguard Lifestrategy 80; and the rest in taxed accounts, buying Vanguard Lifestrategy 60. Then I'd get myself over to Bogleheads and read up account asset allocations and ignore 95% of what they say about 'your number' or what constitutes an acceptable level of spending.

I'd get out my receipts and calculate what I spent and saved in the past year, and use this as a baseline for spending.

If you are still processing your feelings from the event that led to the inheritance, don't make any big decisions until you feel more balanced.
Well thank you very much for your well rounded advice. That seems like a lot to think about. I think that paying off my mortgage because its simpler and I would just collect the old payment that I used to make and also if I'm debt free that eliminates that need to make money. I think that in of itself is far simpler.

If I did decide to invest the money in the markets instead are those things or funds that you spoke of 100% risk free or are they guaranteed rates of return and if they are guaranteed rates of return whats the % that they return on your investment ?

planepoo

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Re: I have $500,000 roughly from an inheritance. What would you do with it ?
« Reply #4 on: October 01, 2016, 09:59:43 AM »
See Frequently Asked Questions under "Should I pay off my X% interest rate mortgage?" for some links on that topic.

Consider How To: Write a "Case Study" Topic if you want more suggestions tailored to your specific situation.

See also https://www.bogleheads.org/wiki/Managing_a_windfall.
Thank you MDM

pbkmaine

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Re: I have $500,000 roughly from an inheritance. What would you do with it ?
« Reply #5 on: October 01, 2016, 10:14:53 AM »
This has been debated many times and there is no absolute right answer: it depends on how much a paid off house means to you. Ignore any advice that says one option is universally better than the other (you can search for more threads using a search engine, the website name and mortgage or invest; don't bother with the forum search, it isn't the best).

Do you have any high interest debts? Credit cards, car loan, student loan?

If you invest it, stick to index funds, not managed funds and if you need financial advice pay for it by the hour not as a percentage management fee.

If it was me I'd put as much as I could into tax advantaged accounts, buying Vanguard Lifestrategy 80; and the rest in taxed accounts, buying Vanguard Lifestrategy 60. Then I'd get myself over to Bogleheads and read up account asset allocations and ignore 95% of what they say about 'your number' or what constitutes an acceptable level of spending.

I'd get out my receipts and calculate what I spent and saved in the past year, and use this as a baseline for spending.

If you are still processing your feelings from the event that led to the inheritance, don't make any big decisions until you feel more balanced.
Well thank you very much for your well rounded advice. That seems like a lot to think about. I think that paying off my mortgage because its simpler and I would just collect the old payment that I used to make and also if I'm debt free that eliminates that need to make money. I think that in of itself is far simpler.

If I did decide to invest the money in the markets instead are those things or funds that you spoke of 100% risk free or are they guaranteed rates of return and if they are guaranteed rates of return whats the % that they return on your investment ?

Investment vehicles with "guaranteed rates of return" are mostly very expensive and vastly underperform the markets over the long term.

Paul der Krake

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Re: I have $500,000 roughly from an inheritance. What would you do with it ?
« Reply #6 on: October 01, 2016, 10:19:26 AM »
If I did decide to invest the money in the markets instead are those things or funds that you spoke of 100% risk free or are they guaranteed rates of return and if they are guaranteed rates of return whats the % that they return on your investment ?
The "markets", usually stocks and bonds, are not risk free. Risk free investments are savings accounts, certificate of deposits, and US treasuries. Rates vary and are currently considered low.

The best thing you can do right now is nothing. Take a couple months to educate yourself on financial matters, starting with the bogleheads link that MDM posted.

planepoo

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Re: I have $500,000 roughly from an inheritance. What would you do with it ?
« Reply #7 on: October 01, 2016, 10:40:30 AM »
If I did decide to invest the money in the markets instead are those things or funds that you spoke of 100% risk free or are they guaranteed rates of return and if they are guaranteed rates of return whats the % that they return on your investment ?
The "markets", usually stocks and bonds, are not risk free. Risk free investments are savings accounts, certificate of deposits, and US treasuries. Rates vary and are currently considered low.

