So my father just retired at 55 and recently got 100k
New York, NY · Member since 2017 · 81 posts · 19 votes
Not being real estate, what’s his best move with this money. With his retirement he is comfortable to live but he’s trying to really use this to his advantage. He asked me and I didn’t have a great answer so I’m here.
initially I thought put it right in index funds that are low currently but then I thought maybe starting a Roth IRA for him or his wife who still works might be better since after 59 1/2 it will be tax fee. Thoughts , ideas will be appreciated
What's your father's risk tolerance and desire to get in to real estate. Purchasing a rental would be a good investment but only really if your father is excited about it and sees the value.
If he's looking for passive income from real estate, you could look at an REIT or investing in a syndication. Meet some folks at REI meet-ups, qualified and vetted investors, who need capital for large projects.
What's your father's risk tolerance and desire to get in to real estate. Purchasing a rental would be a good investment but only really if your father is excited about it and sees the value.
If he's looking for passive income from real estate, you could look at an REIT or investing in a syndication. Meet some folks at REI meet-ups, qualified and vetted investors, who need capital for large projects.
You have not provide enough information to provide much guidance. What is father age? is he retired already? if not when does he plan to retire and what is his net worth. Are you saying his retirement is already fully funded? do your parent have an emergency fund? How much money do your parent need to live off per month? is there house paid for? do they have any debt? What is that debt and at what interest rates and duration.
Does he have some specific goal or objective for this money, what is time horizon he wants to invest it? Is he an accredited investor?
I would probably put 20k, 10k for him and 10k for you mom into I-bonds without knowing any of the above information.
You can put it in an index fund regardless if it is inside a regular IRA, ROTH IRA or regular brokerage account. There are limits to how much can put into an IRA or Roth IRA per year.
@Chris Breezy What is his financial situation? If he got 100k and has 10mil doesn't matter if he got 100k and now he has 101k much bigger deal. Since he retired I assume he already had a plan financially for the rest of his life. Can he just lump the 100k into the existing plan and not complicate things?
Without any of these @Randy Bloch I bond comment is pretty spot on as they are great hedges against inflation. And without any goal or scenario that will be the best way to make sure the money has the same buying power.
Hi Chris,
When your Father was 18 in 1985, adjusted for inflation that windfall would be about $38,000.
Inflation just recently ate up 10% and will probably eat up even more (and I remember when the US Government was sending money out to people freely which is the opposite of inflation, but that was a unique time and we are not likely to see that ever happen again--so I'm not really looking at that).
Where I'm going with this, is do you and your Father believe given say another 35 years, you and he could turn $38,000 into $100,000 (well $100k into whatever inflation adjustment comes out to be)?
If so you will still have your $100,000 to spend on something, but no profits to show for your efforts.
Maybe if Real Estate is not your thing, have you guys thought about maybe buying a small store like a close (used don't wanter) 7/11 in a safe neighborhood, and have family work there (I don't know if $100k would get you into a 7/11), but just saying...because then he has a steady cash stream (for travel, a new car, dinner out, etc...) and the business (if ran right) should hold it's value against inflation.
But then again that's not retirement.
Just my 2 cents.
Good Luck!
A few things to talk through. In my head, when I hear someone "got $100k" or another large chunk, I assume it to be in a non qualified account. IE, not a 401k or IRA. Meaning it has different tax rules.
If your dad is retired and your mom is still working, it's possible that they are in a fairly low tax bracket. When I have clients in a low tax bracket and a decent chunk of money available outside of a 401k or IRA, I talk them through potential partial roth conversions.
The theory is that any money your parents saved into their 401k's while working was probably done pre-tax & saved them potentially around 22% in taxes (most common joint tax rate). If they are retired & now in the 12% bracket, they could convert funds from their IRA/401k over to a Roth. Use the $100k in taxable money to help pay the taxes & anything they need to live. Doing this locks in the 10% tax arbitrage gain (they saved 22% initially & paid 12% upon conversion).
This is obviously frought with assumptions... I echo with everyone else here though, there is a lot of info missing to make an accurate recommendation. I'm just throwing out another idea that is not commonly discussed.
You have not provide enough information to provide much guidance. What is father age? is he retired already? if not when does he plan to retire and what is his net worth. Are you saying his retirement is already fully funded? do your parent have an emergency fund? How much money do your parent need to live off per month? is there house paid for? do they have any debt? What is that debt and at what interest rates and duration.
Does he have some specific goal or objective for this money, what is time horizon he wants to invest it? Is he an accredited investor?
I would probably put 20k, 10k for him and 10k for you mom into I-bonds without knowing any of the above information.
