Financial advice?

Do not count your chickens until they are in your hands. Your FIL may need those funds for nursing home care and they will be gone. If as you say "the couple" has been living off of it the money may never come to your husband as the spouse unless not named in the accounts has first claim on that money. The spouse may do with the accounts what they want to after the father is dead. That said it will depend on if his father names him in his will as beneficiary or has him as his beneficiary on the accounts. The first the money will go to the estate and be subject to any court cost or division by state law. The second your husband or an executor/personal representative will have to provide the companies copies of the death certificates. The annuity depending on how it is setup may be able to have the payments suspended until a later date. The IRA may be able to have the same done with it. Much depends on what they are invested in. As an example I have an IRA CD to receive the money the CD must be cashed. Means the whole amount is taxable.

All that said now is the time that you should be reading and investing small amounts for your future. Some mutual funds which is what I would suggest you using can be setup with a small amount and added to in smaller amounts. You have approximately 20 years to save before you go back to being poor as if something happened and there is no income available other than Social Security you will be poor. Start reading on the internet about the various investment types is a good start.

Is the father ill and has been given a short time to live? If not, he may live to be 90+. Don't count your chickens so fast. A friend's father's last illness ate up every cent before he died, and there was nothing for him to leave to his daughters.

An inherited IRA must be kept separate, no tax liability to the one who inherits, but you must meet the same rules for withdrawals; withdrawals prior to age 59-1/2 will be penalized and taxed as part of your normal income.

You can learn a lot about IRAs and retirement accounts by checking Google for links to reliable companies like Charles Schwab and Vanguard. If you know nothing about investing, you'll do best with index funds that reflect the larger market. Usually a mix of stock and bond funds.

Before anything else, make sure that you have ready-cash savings for 6 months of emergency living expenses. Then you can start with investments.

You can just pick up the phone and call Schwab or Vanguard and get some good direction without a sales pitch. They might mail you some information or direct you to websites. Other brokerage firms will pressure you a lot more.

The Vanguard, Fidelity, and T.Rowe Price websites are all good resources to start learning and you do not have to register or have an account to browse their information. Morningstar is another but I think it is better for somewhat more advanced learners.

Don't forget your local library -- I found a great book some 33 years ago that got me started -- took me from the absolute beginning of saving to building an investment portfolio (wish I could remember the title, but it is probably out of print anyway).

RE this inheritance -- don't worry so much about it, because it may never happen. Instead, start educating yourself, make plans about your own ability to save from your own income, then if it ever does happen you will know more about what you want and need to do, and will know where to go to get questions answered.

But, if you inherit an IRA, I am pretty sure that you only pay tax as you withdraw just as if it had been yours from the beginning. Plus, I think that the inherited amount in the IRA is considered your "cost basis" so you are only taxed on profit from that point. (In plain English, "cost basis" is what you paid for an investment, "profit" is the extra money gotten from interest or an increase in price at the time you sell the investment. Say the IRA is invested in a CD that pays interest -- tax will only be levied on the interest that was earned. But, an IRA that you set up -- you didn't pay tax on that money that was put into the CD, so when you withdraw the money later, you pay tax on all of it.)

Annuities, depends on what kind of annuity it is: are inherited annuities taxable?

If you currently have a mortgage, particularly a high interest rate mortgage, do the math and see what savings would result by including, say, $50 per month toward principle with your regular payments. This in addition to the suggestions above.

If you have a high interest rate mortgage, you should refinance to a lower rate while rates are still low.

Curious about the last two comments about mortgage. What made you comment about mortgage's as they have little to do with investing. Sometimes I miss things.

If you pay off your mortgage you can then invest that amount somewhere, like in mutual funds, or something. You're not making a mortgage payment - take that money and invest it.

I was only responding to the non-sequitur in the post immediately above mine, from SaltiDawg: "If you currently have a mortgage, particularly a high interest rate
mortgage, do the math and see what savings would result by including,
say, $50 per month toward principle with your regular payments."

SaltiDawg that is true but my question was why mention it in relation to the OP question. Other than stating that she budgets I did not see any mention of a mortgage or even a house.

