Sadly, I lost my mom to pancreatic cancer a couple months ago. I'm an only child and the last remaining heir and have therefore assumed ownership of an IRA with ~$130,000 in it.
Typically, I would lean towards leaving the vast majority of this money alone, perhaps rolling in to my 401(k) or similar. However, my wife and I are house hunting in an expensive market (Boston) and if we put the money towards a down payment on a home we would of course save money on interest over the life of the mortgage, and give ourselves some buffer in our emergency savings.
For the sake of this discussion, let's assume our new home costs $450,000. We have about $120,000 saved (not counting this new IRA and retirement savings) so the 20% down payment + closing costs are going to come pretty close to wiping out our savings.
If we were to take out all of my Mom's IRA it looks like I'd be left with close to $100,000 after taxes. I'm basing this off of the assumption that the $130,000 would be added directly to our AGI and we'd be paying 24% on it based on the new tax brackets.
Still using this $450,000 house assumption, we could now have a down payment of something like $180,000 and still have $40,000 left in savings. Our mortgage would be $270,000 rather than $360,000. We'd have lower mortgage payments (obviously) and maybe we could even look into a 15-year mortgage.
I'm not sure what to do though, as:
A) I don't know if my tax calculations are correct. It seems simple enough, but even tax lawyers don't know what's going on with the new tax code right now, so I could definitely be missing something. I do my own (simple) taxes and have never had a tax advisor so I don't have an easy person to turn to.
B) I hate to spend all of that money in one lump sum. I am not sure how much my emotions are tied up into this though - I'm essentially spending my parents' life savings so it is hard to let go of.
C) I will have some new expenses as I've also inherited my parents house. These are minimal though as it is paid off and in rural Maine so I'm looking at less than $2000 a year on taxes and property insurance. I can't see how owning the house costs me more than $5000 a year on average, and I could eventually rent it out some as it is in a winter resort area. If I could break even on owning it I'd be thrilled.
For some additional context, my wife and I make ~$150,000 annually pretax. We have no debts except for ~$10,000 left on my wife's car and paying cheap rent, so we're saving ~$2000 a month without even being as frugal as we should.
I hope I've included all of the needed details, and many thanks for any advice/thoughts you have.
Submitted March 02, 2018 at 09:06AM by blake_ski http://ift.tt/2FeNwRQ