You can put it in an index fund regardless if it is inside a regular IRA, ROTH IRA or regular brokerage account. There are limits to how much can put into an IRA or Roth IRA per year.
Not being real estate, what’s his best move with this money. With his retirement he is comfortable to live but he’s trying to really use this to his advantage. He asked me and I didn’t have a great answer so I’m here.
initially I thought put it right in index funds that are low currently but then I thought maybe starting a Roth IRA for him or his wife who still works might be better since after 59 1/2 it will be tax fee. Thoughts , ideas will be appreciated
Chris -- read the above replies to understand why there isn't sufficient detail to offer opinions on where to put the money. You should probably sit down with him and walk through the posts in this forum to map out ideas.
Does he have debt? If so, how much and what are the terms of the loans? Does he have other obligations (alimony, etc.)? Does he need some of the money short-term for some needs or wants -- and if so, how much? @Randy Bloch offers a great idea with I-bonds (treasurydirect.gov) to park money for him/spouse/kids/business/trusts to at least tread water with inflation. Look up the rules for an I-bond -- understand that is $10k/yr per individual and entity. Yep, if he has a small side-gig business or a living trust, those legal entites can also contribute to the max.
You can do a Roth with this money only if it was earned income as contributions can come from only two sources outside of the Roth: earned income (not dividends, interest, rental payments, lottery winnings, black market dealings, etc.) or rolled over from another retirement account. As mentioned, look up the rules for a Roth. What would you invest within the Roth? Some investors like to be as diversified as possible with funds like VTI within tax-advantaged accounts or simple active trading accounts. Look up VTI's long-term historical performance to see how it behaves compared to inflation. However, it'd be wise to also have an expectation that VTI might tread water or even decline by another 10% from November highs for a few years until we work out from under the current economic cycle. As such, I am NOT offering investment advice, just thought experiments. What is your dad's long-term investment horizon? Does he expect to be around for another decade or three?
You're here on a real estate forum. Does your dad want to entertain private lending, either on his own or partnering with hard money lending pools? Who at your local REIA is playing in that space? Or as @Scott Mac suggests, start a business. Good work seems to keep people alive longer than idle retirement, IMHO.
@Chris Breezy any advice without more knowledge is dangerous, as I think you know and others have pointed out.
So sticking to a real estate perspective, if he owns his own home the biggest bang for the buck is likely to be a purchase of a home in conjunction with a sale of primary residence (usually a no tax event up to 500k gain if married).
Can he/they substantially decrease their cost of living and/ or increase their quality of life by using the 100k to juice such a change? 55+ community, multi, downsized condo with some cash left over etc. lots of options.
HMMV and lots of good options out there. Beware of advice from people selling you one of them :)
Hi @Chris Breezy! Congratulations to your dad. He may want to check out Jim Pfeifer's Left Field Investors to get ideas about passive investing. Whether he is accredited or not, there are lots of opportunities out there. He may want to check out some of the crowdfunding sites as well. Good luck!
@Chris Breezy - one other item we didn't touch on is healthcare. Assuming he is in the US, does he have a HDHP? And if so, does he make annual contributions to an HSA for himself or family as allowed? If so, is this into a savings or investing type of account. Maxing out that contribution annually, and investing wisely, is a valuable wealth retention/building tool. Granted, it will consume a small fraction of the windfall amount, but this tool should be on many folks' radar.
Leave New York State and move to Florida.
With real estate it differs for everyone. If you are looking at a long term rental, you need to put down some money to buy one and get a mortgage. If he's retired, that may be a problem. On the other hand if he pays cash, he's putting a lot of money into the home and you have to run the numbers to see if what he gets at the end of the day is a good return. If he does buy a place, I don't know what $100K buys you where he lives. Do not buy a cheap house as they may look good on paper, but they cost you more in the end with higher turnover and bad tenants.
Leave New York State and move to Florida.
Sadly, looks like greater Tampa is going to have some desperate sellers coming into the market this weekend, with possible repairs needed. Florida, be safe and get out now. There's nothing that can't be replaced except your lives.
Well, on the plus side, there are no State income taxes to deal with. And no winter heating bills. Some good friends and Clients have moved, with no regrets. If he really wants to stretch his loot, then there is always Mexico or other countries in Central America where the living is cheap. Check the internet on Americans retiring South of the border.