The best thing you can do right now is nothing. Take a couple months to educate yourself on financial matters, starting with the bogleheads link that MDM posted.
Thanks for the tip, but I guess since there is no guarantee rates of return out there that is worth anything really I will just pay off the house. Its just simpler and quicker and cleaner and ultimately less to think about and way less risk. I couldn't even imagine taking this $500,000 that my Mother worked to hard for and throwing it into the markets and then losing it when I could have simply paid off my house and just starting stashing cash.

Eurotexan

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Re: I have $500,000 roughly from an inheritance. What would you do with it ?
« Reply #8 on: October 01, 2016, 11:27:33 AM »
Sorry for your loss.

I agree with doing nothing for the next few months, this isn't the time to make rash decisions.


planepoo

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Re: I have $500,000 roughly from an inheritance. What would you do with it ?
« Reply #9 on: October 01, 2016, 11:40:12 AM »
If I did decide to invest the money in the markets instead are those things or funds that you spoke of 100% risk free or are they guaranteed rates of return and if they are guaranteed rates of return whats the % that they return on your investment ?
The "markets", usually stocks and bonds, are not risk free. Risk free investments are savings accounts, certificate of deposits, and US treasuries. Rates vary and are currently considered low.

The best thing you can do right now is nothing. Take a couple months to educate yourself on financial matters, starting with the bogleheads link that MDM posted.
The last time I checked even with a CD there is a risk of losing 100% of your investment if you read the fine print.

planepoo

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Re: I have $500,000 roughly from an inheritance. What would you do with it ?
« Reply #10 on: October 01, 2016, 11:42:19 AM »
This has been debated many times and there is no absolute right answer: it depends on how much a paid off house means to you. Ignore any advice that says one option is universally better than the other (you can search for more threads using a search engine, the website name and mortgage or invest; don't bother with the forum search, it isn't the best).

Do you have any high interest debts? Credit cards, car loan, student loan?

If you invest it, stick to index funds, not managed funds and if you need financial advice pay for it by the hour not as a percentage management fee.

If it was me I'd put as much as I could into tax advantaged accounts, buying Vanguard Lifestrategy 80; and the rest in taxed accounts, buying Vanguard Lifestrategy 60. Then I'd get myself over to Bogleheads and read up account asset allocations and ignore 95% of what they say about 'your number' or what constitutes an acceptable level of spending.

I'd get out my receipts and calculate what I spent and saved in the past year, and use this as a baseline for spending.

If you are still processing your feelings from the event that led to the inheritance, don't make any big decisions until you feel more balanced.
Well thank you very much for your well rounded advice. That seems like a lot to think about. I think that paying off my mortgage because its simpler and I would just collect the old payment that I used to make and also if I'm debt free that eliminates that need to make money. I think that in of itself is far simpler.

If I did decide to invest the money in the markets instead are those things or funds that you spoke of 100% risk free or are they guaranteed rates of return and if they are guaranteed rates of return whats the % that they return on your investment ?

Investment vehicles with "guaranteed rates of return" are mostly very expensive and vastly underperform the markets over the long term.
Which ones are guaranteed rates of return with the high fees ?

pbkmaine

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Re: I have $500,000 roughly from an inheritance. What would you do with it ?
« Reply #11 on: October 01, 2016, 11:54:29 AM »
Are you in the US?

Paul der Krake

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Re: I have $500,000 roughly from an inheritance. What would you do with it ?
« Reply #12 on: October 01, 2016, 12:01:38 PM »
The last time I checked even with a CD there is a risk of losing 100% of your investment if you read the fine print.
Are you referring to the fact that the FDIC could fail? That's a possibility, sure, but if that happens the systemic problems will be running so deep that losing a couple hundred thousand dollars will be the least of your worries. So long you don't have any deposits with one institution over the FDIC limits ($250,000 today), the risk can be considered non-existent for all intents and purposes.

