Kiki, It really depends. If you set aside all of the money you believe you will need for the balance of your life, any extra funds could be invested for your heirs. But make sure ALL of the capital you can possibly need is in low risk investments. Very sweet of you to think of your family, but you have worked hard, take care of yourself first.
Erin, you could take a look at Mint.com as a possible budgeting tool.
Here is a question from JeanO...
HI Javelin101. I'm sorry to hear of your loss. At 37 if you only have $25,000 saved for retirement, you are right to consider putting away the bulk of this inheritance for retirement. I would recommend finding a fee-only financial planner who can help you determine how much needs to be segregated for the long term and how aggressively you will need to invest it. Such a planner can also usually give you advice regarding specific investments for that money.
Amanda - You mentioned that you want to buy the Kiplinger recommended funds and then you mention buying shares in the same companies. I just want to clarify that you that the shares you referred to are the recommended funds. Check with the individual fund families to see if you can set up an account where you automatically purchase funds each month. With automatic purchases, some fund family allow purchases of a few $100/month. You should also be able to avoid transaction fees that your brokerage acct may charge.
Regarding which fund - a dividend fund will produce income, which will mean taxes. It is best to put your income producers into your retirement accounts and growth funds in taxable accounts. Look up asset location for more info.
Another question for the group from Brad...
Javelin 101, you are asking a great question. NAPFA advisors can do a retirement illustration for you, but the short answer is, it would be great for you to take a portion of the inheritance and put it in a retirement account. Frankly, $25,000 won't go very far in retirement.
JeanO, the depreciation is subracted from your original cost of the rental. For example, if your cost is 310,000 and you have rented it for 10 years with a total depreciation cost of $80,000 (land does not get depreciated), your current cost basis is $230,000. There is a wrinkle of course, if you are in a high income tax bracket, you might have not been able to take all of the depreciation on the property. That will carry over. Your accountant will have the current tax basis for you.
Here's another rental house/depreciation question...
Brad, check out NAPFA.org for one. You should also look at the CFP (Certified Financial Planner) website. Starting a discussion with a local NAPFA member would also be of value.
Hi Brad. Glad to hear you are interested in financial planning! Many colleges around the country now offer specific courses that, when completed, will allow you to sit for the CFP exam. If you can't find a set of courses near you, I also highly recommend the College for Financial Planning - they offer several certification courses and you can do them online or as self-study. They aren't easy and often each course takes up to six months to complete, but they prepare you well for the exam.
Hi Brad - This is a great field and we need more young people to help. Take a look at the CFP website to see the credentials required to get this designation. It is the 'gold standard'. Also take a look at the NAPFA website and the Garrett Planning Network site. Both of these organizations are fee-only planners, who have the clients interest first and foremost.
Brad congratulations, financial planning is the best career one could have. For 99% of financial planning firms, you will need to be certified as a financial planner (CFP) That typically takes 2 years to complete with 3 years of experience. I agree with George, talke to local NAPFA members, most will be willing to meet with you to give advice. Good luck.
With March Madness around the corner, here's a timely question from Marshall!
MMMM, those three ideas you proposed are mainly lifestyle questions. If you wait and leave it to your children in your estate, what are the costs of holding it until then. If you move into it to get residential status agian, it is a move (more money) sale of current residence with sales commission. Sometimes it is the least costly idea to just sell it and pay the piper.
Marshall - Yep - The IRS wants their piece of your good choices.
Here's a question for the group from juggling man...about an issue a lot of people are facing.
Marshall, does that mean you have picked NC State to win? If you are gambling and win over 1200, most places will give you a W2G. If this is a friendly neighborhood pool with a couple hundred dollars. Let your concience be your guide.
Marshall, I think perhaps I should ask you for some tips on my bracket!
But back to the topic at hand...
Here's a question from Mariette for the group...
Marshall has another question, about estimated taxes...
Juggling Man, or should we say "sandwich generation". You are in a common situation. I understand your committment to your mother, but it is a personal committment, not a legal one. Have you started with a plan? Choosing a retirement facility that takes medicaide? Looking at all of her assets, then talking to social security about her options for help. Having a plan in hand will make that late night call that mom is in the emergency room easier to handle. But, don't feel guilty, you are right to be concerned about your financial future as well.
Juggling Man - You are definitely part of the sandwich generation. There's no one right answer here, but if your mother is in the low income bracket, she may qualify for a variety of social services that can help her effectively and at low or minimal cost. I would recommend going onto your state's Medicaid website to see what types of services might be available.
Hi Juggling Man
You are in a very difficult spot. As much as your mom is expecting your help, honestly, you need to think about yourself and your family. You could check into Medicad for your mother. This isn't ideal, but it provides health care with few assets.
Regarding saving for your retirement vs college. There is a common phrase "you can't get a loan for retirement' . So again, you need to think about yourself first. As a parent, I understand this isn't easy (and I'm guilty myself of emphasizing my kids over myself). I'd suggest you sit down with a fee only planner to look at all the things you are juggling and see what can work, and what can't. Knowledge is power.
Marshall, in a word, probably. It depends on if you met the requirements for estimated payments using 2011 tax information. Look at your tax return and it will plainly itemize penalty and interest charges. OR, just ask your accountant.
A followup for Deborah from JeanO
Yes, rental properties are taxed at Capital Gain rates. There are several rates depending on your income level. Talk to your cpa before putting the rental property on the market. No surprises then.
Mariette - LTC insurance in your 40s may be a bit early. Do you have any factors that would cause you to think you may need it soon? (May be ineligible if so). The LTC insurance industry is going through massive changes right now. (My policy premium doubled this year!) Typically, if you are in good health, I suggest someone wait until mid 50s to early 60's.
Kiki, It really depends. If you set aside all of the money you believe you will need for the balance of your life, any extra funds could be invested for your heirs. But make sure ALL of the capital you can possibly need is in low risk investments. Very sweet of you to think of your family, but you have worked hard, take care of yourself first.
HI Javelin101. I'm sorry to hear of your loss. At 37 if you only have $25,000 saved for retirement, you are right to consider putting away the bulk of this inheritance for retirement. I would recommend finding a fee-only financial planner who can help you determine how much needs to be segregated for the long term and how aggressively you will need to invest it. Such a planner can also usually give you advice regarding specific investments for that money.
Amanda - You mentioned that you want to buy the Kiplinger recommended funds and then you mention buying shares in the same companies. I just want to clarify that you that the shares you referred to are the recommended funds. Check with the individual fund families to see if you can set up an account where you automatically purchase funds each month. With automatic purchases, some fund family allow purchases of a few $100/month. You should also be able to avoid transaction fees that your brokerage acct may charge.
And in case anyone is wondering what Amanda and Andy were referring to with "Kiplinger recommended funds that pay dividends" I'm betting that they're these: Great Funds for Growing Dividends.
