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-   -   Coming out of the shadows (http://www.early-retirement.org/forums/f26/coming-out-of-the-shadows-17275.html)

cube_rat 07-12-2005 07:09 PM

Coming out of the shadows
 
Hi all,

I've been lurking on this site for several months. I'm truly impressed with the information here. I used to post on Motely Fool but decided the forums were not my cup of tea.

Anyway, I'm looking for investment advice. We recently received a small windlfall of 75K and I'm in a quandry as to what to do with the money. :P Here's our situation:

I'm a 43 female working in the high tech industry. My salary is 115K. My husband is self employed and makes about 30K a year. We own a condo that's recently been appraised for $550,000, our mortgage is $380,000. We a car loan for $14,000 at 1.9%. Our cc debt totals $8K which is at 0% interest. My 401k is 28K (pathetic!) and I have about 20K in stock options.

I'm trying to figure out what to do with the 75K. I currently have it sitting in an ING Direct account. However, with each passing day I can't help but think that I could be getting better returns on this money. Can someone guide me on a better investment vehicle(s)?

Thanks so much.


MRGALT2U 07-12-2005 07:15 PM

Re: Coming out of the shadows
 
Quote:

Originally Posted by cube_rat
Hi all,

I've been lurking on this site for several months.* I'm truly impressed with the information here.* I used to post on Motely Fool but decided the forums were not my cup of tea.*

Anyway, I'm looking for investment advice.* We recently received a small windlfall of 75K and I'm in a quandry as to what to do with the money. :P Here's our situation:

I'm a 43 female working in the high tech industry.* My salary is 115K.* My husband is self employed and makes about 30K a year.* We own a condo that's recently been appraised for $550,000, our mortgage is $380,000.* We a car loan for* $14,000 at 1.9%.* Our cc debt totals $8K which is at 0% interest.* My 401k is 28K (pathetic!) and I have about 20K in stock options.*

I'm trying to figure out what to do with the 75K.* I currently have it sitting in an ING Direct account.* However, with each passing day I can't help but think that I could be getting better returns on this money.* Can someone guide me on a better investment vehicle(s)?*

Thanks so much.


Not enough info. For example, we need more on where you want to be in 2, 5 , 10 years, etc.

JG

cube_rat 07-12-2005 07:28 PM

Re: Coming out of the shadows
 
I want to retire by 55!!!! How's that for being specific. I feel so hopeless because my 401k is truly pathetic. I had financial difficulties stemming from two bad marriages which resulted in having zero retirement at the age of 40.

retire@40 07-12-2005 07:46 PM

Re: Coming out of the shadows
 
Quote:

Originally Posted by cube_rat
We recently received a small windlfall of 75K and I'm in a quandry as to what to do with the money...We own a condo that's recently been appraised for $550,000, our mortgage is $380,000.

Just pay down the mortgage by $75K.

cube_rat 07-12-2005 07:58 PM

Re: Coming out of the shadows
 
Quote:

Originally Posted by retire@40
Just pay down the mortgage by $75K.

And what would be your argument for using the 75K to paydown the loan? I'm all ears....

Caroline 07-12-2005 08:16 PM

Re: Coming out of the shadows
 
Hi!

Don't know much about where you should invest, but I can't help but notice (as a 48 year old cube rat myself, also working in IT) that 20K is in stock OPTIONS.

I've learned not to count that as real money until a week after I exercize the options and the money hits my bank account. Are you at a point where you can exercize? Does it make sense to cash in on at least some of that and put it somewhere safer? Maybe with $95K to invest, you'd feel better about putting some of it in riskier stocks and the rest in bonds, MM, etc - in other words, in a reasonable asset allocation.

I don't pay attention to rules for marrieds, since I'm single, but does yoru total income allow for opening a ROTH? From what I read on this board and elsewhere that's a good thing to have.

Just idle thoughts, FWIW. Best of luck!
Caroline

Brat 07-12-2005 08:59 PM

Re: Coming out of the shadows
 
You need to talk to a CPA who understands the details of exercising options. Lots of tec folks got upside down with the tax folks in recent years. One sign of when to cut an run is when there when a CFO leaves.

wabmester 07-12-2005 09:45 PM

Re: Coming out of the shadows
 
Quote:

Originally Posted by cube_rat
And what would be your argument for using the 75K to paydown the loan?* I'm all ears....