Frankies Girl

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Re: I have $500,000 roughly from an inheritance. What would you do with it ?
« Reply #13 on: October 01, 2016, 12:04:28 PM »
I inherited around this amount when my dad died a while back.

First, I completely agree to do nothing now. Just get the accounts over in your name, set up with them correctly if you have to take any required distributions, then get those scheduled... and leave it all alone for now.

You're still grieving, and you also sound like you have no clue how investing and the stock market works.

I was in the same exact place. I had no experience with it other than blindly throwing money into my 401k, and the idea of investing and handling the investments myself scared the crap out of me.

I suggest you start doing some reading. Here of course, but also check out Jim Collins' stock series: http://jlcollinsnh.com/stock-series/

I learned how it all works from him. Total eye-opener.

Then I started asking questions here and doing more reading at the Bogleheads site: https://www.bogleheads.org/wiki/Main_Page

Now I totally get why paying off a house isn't always the best use of funds, and I feel 100% confident in handling my investments and I'm doing just fine. I'm not scared of "losing" anything because I know that losses from market volatility aren't real unless I panic and sell everything. Which isn't happening because I know how to invest well for my situation (index funds FTW) and minimize any actual risk.

 You've been handed an amazing opportunity by your parent. But give yourself time to grieve, do some research and figure out what sounds right for you going forward, once you feel confident in what direction you want to go in, make your moves then. There is nothing whatsoever wrong with taking 2-6 months or longer to get your head space clear and educate yourself. It will make a world of difference.

And so very sorry for your loss.


« Last Edit: October 01, 2016, 01:26:42 PM by Frankies Girl »

Catbert

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Re: I have $500,000 roughly from an inheritance. What would you do with it ?
« Reply #14 on: October 01, 2016, 12:26:30 PM »
Sorry for your loss.  I agree with the advice to do nothing in a hurry.  Take a few months to grieve for your mother and ponder your options.


As a minimum before you do anything ensure that there are no tax ramifications to this inheritance.  Assuming you're in the US, if you are getting cash whatever you do will have no tax impact.  If you're getting stock/mutual funds/bonds there will also likely be no taxes due because the basis will have reset on the date of your mother's death.  OTOH if you are inheriting IRAs, 401ks or similar retirement funds distributions will be taxed when you take them out.  There are also very specific rules about withdrawals from inherited retirement funds.  If any of this inheritance is in IRA/401k/similar understand all the tax and distribution rules before you touch it.   

frugaliknowit

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Re: I have $500,000 roughly from an inheritance. What would you do with it ?
« Reply #15 on: October 01, 2016, 01:14:41 PM »
Sorry for your loss.  My advise:

1.  Make no major decisions for up to one year.

2.  Put the funds in FDIC insured accounts liquid accounts for now.

3.  Research.  I would read this book:  https://www.amazon.com/dp/0071786988/?tag=googhydr-20&hvadid=31672216117&hvpos=1t2&hvnetw=g&hvrand=11357431786005887653&hvpone=24.46&hvptwo=&hvqmt=e&hvdev=c&hvdvcmdl=&hvlocint=&hvlocphy=9021712&hvtargid=kwd-33460162884&ref=pd_sl_2nffsupyx2_e

4.  Consider hiring professional advise.

Good luck to you!

SwordGuy

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Re: I have $500,000 roughly from an inheritance. What would you do with it ?
« Reply #16 on: October 01, 2016, 01:15:15 PM »
  ... what she said ...

Frankies Girl had given you some excellent advice.

You have a once in a lifetime chance.  Don't make a choice simply because you're too lazy to learn about the alternatives.   That's simply foolish.

To put it in face-punch worthy terms, "If being given HALF A MILLION DOLLARS isn't enough to motivate you to get off your ass and study, what the heck will?"

Spend several evenings or lunchtimes at work over the next couple of months reading the JL Collins stock series.   It's very straightforward.   It's written for regular people.   