I just wanted to give a little more information. I have not yet read everyone's comments but I just came back to check and saw that 11 people were kind enough to respond to me, and I thank you all. The little bit I read so far made me want to reply. I'm sorry I was not more clear. My husband's father has early onset Alzheimer's and it is progressing very fast. His wife has been very kind and understanding of why there was an estrangement between the two of them ( FIL was an abusive man. We visited mostly because we feel bad for his wife.) and yes, I know there is a very strong possibility that there will be nothing left of it after he passes and she lives her retirement on what he had remaining as well as her own. But I just wanted to ask these questions so that I have a clear idea of what we need to do if it becomes real. I know that the "death tax" is 60% and I was wondering if there was a way to get around it......

Okay, more information. We have a mortgage at 4.5%, and only owe 23k on our house. Our mortgage is is low by most people's standards but I would not look to increase it. Though we are looking to move soon, we will sell this house and look to keep the mortgage on the new place close to the same amount as this one (600 a month, which includes taxes and insurance.) I am an LPN, which is an entry-level nurse. I am currently still debating whether incurring more student loan debt to become an RN would be a good idea at my age, as the small raise probability would be eaten up by the student loan payment. I did not include this information because I didn't think it had anything to do with my original question, but hey, if people want to give advice for my investments as well, why not..

My husband has (what I consider) a good job with a 401k and the company matches 6% and also has stock options that he is able to take advantage of. He makes less than I do after all of this is taken out (which means I pay a higher percentage of the bills, lol! Lucky guy.) so he is investing in our future and is lucky enough to be guided by the Fidelity representative for investments. His funds are generating a 10% return right now. Not bad!! Right? Lol!

My company has no such 401k, so I am on my own. Sadly, this is the way it is in most of healthcare. I have been putting $300 a month away, and so far I have $10k but my investments are only generating a 3% return at the moment. I have my money in ETFs, index funds and mutual funds. I did follow the percentage amount thing recommended by Schwab (40% large cap, 20% small cap, 10% international and the rest, where Schwab recommends bonds and cash, I instead have it in a broad market index fund. ) I chose all of my funds from Schwab's One family so that the cost of the funds does not exceed what I am able to make from it. I have found researching and investing to be quite fun but I am disappointed that the return has not been what my husband's is.

Again, I thank all of you for taking the time to respond to me and I would love any other advice anyone has. So what I read in response to my original question, is if in the event that the ira and annuity have anything left in them, we would only pay taxes on the interest that was earned for the time we have it? That is good! Better than having to pay 60%, and it gives me an idea of what we need to do if we want to be able to leave our children anything. It has been discouraging to think that we can't leave anything for our kids because Uncle Sam will take 60% of it. We won't be able to leave much, and if they would have to give 60% of it, they MIGHT be able to afford to go out to dinner after our funeral. Lol!!!

Since it is a regular IRA you would pay taxes on the money when you withdraw it. The amount Uncle Sam will take will depend on what and when you withdraw the money once you have it. At your age leave it until you are old enough to withdraw without a penalty. You are wise to invest as much of your husband's income plus some of yours. When my husband was offered a buyout and decided to retire we went to sign the paperwork. The person told us how much we would be receiving. We ducked out heads and looked at each other. He thought we were upset it was so low. It was actually more than my husband had been taking home before retirement. When we looked up be both had grins on our faces. Do not worry about leaving something for your children other than the training to make good decisions. Better you have it to use for yourself than to have to borrow or live with them because you have no choice.

Federal estate taxes exempt the first $5 million dollars of an estate. Does your FIL have that much money? If not, don't worry. And you seem confused about an inherited IRA.... early withdrawals will be penalized if the heir is under 59-1/2 when he tries to withdraw. .

Thank you, everyone! Thank you for answering my questions. No, my FIL would probably not have 5 million in any type of fund, and like was already pointed out, nothing will probably come of this. I don't dwell on it at all, and we are certainly not hoping for someone else to set us up financially in any way. It was just brought up the day I posted the OP, and I had so many questions about how one goes about something like that, so I came here because I knew from reading here for years that there are some very financially savvy people here.

