[USER]

I inherited 85K and will have 75k to do something with. Our debt is our home with 76.5k balance but is only 3.5% interest so I’m thinking I should bypass paying that off and put the $ into CD with 4.3% interest?

I am very conservative so am not a fan of stock market.

What suggestions can you give? Age 32 with 7 kids age 16 and under so don’t really want the $ in an IRA that I can’t touch without penalty until age 59.5.

Annual income for home is 100K so the tax bracket doesn’t seem to matter for determining what amount I withdraw from the Inherited IRA the $ is currently in.

[Becky]

Pay off the house, then use that monthly payment amount toward savings. Nothing like the feeling that you are dept free.

[Jaide]

I would max out the Roth for the year (7500??), pay off half of the house balance, and put the rest in a high yield savings account or CD.

Maybe half in HYS and the other half in CD.

[Kathleen]

I don’t think you need a financial advisor, it sounds like you know what you are doing.

I paid off my house at the age of 37, and I suggest you do not pay off your house with that kind of interest rate.

I would probably put $30,000 towards the house and take the rest and put it in a CIT online savings account. Use that account to make your mortgage payments.

I would not tie that money up in a CD.

If I could do a do-over, I would not have paid my house off completely because I had an interest rate of 2.875.

I would have kept my money in the bank, earned interest on it and would have been able to affford a pre-owned car in cash.

Loans for anything now are insane. Take advantage of your low interest rate and make your money work for you.

[Christy]

CD or high yield savings acct. I wouldn’t pay off a house that has interest lower than what I can earn.

[Nicole]

Pay off mortgage and secure your home. You never know when a life changing illness or accident could make you unable to make those payments.

I became ill (unexpectedly) 3 yrs ago and the health problems keep coming.

I’m 53, not able to work but I KNOW I have a place to rest head regardless of what comes my way.

[Stephanie]

Pay off the mortgage. Use the money you normally pay for the mortgage and invest that.

[Riley]

I would find a high yield checking or money market account that’s paying more than 3.5% and put the mortgage amount in that account. Autopay the mortgage from that account.

For every dollar you pay interest on on your mortgage, you’ll earn more than that in the deposit account so you’ll end up “paying off your mortgage” so you don’t have to pay that out of your income every month, but you also don’t spend all that money immediately in case you need it for something else.

At 3.5% interest, I would be holding onto that for as long as possible

[Stephanie]

I have seen people inherit money or get money from a lawsuit and not pay their mortgage off and each person wished they had.

You never know what the future holds and having a paid off home which is an investment is called future security.

[Stephanie]

I know it goes against conventional wisdom. But the best thing I ever did was pay off the house.

[Annette]

I agree don’t pay off the house if you can find a higher interest rate elsewhere. I would compare CD rates with High Yeild Savings rates.

HYS are completely liquid when CD are for a term with a penalty for early withdrawal.

[LoriJeanne]

For a portion… I like longer CD but stagger them. Take the $ alloted for CDs and open a 12 month CD each month with 1/12 of the money. Then they just keep rolling over.

Longer CD often have higher interest rates and you can always withdrawals with 30 days. Of course look at what is available.

Sometimes different terms and different amounts do better than others.

Another thing to consider, with money you want access to is Money Market.

Usually higher interested but accessible (I think mine has a six times per month withdrawal limit). Some of those require a higher balance like $10k.

That gives you time to look at longer term solutions while still making interest in the meantime.

[Jolie]

Pay off your house. To live debt free is amazing and the burden of debt is heavy on you. Then start investing with your incoming income.

If you have no debt… including cars.

Then you can retire early and enjoy your life sooner

[Carlz]

I would pay off your mortgage.
You are looking at the interest rate and the spread, you could make in a CD as if that is life changing money.

The spread is 0.7%.
$532/year.

If you pay off your mortgage you gain back ALL, the mortgage payments you make in a year.

Plus, the certainty that you actually own your home instead of only partially owning it while the bank still owns part…

What could you do in your life if you got to keep all those mortgage payments over the next however many years?