Let's say you have a $500,000 fixed rate mortgage at 3% for 30 years.  That works out to $25,296 a year in P&I, the Principal and Interest portion of your mortgage.   (You'll still be stuck with taxes and insurance no matter what you do, so I'll ignore them.)

When you read up about the stock market, you'll learn that, over history, the stock market has earned 7% over inflation.
Some years it goes up way, way more.  Some years it crashes and burns 50%.  But over time, it's gone up 7% over inflation.   That's because the assembled brains, greed and hard work of the companies in this country has made that happen and are likely to continue to.  Our country is inventing multiple totally new industries per generation.   That's a phenomenal growth opportunity.

Now, presumably, you bought your house with the expectation that you could pay it off because you (a) made enough money, (b) expect to continue to make enough money to do so, and (c) haven't sunk yourself in so much other debt you can't make it work out.

What might happen if you invested it in the stock market per JL Collins' advice by the end of your 30 year mortgage?  Well, you might have anywhere from $1,100,000 to $7,700,000 worth of stock at that time.    That's based on a 90/10 stock bond split, invested for  30 years, based on the historical real results for every 30 year period of time we have data for.  Some of those time frames had up to 60% drops in value in just one year.  And yet over time the value of the investments climbed.

Here's what it would look like if each year could be reliably counted on to return 7% over inflation.  (It can't.)   But it still is very illustrative.

$500,000
$535,000  1st year earnings, $35,000
$572,450 
$612,522
$655,398
$701,276  5th year earnings, $45,858
$750,365
$802,891
$859,093
$919,230  10th year earnings, $60,137.  Getting close to double 1st year earnings.
                Your 30 year mortgage would now be 380,099.
                You could pay it off 20 years early and still have more than you inherited.
$983,576  Or hang on for the ride and keep the mortgage...
$1,052,426
$1,126,096
$1,204,923
$1,289,267 15th year earnings, $84,344. 
                  At this point, you are earning, on average, 4 times your annual principal and interest payment.
                  Think about that for a moment.
$1,379,516
$1,476,082
$1,579,408
$1,689,966
$1,808,264 20th year earnings.
$1,934,842
$2,070,281
$2,215,201
$2,370,265
$2,536,183 25th year earnings.
$2,713,716
$2,903,676
$3,106,934
$3,324,419
$3,557,129 30th year earnings.

What are the risks if you follow JL Collin's stock advice?

Well, the entire US or world economy could collapse and we could be in Mad Max times.   Nothing you did to save money for the future would likely matter.   So ignore this.  (Or stockpile ammo, food, hand tools, how-to books and medicine.   And move to a defensible house.)

At some point the stock market craps out like the Great Depression.  Golly , wasn't that horrible?   Well, remember that $1,100,000 to $7,700,000 spread in ending values I mentioned.   That included every 30 year period of time between 1871 and last year.   59 of the tested outcomes included the Great Depression.   And yet the money ended up at least doubling.

Actually, in your shoes, if you and your spouse keep your jobs, that's possibly the coolest thing that would happen.  Why?
Because you don't HAVE to spend any of the money, so you don't have to sell any stock while it is still low. 

So why is that so cool?  Because when you re-invest the dividends your stocks are earning you'll be buying more stock at a huge discount!   How neat is that?

What happens if you lose your jobs?  Well, you could use a year's earnings to pay your mortgage principle and interest payments and just delay the increase in earnings a year. 

I would hope, however, that if you've got a house you owe half a million dollars on that you have some other savings...

Of course, if you inherited this money at age 70, and have no kids, then worrying about optimizing for 30 years from now might be more trouble than it's worth. :)

Hope that gives you some food for thought!




   





planepoo

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Re: I have $500,000 roughly from an inheritance. What would you do with it ?
« Reply #17 on: October 01, 2016, 03:32:01 PM »
  ... what she said ...

Frankies Girl had given you some excellent advice.

You have a once in a lifetime chance.  Don't make a choice simply because you're too lazy to learn about the alternatives.   That's simply foolish.