Yes, while I really appreciate the advice from every single person that was nice enough to reply to me, I didn't really "get" the mortgage advice. I have always paid extra on any loans I had to take out, to get the loan paid off earlier. I pay a little extra on my student loan every month, and I pay 50 extra on my mortgage, because I want to move and buy a more expensive house. Any extra I pay on this house, presumably increases the amount I can put down on the next house. But, while I always used to think being mortgage free was a goal I was pursuing, I no longer feel that that's where the majority of the money needs to go at this point. Maybe I should make a whole new post with this subject, because no doubt there would be tons of varying opinions and advice. But the whole point of saving for retirement is to start as early as possible so that you can take advantage of compounding interest, correct? So, say I put my extra $300 a month into my mortgage and it then takes me ten years to pay off the mortgage in full. I can then put that money into my retirement plan, but at that point I'm 52 and I have lost ten years of potential growth. Please correct me if I'm wrong. My plan is to sock away as much as we can for the remaining working years we have, and to also have our mortgage paid off within the timeframe of when we plan to retire. So with this plan, I've maximized my income while also having no mortgage in my retirement years. Is there something I am not seeing here?

No one should rely on a potential inheritance for their own financial needs. With people living longer, that often means they end up needing some kind of assisted living/nursing care. My mother had all of her assets spent on the last 3 yrs of her life, when she needed nursing home care. I never relied on getting anything, just wanted Mom to be well taken care of. You need to save on your own, anything you may inherit will be extra, don't plan on it as retirement income.

Thanks for your comment, however rude. I said many times we are not counting on, and never expected, anything. It just was brought up by my FIL' s spouse and I had questions. Okay, I'm backing away from this discussion now. There was no reason to say that. I do thank the kind people who took the time to answer my question.

Rude? You should examine your own posts! Can't figure out why you actually started this thread.

I don't consider my comment rude at all. It's common sense. There are no guarantees in life and the facts are as stated - people are living longer and when they do, they often need more help with personal care. If they have assets, they must use those to pay for it, then, when the assets are depleted, medicaid pays. I don't make the rules, this is the way it works. An inheritance should be looked at as an unexpected windfall, not something that you factor into your budget, because situations can change. The best thing anyone can do is to save as much as they can for it. It is not easy today to save for retirement, guaranteed pensions seem to be a thing of the past. And of course, we too can expect to live longer and that means we have to plan for that too, by saving even more so we don't run out of money before we pass on. As for your questions regarding how to invest, IRA rollovers, etc you would probably find speaking with an financial advisor helpful.

Don't speak to financial advisors. They are more interested in selling you particular financial products that earn them commissions than helping you. You need to educate yourself.

For financial help and education, you may want to consider going to the Money Mustache forums. They can be a little rude and sometimes extreme but they are also some of the most helpful people on the internet as far as financial education goes. You'll also want to consider the book 'Simple Path to Wealth' by J L Collins (probably available at your local library. I found it at mine.). It really cut out a lot of the nonsense you read about investing for me and was easy to read and understand.

as far as mortgages go, so long as you aren't paying pmi or with a mortgage with a high interest rate, you are probably better off taking that 300 a month and putting the money in low cost index funds. The thing about paying your mortgage early is that if you find yourself needing the money one day, you can't really get it out of your house but if you have it invested in index funds or whatever, its pretty close to liquid while also working hard for you.

"Don't speak to financial advisors. They are more interested in selling
you particular financial products that earn them commissions than
helping you."

Demonstrates a total lack of understanding about the industry.

Not all advisors represent financial products and thus suffer a potential conflict of interest.

at poster! You raise important questions! I recommend two apps for you! "learn" and "trigger" and I also recommend you make a spreadsheet for your ideas. In this amount of money, within investing you have a narrow amount of good stocks to choose from! That is okay! I would focus on only a few and in "play" form.. be honest about your game.. you will need to be diligent about finding a firm with low fees that you don't need a lot to invest (start account minimum).

a few things;

there are index funds (no thoughts daily.. slow) be careful

take high risk sometimes with a small amount to start and decide what you want to gain and loose. Gain is great! Sell!

