Author Topic: What should I do with an inheritance?  (Read 14225 times)

Fi(re) on the Farm

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Re: What should I do with an inheritance?
« Reply #50 on: October 27, 2015, 06:33:37 PM »
I'm with NoraLenderbee, pay off the loans with over a 4% interest rate, max out your retirement, put some aside for emergencies and then breathe for just a bit. Talk with your wife and do some serious thinking about what you want from your lives. Once you've lowered your debt load you may be able to focus on what's next. You've had a stressful few years and you need to give yourselves the opportunity to relax a little.


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Re: What should I do with an inheritance?
« Reply #51 on: October 27, 2015, 06:43:24 PM »
This is a no-brainer. Pay off all of your debt.

Don't even bother trying to analyze the cost/benefit of the interest rates versus investing.

I just bought a reasonable used car financed at 1.99%. I am pouring money into tax-advantaged retirement accounts instead of paying cash for a car. Given the choice of:
Max IRA at $5500
Buy car for $6000 cash

I think option 1 is preferable. I'm sure others will disagree.

Red Beard

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Re: What should I do with an inheritance?
« Reply #52 on: October 28, 2015, 10:44:49 AM »
The first thing I would do is get a very clear understanding of your loans.

Federal loans under Income-Driven Repayment are forgiven after 25 years, even if you borrowed before 2014. This could mean that the best course of action would be to pay off the private loans first, address the car issue and save the rest. The could depends on a number of factors. Would you continue to qualify for IDR if you paid off the private loans? Will your future income grow at a more rapid rate than your loan interest, meaning that at some point you would no longer qualify?

Without knowing the answer to those questions, I would probably pay the private debt as well as the 6.8% loans. I would put the rest into savings (the IRA advice you've already gotten). I would also absolutely move to an area where jobs are more abundant before considering grad school.


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Re: What should I do with an inheritance?
« Reply #53 on: November 27, 2016, 01:23:46 PM »
+1 to Red Beard, along with the other good advice on this old thread. For others viewing this:

Interest will continue to accrue on Income Based Repayment plan.

You may owe taxes on the forgiven amount after the 25 - the amount forgiven is considered income. With interest continuing to accrue, that amount could be very large.