To put it in face-punch worthy terms, "If being given HALF A MILLION DOLLARS isn't enough to motivate you to get off your ass and study, what the heck will?"

Spend several evenings or lunchtimes at work over the next couple of months reading the JL Collins stock series.   It's very straightforward.   It's written for regular people.   

Let's say you have a $500,000 fixed rate mortgage at 3% for 30 years.  That works out to $25,296 a year in P&I, the Principal and Interest portion of your mortgage.   (You'll still be stuck with taxes and insurance no matter what you do, so I'll ignore them.)

When you read up about the stock market, you'll learn that, over history, the stock market has earned 7% over inflation.
Some years it goes up way, way more.  Some years it crashes and burns 50%.  But over time, it's gone up 7% over inflation.   That's because the assembled brains, greed and hard work of the companies in this country has made that happen and are likely to continue to.  Our country is inventing multiple totally new industries per generation.   That's a phenomenal growth opportunity.

Now, presumably, you bought your house with the expectation that you could pay it off because you (a) made enough money, (b) expect to continue to make enough money to do so, and (c) haven't sunk yourself in so much other debt you can't make it work out.

What might happen if you invested it in the stock market per JL Collins' advice by the end of your 30 year mortgage?  Well, you might have anywhere from $1,100,000 to $7,700,000 worth of stock at that time.    That's based on a 90/10 stock bond split, invested for  30 years, based on the historical real results for every 30 year period of time we have data for.  Some of those time frames had up to 60% drops in value in just one year.  And yet over time the value of the investments climbed.

Here's what it would look like if each year could be reliably counted on to return 7% over inflation.  (It can't.)   But it still is very illustrative.

$500,000
$535,000  1st year earnings, $35,000
$572,450 
$612,522
$655,398
$701,276  5th year earnings, $45,858
$750,365
$802,891
$859,093
$919,230  10th year earnings, $60,137.  Getting close to double 1st year earnings.
                Your 30 year mortgage would now be 380,099.
                You could pay it off 20 years early and still have more than you inherited.
$983,576  Or hang on for the ride and keep the mortgage...
$1,052,426
$1,126,096
$1,204,923
$1,289,267 15th year earnings, $84,344. 
                  At this point, you are earning, on average, 4 times your annual principal and interest payment.
                  Think about that for a moment.
$1,379,516
$1,476,082
$1,579,408
$1,689,966
$1,808,264 20th year earnings.
$1,934,842
$2,070,281
$2,215,201
$2,370,265
$2,536,183 25th year earnings.
$2,713,716
$2,903,676
$3,106,934
$3,324,419
$3,557,129 30th year earnings.

What are the risks if you follow JL Collin's stock advice?

Well, the entire US or world economy could collapse and we could be in Mad Max times.   Nothing you did to save money for the future would likely matter.   So ignore this.  (Or stockpile ammo, food, hand tools, how-to books and medicine.   And move to a defensible house.)

At some point the stock market craps out like the Great Depression.  Golly , wasn't that horrible?   Well, remember that $1,100,000 to $7,700,000 spread in ending values I mentioned.   That included every 30 year period of time between 1871 and last year.   59 of the tested outcomes included the Great Depression.   And yet the money ended up at least doubling.

Actually, in your shoes, if you and your spouse keep your jobs, that's possibly the coolest thing that would happen.  Why?
Because you don't HAVE to spend any of the money, so you don't have to sell any stock while it is still low. 

So why is that so cool?  Because when you re-invest the dividends your stocks are earning you'll be buying more stock at a huge discount!   How neat is that?

What happens if you lose your jobs?  Well, you could use a year's earnings to pay your mortgage principle and interest payments and just delay the increase in earnings a year. 

I would hope, however, that if you've got a house you owe half a million dollars on that you have some other savings...

Of course, if you inherited this money at age 70, and have no kids, then worrying about optimizing for 30 years from now might be more trouble than it's worth. :)

Hope that gives you some food for thought!