You didn't mention what your mortgage interest rate was, but it's probably higher than what you're getting from your ING account.* *Paying down the mortgage is a simple way to invest if you can't find a better yield than whatever your mortgage rate is.* (SG, I think this is your cue.* :))

wildcat 07-12-2005 10:11 PM

Re: Coming out of the shadows
 
Si Si more specifics on the mortgage....

Do you have an IRA? Reco you start one if you haven't already. It won't shave too much off the 75k but excellent retirement vehicle

You may be low in retirement savings but you can add catch up contributions once you hit 50.

retire@40 07-12-2005 11:40 PM

Re: Coming out of the shadows
 
Quote:

Originally Posted by cube_rat
And what would be your argument for using the 75K to paydown the loan?* I'm all ears....

The goal is to maximize net cash flow over your life. If your mortgage rate is in the the 5% to 6% range, that is the best place to give you a guaranteed savings based on all the info you provided. Plus you are reducing your debt. Most FIRE people want to be debt free. It's a comfort thing.

sgeeeee 07-13-2005 12:35 AM

Re: Coming out of the shadows
 
Quote:

Originally Posted by wabmester
You didn't mention what your mortgage interest rate was, but it's probably higher than what you're getting from your ING account.* *Paying down the mortgage is a simple way to invest if you can't find a better yield than whatever your mortgage rate is.* (SG, I think this is your cue.* :))

You've covered it, wab. Paying down mortgage probably makes more sense than leaving it in an ING account unless you have a really low interest mortgage. The fact that you have the money in an ING account and are asking this board for advice probably means you would not be comfortable trading risk for reward by investing that money in an investment that is likely to pay off long term.

But I would provide this observation . . . Advice on this board is free and it is often worth every penny of that. :laugh: :laugh: :laugh:

haha 07-13-2005 12:48 AM

Re: Coming out of the shadows
 
Everyone sees things differently. I would not pay down the mortgage if it is less than 6% fixed. If the housing market collapses big time, you will have greater flexibility. Esp. if you are in California.

I would earmark enough to pay off your CC debt when it is no longer at 0%, in case you can't roll it that cheaply again. I would set aside some money to buy your next car for cash. Your interest rate on the car loan is great, but it may not be available the next time around. And if it is, it could be better for you to elect the price reduction and pay cash.

Enough cash to do these things IMO should be kept in short duration fixed instruments. If it were me, that is what I would do with all of the $75,000. You don't need investments so much as you need a cushion to get your finances in order.

Haha

preben 07-13-2005 02:12 AM

Re: Coming out of the shadows
 
Some good replies already but first of all: you are CERTAINLY not doing badly considering you have a networth of $200-300K today and ample oppurtunity to increase savings further.

Pay of credit card debt followed by an evaluation of tax-sheltered options vs paying of chunk your mortgage. Cheers!

justin 07-13-2005 11:50 AM

Re: Coming out of the shadows
 
I was faced with a similar decision recently. I sold my condo free and clear and received $93,000. I put $56000 into the market, mostly stocks (some stock/bond blend funds though). I paid $15000 towards my mortgage. I put $9000 into ING direct that I'll invest in my 401k over the next 6 months. I kept $5000 for "emergency money". I put $8000 more into ING direct that I'll use on 1/1/2006 for the 2006 Roth IRA contribution for wife and I.

A little here and there.

The mortgage prepayment amounts to 12% of what I owed on the mortgage. I've got (or rather, did have) 29 years left on the mortgage, but I don't plan on being in the rat race that long, so I'm trying to pay that off in the next 10-15 years. My mortgage is also adjustable rate, but with good terms the next 5-7 years. I figure if the rate jumps up, I can pay it off sooner. I think paying what I paid on the mortgage actually shortened the length by 5 years or so.

As to what you do with your money, that's your call. I just wanted to let you know how I approached the issue.


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