Not being real estate, what’s his best move with this money. With his retirement he is comfortable to live but he’s trying to really use this to his advantage. He asked me and I didn’t have a great answer so I’m here.
initially I thought put it right in index funds that are low currently but then I thought maybe starting a Roth IRA for him or his wife who still works might be better since after 59 1/2 it will be tax fee. Thoughts , ideas will be appreciated
Not being real estate, what’s his best move with this money. With his retirement he is comfortable to live but he’s trying to really use this to his advantage. He asked me and I didn’t have a great answer so I’m here.
initially I thought put it right in index funds that are low currently but then I thought maybe starting a Roth IRA for him or his wife who still works might be better since after 59 1/2 it will be tax fee. Thoughts , ideas will be appreciated
@Chris Breezy hello Chris, he has several different options based on his interests. There are plenty of opportunities to find cash flowing rentals in the central Florida area that are in good appreciating locations so that is a good start whether they are SFH, SFH with ADU or MFH. He can look into purchasing tax liens if his risk appetite his low or perhaps tax deeds of land and owner financing that land afterwards. PM me if you want to connect further.
If I came into an easy 100K I would fully fund my IRA for the year, and the rest I would use as a down payment on real estate. I mean, after all, this is a real estate investing forum. Is that what your father should do? I don't know.
Your father should talk to a tax professional and a financial advisor.
If I came into an easy 100K I would fully fund my IRA for the year, and the rest I would use as a down payment on real estate. I mean, after all, this is a real estate investing forum. Is that what your father should do? I don't know.
Your father should talk to a tax professional and a financial advisor.
We'd need to know what the source of the 100k is -- is it qualified to be put in an IRA tool or not? @Chris Breezy will have to fill in that detail. Another thought is depending on the type of IRA, his dad may not have access to that money for other needs/wants until 59-1/2, and some IRAs may result in taxes for the distribution back out. Again -- the details get sticky. I agree that some set aside is a great idea, but without knowing a whole lot more (and it's none of our business), sharing opinions here because difficult. Your last line is the solution: talk with a pro, not us. :)
Hello Chris Breezy from New York, this is the best explanation for our current situation that I have found and Peter Schiff explains what you need to do with Cash to survive on his youtube video, "The Fed Will Seize All Your Money In This Crisis"
Hello Chris Breezy from New York, this is the best explanation for our current situation that I have found and Peter Schiff explains what you need to do with Cash to survive on his youtube video, "The Fed Will Seize All Your Money In This Crisis"
Hello Paul Vail in NC, with all due respect, since you are responding to my suggestion for a Newbie with no Knowledge of Finances to get a Big Picture of our dire situation with a free youtube video, I have a question for you...How many years have you been in the Real Estate Market? Did you own any Properties during the 2008 Economic Crash? Do you Invest in Stocks or Bonds or Futures or Gold etc? Do you own any properties outright? How many Rentals do you have that are producing Positive Cash Flow? Are you Debt Free? Do you have any Cash? If not, then, why would you get Political about a simple youtube video? You could have given Chris Breezy your Sage Advice on what his father can do with his hard earned $100,000...which you did not. Money talks and B.S. walks. And I was told 40 years ago when I started building my Rental Portfolio, for my Retirement, that, "You should never take Financial advice from anyone who does already have a Million Dollars."
Hello Paul Vail in NC, with all due respect, since you are responding to my suggestion for a Newbie with no Knowledge of Finances to get a Big Picture of our dire situation with a free youtube video, I have a question for you...How many years have you been in the Real Estate Market? Did you own any Properties during the 2008 Economic Crash? Do you Invest in Stocks or Bonds or Futures or Gold etc? Do you own any properties outright? How many Rentals do you have that are producing Positive Cash Flow? Are you Debt Free? Do you have any Cash? If not, then, why would you get Political about a simple youtube video? You could have given Chris Breezy your Sage Advice on what his father can do with his hard earned $100,000...which you did not. Money talks and B.S. walks. And I was told 40 years ago when I started building my Rental Portfolio, for my Retirement, that, "You should never take Financial advice from anyone who does already have a Million Dollars."
@Chris Breezy You have gotten a lot of responses here. BP is real estate, there are definitely Financial advisors on here as well some really smart RE investors.
there are so many different avenues that your father could go with this money. Step one is determining which direction your father wants to go. Does he want something passive or active, does he want to get dividends on the money? does he need the income that the money could generate? what are his risk tolerances? what other investments does he have?
I like using Life Insurance to create extra arbitrage points for whatever investments I am making.
Each investment is another tool in your investing toolbox. It is up to you/your father personally as to which tools you are going to use to reach the completion of the job that you want to do.
Hello Paul Vail in NC, I said with all due respect, I glanced at your comments, but, none of them showed me or anyone else, "How to protect the guys $100,000 or how to make more MONEY at this time."