 
Holy good God Gully. That's a lot of thinking. I'm going to take a nap now. In fact you made me so tired I think that I am just going to quit my job and live off the money. I have some big spending habits and I'm sure that I can spend it quickly. Hello isn't that what money is for anyways ? To spend and buy stuff and things and more things and stuff ?

Hotstreak

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Re: I have $500,000 roughly from an inheritance. What would you do with it ?
« Reply #18 on: October 01, 2016, 06:04:30 PM »
  ... what she said ...

Frankies Girl had given you some excellent advice.

You have a once in a lifetime chance.  Don't make a choice simply because you're too lazy to learn about the alternatives.   That's simply foolish.

To put it in face-punch worthy terms, "If being given HALF A MILLION DOLLARS isn't enough to motivate you to get off your ass and study, what the heck will?"

Spend several evenings or lunchtimes at work over the next couple of months reading the JL Collins stock series.   It's very straightforward.   It's written for regular people.   

Let's say you have a $500,000 fixed rate mortgage at 3% for 30 years.  That works out to $25,296 a year in P&I, the Principal and Interest portion of your mortgage.   (You'll still be stuck with taxes and insurance no matter what you do, so I'll ignore them.)

When you read up about the stock market, you'll learn that, over history, the stock market has earned 7% over inflation.
Some years it goes up way, way more.  Some years it crashes and burns 50%.  But over time, it's gone up 7% over inflation.   That's because the assembled brains, greed and hard work of the companies in this country has made that happen and are likely to continue to.  Our country is inventing multiple totally new industries per generation.   That's a phenomenal growth opportunity.

Now, presumably, you bought your house with the expectation that you could pay it off because you (a) made enough money, (b) expect to continue to make enough money to do so, and (c) haven't sunk yourself in so much other debt you can't make it work out.

What might happen if you invested it in the stock market per JL Collins' advice by the end of your 30 year mortgage?  Well, you might have anywhere from $1,100,000 to $7,700,000 worth of stock at that time.    That's based on a 90/10 stock bond split, invested for  30 years, based on the historical real results for every 30 year period of time we have data for.  Some of those time frames had up to 60% drops in value in just one year.  And yet over time the value of the investments climbed.

Here's what it would look like if each year could be reliably counted on to return 7% over inflation.  (It can't.)   But it still is very illustrative.

$500,000
$535,000  1st year earnings, $35,000
$572,450 
$612,522
$655,398
$701,276  5th year earnings, $45,858
$750,365
$802,891
$859,093
$919,230  10th year earnings, $60,137.  Getting close to double 1st year earnings.
                Your 30 year mortgage would now be 380,099.
                You could pay it off 20 years early and still have more than you inherited.
$983,576  Or hang on for the ride and keep the mortgage...
$1,052,426
$1,126,096
$1,204,923
$1,289,267 15th year earnings, $84,344. 
                  At this point, you are earning, on average, 4 times your annual principal and interest payment.
                  Think about that for a moment.
$1,379,516
$1,476,082
$1,579,408
$1,689,966
$1,808,264 20th year earnings.
$1,934,842
$2,070,281
$2,215,201
$2,370,265
$2,536,183 25th year earnings.
$2,713,716
$2,903,676
$3,106,934
$3,324,419
$3,557,129 30th year earnings.

What are the risks if you follow JL Collin's stock advice?

Well, the entire US or world economy could collapse and we could be in Mad Max times.   Nothing you did to save money for the future would likely matter.   So ignore this.  (Or stockpile ammo, food, hand tools, how-to books and medicine.   And move to a defensible house.)

At some point the stock market craps out like the Great Depression.  Golly , wasn't that horrible?   Well, remember that $1,100,000 to $7,700,000 spread in ending values I mentioned.   That included every 30 year period of time between 1871 and last year.   59 of the tested outcomes included the Great Depression.   And yet the money ended up at least doubling.

Actually, in your shoes, if you and your spouse keep your jobs, that's possibly the coolest thing that would happen.  Why?
Because you don't HAVE to spend any of the money, so you don't have to sell any stock while it is still low. 