[Amy]

While paying off your mortgage may make sense on paper, the peace of mind it gives you and financial freedom are huge and priceless.

You can use the money you normally would have used to pay the mortgage to ramp up your retirement contributions, save an ample emergency fund or contribute to laddered CDs, kids college fund etc.

With inflation most likely going up soon with tariffs looming, the extra money is also a buffer for that.

[Brenda]

This is amore information needed situation. Do you have at least 6-12 months in an emergency fund? Are you on track with your retirement savings? How about the kids college funds?

Any other debt such as credit cards, car loans, student loans?

Are you using the standard deduction on your income taxes or does itemizing on a schedule A give you a larger write off? Lots to consider.

[Peggy]

Pay off the mortgage. First, you’re making 3.5% minimally on the money when you pay the loan off, just as if you had it in a savings account.
Second, peace of mind!

To be 32 with 7 kids and a paid for house? Priceless.

[Staci]

Not knowing your area or assuming the housing prices, but if possible, consider investing in real estate. If you could buy a property to rent (maybe in a nearby city) or even a mobile home, you likely will reap the best return on your investment.

I went from being bankrupt after a divorce to saving $60,000 to purchase my first property (15 years ago), which I sold a year later for a 33% profit (PLUS a year of rental income), then re-invested it, and have been repeating (renting and selling) ever since.

That original investment property has now bought me (paid in full) 2 properties worth over $250,000 and I’m getting monthly income (over $3000 a month) from 4 units.

There are hassles being a landlord, and there certainly are maintenance costs, but if you do your research and invest wisely, it’s a great way to grow that inheritance (each year, I net over 10% return on investment). Best to you!

[Teri]

If the money is in an IRA, the amount of the distribution will be taxed as ordinary income.

It would be smart to have your tax preparer run an estimate of what you will owe before taking the distribution.

[Sharon]

With 7 kids at such a young age, I’d definitely pay off the house. Life gives you plenty of curveballs.

Be prepared!

[Mindy]

A lot of interesting responses here. I’d chat with a financial advisor first. I’d also write out a list of present and future financial obligations with their timeframes.

Many people said to pay off the house but I’d disagree.

There are many videos which explain why not to do this, but I understand the feeling of one less bill.

It’s great to have a cushion of money sitting there especially with a large family. And as usual, I’d do a pros and cons list.

[Lynn]

Pay off the house. You will be free not having to pay a mortgage payment! Try to stay debt free, your money goes further.

[Amanda]

Talk to a financial advisor about a Maximum Funded Tax Advantaged (MFTA) life insurance policy which is a type of Indexed Universal Life (IUL) policy that offers tax-advantaged savings.

MFTA policies grow tax-deferred, and the policyholder can access the gains tax-free. I.e. take out a loan against the cash value.
How it works

The policyholder pays into the policy each year, contributing more than the amount needed to cover the cost of insurance.

The excess premium payments build cash value in the policy.
The cash value grows through interest based on the performance of a stock market index.

The policyholder can access the gains tax-free.
If the policyholder passes away, the death benefit is paid to their beneficiaries.

Who it’s for
MFTA policies are best for people who have accumulated a substantial amount of money for retirement.

They can be a good option for people who want a safer and more secure financial option.

Benefits Tax-advantaged savings, Predictable rates of return, Liquidity, and Death benefit to beneficiaries.

[Mary]

Put the money in a high yield savings or something similar in your name only. Do not commingle this money with your husbands money. Once you do that, he gets half of something happens and you divorce.

Don’t pay off the house as he will get half of you divorce. While you guys may live to be a ripe old age together, you also may not.

In 5 or 10 years he may decide he wants out. Or you might. If you do divorce later you will have money saved to buy out his portion of the house if you want to.

If you do need to use some of the money for joint things later. Figure out how to move some of the money without it all being considered marital property.

You will also need to figure out how to pay the taxes on the money without it all being considered marital property.

Just saw where you have student loans. I would pay those off even though they are on hold now.

Wishing you the best with your money and marriage.

[Author]

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