Lots more to say but those apps should help you.

Good ceo

good ideas and a feeling they won't go bankrupt. Lots of companies you can see. Be ready for change when the news comes out. The stock will change. You will see change when earnings report, mergers.. etc.

metals are unique with growth.

Find a sector that interests you and something you can understand.

sometimes it takes 3 days and something it takes a dip and takes 6-12 weeks just to get back your loose. I get tired and impatient, sometimes I make a small profit and walk to my next investment.. I turn back and see I could have made more staying in. You never know.

watch the John Oliver video on investing!!!

Pick up the latest issue of Kiplingers Personal Finance-Summer at your local newsstand. Lots of good info on retirement strategies.

Hi, I love to cook ... hope you're still around.

Learning how money works is an interesting hobby ... and it pays well!

How about making a visit to your local library? Many of them have some good resources on managing money and investing. Ours carried a good resource from the U.S. until recently, called "Value Line".

Someone spoke of the Kiplinger resources in the U.S. and I feel that they offer good value.

The Motley Fool people, advisors related to the stock market in the U.S. for years, at www.fool.com, began operations in Canada recently, and I read their material occasionally.

As for how to proceed, I like to have some funds fairly quickly available on hand, in case of emergency. I don't like to carry "credit" card (really "debt" card) debt, as their rates are so high, and I pay off balances owing monthly. For years I've had a line of credit at the bank, usually secured by assets, for lower rate of interest.

As to whether to pay down mortgage, compare the rates of return on potential investments compared to the interest rate on the mortgage, after tax in each case - mortgage interest rates in Canada aren't deductible (but capital gain on owner-occupied home is tax-free).

I was born just before the Dirty Thirties, that major depression.

Dad had a larger than usual farm near a village called Lambeth in southern Ontario, and I learned from him to be careful with money, to manage it wisely. I was 10 when World War II started, in 1939, for Canadians, and soon our hired help had gone to war, so what Dad and this teen-ager and a couple of younger boys got done - got done, for the next few years: the rest ... didn't.

We got an allowance throughout the year, and Dad paid us for our work in the summer, just before school started ... and we were to buy what clothes and books, etc. we needed. We found it wise not to blow our wages, as sometimes through the year the allowance didn't cover what we felt we needed ... so it was good to have a cushion.

After taking the courses that stockbrokers take, something over 30 years ago, I sold mutual funds, for a brokerage, not a company where they sold only funds managed by their company ... but didn't sell enough to suit my employer, so was "decommissioned".

I've bought some (mainly stock-based) mutual funds, paying a commission on purchase, that have paid amounts each year, which have been reinvested in that fund. The management companies charge a management fee annually, part of which is paid as a trailer fee to the guy who sold the funds to me in the first place, as compensation for his ongoing financial guidance ... or to his manager, if he's no longer there. Don't hear from them much. Some of the funds have produced a better rate of return than others.

I bought some stock in a Canadian bank, about 50 years ago, for $4.25 per share, paying about 15 cents a year dividend, and don't remember whether the tax rate on Canadian dividends was lower then than on interest earnings, which in Canada are taxed at top rate. Back around 2007 each share could be sold for about $107, and paid $3.08, at low tax rate. Later, involved some in the financial fiasco in 2008, the share price dropped to about $40 and the dividend stayed at the same rate for upwards of three years. The share price has recovered, now runs around $120. per share, and I said a few years ago that I hoped it would pay me each year what I'd paid in the first place ... granted, about 50 years ago, when each dollar bought more: it's now $5.44. I've paid not one cent to any agency to manage them for me.

For something like 20 years I've attended a monthly meeting locally, one of about 45 across Canada, of subscribers of what many of us feel to be Canada's best financial advisory magazine, totally committed to their subscribers, as they don't carry ads. Usually about a dozen and a half attend, and I've learned a good deal about investing from them.

Good wishes for learning about how to invest wisely.

ole joyful

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