So why is that so cool?  Because when you re-invest the dividends your stocks are earning you'll be buying more stock at a huge discount!   How neat is that?

What happens if you lose your jobs?  Well, you could use a year's earnings to pay your mortgage principle and interest payments and just delay the increase in earnings a year. 

I would hope, however, that if you've got a house you owe half a million dollars on that you have some other savings...

Of course, if you inherited this money at age 70, and have no kids, then worrying about optimizing for 30 years from now might be more trouble than it's worth. :)

Hope that gives you some food for thought!




 
Holy good God Gully. That's a lot of thinking. I'm going to take a nap now. In fact you made me so tired I think that I am just going to quit my job and live off the money. I have some big spending habits and I'm sure that I can spend it quickly. Hello isn't that what money is for anyways ? To spend and buy stuff and things and more things and stuff ?




Well, not exactly :).  Check out this blog for some thoughts: www.mrmoneymustache.com

Frankies Girl

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Re: I have $500,000 roughly from an inheritance. What would you do with it ?
« Reply #19 on: October 01, 2016, 07:07:49 PM »
Holy good God Gully. That's a lot of thinking. I'm going to take a nap now. In fact you made me so tired I think that I am just going to quit my job and live off the money. I have some big spending habits and I'm sure that I can spend it quickly. Hello isn't that what money is for anyways ? To spend and buy stuff and things and more things and stuff ?


Hmmmm. Troll-ish answer there. So sad.

planepoo

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Re: I have $500,000 roughly from an inheritance. What would you do with it ?
« Reply #20 on: October 01, 2016, 07:17:37 PM »
Holy good God Gully. That's a lot of thinking. I'm going to take a nap now. In fact you made me so tired I think that I am just going to quit my job and live off the money. I have some big spending habits and I'm sure that I can spend it quickly. Hello isn't that what money is for anyways ? To spend and buy stuff and things and more things and stuff ?


Hmmmm. Troll-ish answer there. So sad.
hmmmmm I think that you think too hard.

BTDretire

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Re: I have $500,000 roughly from an inheritance. What would you do with it ?
« Reply #21 on: October 01, 2016, 08:48:27 PM »
Holy good God Gully. That's a lot of thinking. I'm going to take a nap now. In fact you made me so tired I think that I am just going to quit my job and live off the money. I have some big spending habits and I'm sure that I can spend it quickly. Hello isn't that what money is for anyways ? To spend and buy stuff and things and more things and stuff ?


Hmmmm. Troll-ish answer there. So sad.
hmmmmm I think that you think too hard.
I don't get your response planepoo,
 Swordguy laid out what your money could do, it would be sad to let it set in a bank at .2%
and not grow. I'll wager that 80% of the people on this group have money invested in the stock market. There are people that can't tolerate any risk, if that's you, go about your life feeling comfortable with $500,000.
If your in it for the long term, risk goes with getting the reward. I went through the market decline in 2000, lost about $85,000, I went though the decline in 2008 and lost about $300,000, I stayed in the market and today I'm happy I did.
 You have got some good advice, wait before investing, study investing, jlcollins was mentioned, very good series.
 I would add this, watch out for sharks, they will act like they are doing you a favor, while turning your money into their money. This starts with commissions and fees, often yearly fees.
There are companies that get a 2% yearly management fee, That's $10,000 a year, even if they invest it and get zero growth, that's $300,000 over 30 years. More if they quadruple your money. A total stock market index fund could do that for you and more over 30 years at a yearly fee of only 0.07%.
               Good luck

frugaldrummer

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Re: I have $500,000 roughly from an inheritance. What would you do with it ?
« Reply #22 on: October 06, 2016, 06:02:23 PM »
Quote
Here's what it would look like if each year could be reliably counted on to return 7% over inflation.  (It can't.)   But it still is very illustrative.

