If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!
I have started to do a segment on fridays called “Financial Fridays” where I will write about something having to do with personal or business finance. I have always been intrigued with money and making it work so this is a natural progression for this blog. If you have questions you want to submit just click the contact me link above.
The guy over at FreeMoneyFinance posted this question from one of his readers and asked for comments. I decided to answer it here for my Financial Fridays post.
my husband passed away dec 2007 i’ve just gotten 500k from life insurance the insurance agent wants to invest all of it and give me an allowance a month. I’m 40 two children who have their own 85k each when they hit maturity. I owe 230k on my house I have a job and ss for the kids untill they are 18 ( 9 & 11 now) I want to pay off my mortgage invest 150k for retirement and have the balance for emergency also smaller investments. I feel like he’s pushing me he also wants control of the childrens UTMA accounts once I have guardianship. What sounds right. I’m picking up the check today.
OK first things first… Never EVER take financial advice from an insurance salesmen. They are SALESMEN and are not looking out for your best interest. He wants to sell you products that are going to have horrible rates of return and anyone getting a commission on the advice they are giving you are not a true advisor.
Second thing is that you just went through a fairly tough emotional crisis in the losing of your husband I don’t care how sudden or not it is still hard. You need to put the money into a money market account and sit on it for 6 months. This will allow you to get your head on straight and figure out where you need to go next.
After that I would go ahead and write a check to pay off your house. You will be debt free at this point and then I would put about $15k in a money market as an emergency fund and then the remaining $255k in an investment account. I would suggest good growth stock mutual funds that have a 5 year or more track record and yield 10% or more on average. This will give you a good income of about 30k a year and with no house payment and your own income it will give you steady money for the future.
Oh and did I mention NEVER TAKE ADVISE FROM A SALESMAN!?!?!?!
Did I make myself clear? :-)
Comments
Excellent advice and thoroughly right on target. Hopefully this solid and conservative approach is heeded.
Solid advice indeed…it as if you are channeling Dave Ramsey himself. You must be a fellow DR follower, eh?
hahaha, yeah being in Nashville it is hard to miss him :-) Have been listening for about 8 years now so it is slightly ingrained in my head.
The only change I would make is to put the money in FIVE money market accounts that are FDIC insured.
Paying off the house would be contingent on the payment and interest rate. With $500k, you can be very close after growing it for a few years to being set for life. While it’s tempting to pay off the house, that could do some long term harm if her current income is enough to keep up with all the bills.
hi JJ, good advice. I feel for the lady. It’s good she had the life insurance policy in the first place, and that it was $500K instead of a “free” work policy that is 2 years salary or something. But its terrible to actually use it. One nice thing though that wasn’t pointed out is that life insurance proceeds are tax free (at least at this point). Imagine the added pain if the government took half of it!
I agree (1) DON’T listen to the salesman, (2) pay off the house (and leave it paid off!), (3) put some in an FDIC “emergency” fund, and (4) put the rest in a domestic stock INDEX fund (don’t bet on a single stock). One should also consider putting some in an IRA or ROTH though where it can grow tax-free for retirement.
Bottom line to all of us (at least those with kids). Get life insurance (and enough), pay the premiums every year, and pray you never use it!
Yeah, it reminded me that I needed to up my term insurance. I am going to work on a post today about the rates for term going down… so you might want to reapply for your term insurance.
-
About This
I'm J.J. Merrick, a Web developer from Nashville, TN. This is a blog, intended to be my venting station about all things technology. I will talk about the Internet, Web Development, ColdFusion, Flex, Ajax, etc.
