Sure. I'm 41. I have a bachelor's degree in communications with a minor in visual arts. Currently working as a print production artist for a book advertising agency. I make about $45K/year, which is the median salary in NYC (last I checked). I have absolutely no debt. My own personal savings aren't incredible. I have $24.4K in an IRA which I'm not touching. I have about $9.5K in my checking account. I'd be willing to invest most of the checking acct. funds.
Here's where my inheritance is:
$95K sitting waiting in a "high apy" (highest I could find) savings account.
$142.5K in an Inherited IRA. There's no inheritance tax on this money, but I'd have to pay income tax on whatever I pull out. I worked out the numbers with a financial planner friend of mine. We think I can pay cash up to around $200K for a home and still have plenty left to pay the income tax for the Inherited IRA. He thinks I should buy.
Tapping an (inherited or otherwise) IRA comes with
two caveats:
you'll be hit with the early withdrawal penalty of around 10%, and you'll also be hit with income taxes as the amount removed (your taxes will reflect you "made" amost 200K in one year! Ouch!) that will count towards your income... so that will slam you into a tax bracket MUCH higher than you are now if you clear out that account to purchase a house with it. I would strongly advise against doing this. You won't get a "first time homebuyer" break on anything removed since this is an inherited IRA (not one you opened and funded yourself).
http://www.investopedia.com/ask/answers/03/062303.aspYou also are 41 and have almost no savings/investments on your own. Just over $30K - That's not good, even if you're not planning an early retirement. I understand the draw to purchase a house, but I don't think that it is a good idea to rob that IRA and pay out large amounts of penalties and tax on it. At the most, I'd run the numbers on putting a down payment of around 100K (the cash in the high yield + a bit of your own cash) will get you a decent mortgage rate that is comparable to your current rent. Otherwise, I wouldn't do it.
You're going to be taking a required minimum distribution from the inherited IRA once a year minimum (please tell me that someone has already set that up for you cause you'll be forced to take the entire account out in a 5 year period if not), and you can roll that money to a Roth IRA (after having taxes taken out) and start building up a tappable retirement vehicle. Don't tie up the IRA money in a house purchase that may or may not be a decent investment - especially when it will cost you so much right up front.
Your friend/planner whatever isn't quite thinking clearly if he said this is a financially sound move. Deliberately taking all that money now will rob you of thousands of dollars (tens of thousands really) it is the opposite of "tax efficient" advice.
Your distribution is based on your age, and for that amount, that's something in the range of $3K a year. Ask the company holding the IRA to deduct taxes at your current rate (15%?) and boom, done. It will be like a nice raise each year, and you can probably still even stay in the same tax bracket if you bump up your 401K contributions to drop your taxable income. Versus taking out 140K now,
losing 10% off the top ($14,000!!! NOOOOO!) and then paying taxes on 140K + your regular taxable income ($45K)... dude, that's thousands of dollars just wasted because you think a house is a good idea.
So basically, buy a house if you can use the ready cash and get a decent place and affordable mortgage. Use that inherited IRA correctly - take the RMDs (you could even up the amount taken to fully fund a Roth IRA, but do the math to figure out how to keep yourself in a low tax bracket!), roll them into a Roth IRA each year, and pay tax on the distributions up front so it's not a headache come tax time. And you might just get to have your cake and eat it too...
And it goes without saying that you'd need to do some research on how to invest if you haven't already. JL Collins has a great stock series, and it's easy to move IRAs and such accounts around to someplace like Vanguard and invest in index funds... lots of posts about that stuff on here.
http://jlcollinsnh.com/stock-series/https://turbotax.intuit.com/tax-tools/calculators/taxcaster/Try playing with the numbers in this to see what you'd be facing as far as taxes owed and tax rates. It could be pretty scary.
And finally, I'm very sorry for your loss. Both parents in a short time has got to be hard to deal with.
Edited to strike thru the inaccurate info pointed out by Beltim.