$500,000
$535,000  1st year earnings, $35,000
$572,450
$612,522
$655,398
$701,276  5th year earnings, $45,858
$750,365
$802,891
$859,093
$919,230  10th year earnings, $60,137.  Getting close to double 1st year earnings.
                Your 30 year mortgage would now be 380,099.
                You could pay it off 20 years early and still have more than you inherited.

Just to make an apples-to-apples comparison:  If you instead decided to pay off the house with the inheritance, and then put the money you were paying on the mortgage into savings:  let's estimate that's $2500/mo or $30,000 a year, x 10 years at 7% growth rate = $432,714

So - if you invested the inheritance, you end up in ten years with $919,230- $380,099 = $539,131
If you paid off the house now and saved up what you were spending on the mortgage - you would have $432,714.
A difference of about $107,000, BUT with much less stress in that you would have the comfort of knowing your house was paid off (this has different value to different people).

Another option might be this:  Use HALF the inheritance to pay off half the mortgage (refinancing the mortgage in the meantime at today's lower rates and a lower rate because it's no longer a jumbo loan).  Invest the other half.

That would give you a lower monthly mortgage payment (making it much less stressful to think about getting through a rough patch of underemployment with lower fixed costs) AND would still have half the money growing in investments.  If you keep paying what you are currently paying towards the mortgage, the difference at ten years between the full investment option and this one should be about half the scenario above, or just $53,500.  To me that would be worth it to have the peace of mind to know that I wouldn't have to sell the house in a downturn.

MoneyStacher

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Re: I have $500,000 roughly from an inheritance. What would you do with it ?
« Reply #23 on: October 07, 2016, 04:44:53 PM »
I would say put the entire $500k into a Vanguard account invested in index funds. Low-cost and good market returns. You bought the house with the intention to pay the monthly mortgage, right? So do it. Keep paying the monthly mortgage because that is what you signed up for. It was a good deal when you went for it. Now, you have what you had before, but unfortunately, you don't have your Mom. Keep the money invested and thank your Mom big-time down the road. I've read most replies here and scanned others and I don't know your age. Say you are not even 30 yet, invest for sure and let that 500 go to 2M in 15 years. Say you are almost FI and you are 50, sell the house and invest the money and do whatever you want.

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Re: I have $500,000 roughly from an inheritance. What would you do with it ?
« Reply #24 on: October 08, 2016, 12:37:19 AM »
This:

Holy good God Gully. That's a lot of thinking. I'm going to take a nap now. In fact you made me so tired I think that I am just going to quit my job and live off the money. I have some big spending habits and I'm sure that I can spend it quickly. Hello isn't that what money is for anyways ? To spend and buy stuff and things and more things and stuff ?

Makes me think you can't do this:

I think that paying off my mortgage because its simpler and I would just collect the old payment that I used to make and also if I'm debt free that eliminates that need to make money. I think that in of itself is far simpler.

Villanelle

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Re: I have $500,000 roughly from an inheritance. What would you do with it ?
« Reply #25 on: October 08, 2016, 03:58:01 AM »
In reality, I'd discuss it with DH and we come up with a plan that would likely involve compromise.  But my plan going in to that conversation would be to dump it all in to index funds in a taxable investment account (retirement accounts are maxed). Husband would likely want to pay off what is left of our mortgage, and I'd be okay with that given that it is a relatively small amount. 

We might also consider buying an additional rental property once we move back to the States.   DH would probably want that, though it wouldn't be my first choice.





Metric Mouse

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Re: I have $500,000 roughly from an inheritance. What would you do with it ?
« Reply #26 on: October 08, 2016, 09:41:48 PM »
This:

Holy good God Gully. That's a lot of thinking. I'm going to take a nap now. In fact you made me so tired I think that I am just going to quit my job and live off the money. I have some big spending habits and I'm sure that I can spend it quickly. Hello isn't that what money is for anyways ? To spend and buy stuff and things and more things and stuff ?

Makes me think you can't do this:

I think that paying off my mortgage because its simpler and I would just collect the old payment that I used to make and also if I'm debt free that eliminates that need to make money. I think that in of itself is far simpler.

Astute observation.

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