Inheriting and buying house,

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Dontwasteit
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Inheriting and buying house,

Post by Dontwasteit » Wed Apr 12, 2017 7:51 pm

Hi all, 1st post. Here's the scoop... I retired 5 years ago (NY MTA Bus operator, worked 31 years). I am 60 Y.o. I am married with a daughter in her 3rd year away at college. I collect a pension of $33,000 per year and at 62 I will take my S.S. My wife (58 y.o.) works for the city and in 2 years will retire and collect her pension ( Guessing 27,000) and at 62 will take her S.S. We own a co-op that is paid for (Worth $320,000), so we just pay the maintenance. My mom just informed me that I will be inheriting approx. $1,000,000- $1,200,000...I had NO idea! My parents live frugally. When the time comes and I inherit their money, my wife and I want to buy a house. We can sell the co-op for the $320,000. What I want to know is...Can we/should we buy a house for $500,000, put maybe $75,000 in upgrades for a total of approx $600,000? I am not used to this kind of money and feel a bit overwhelmed. If we pay cash that would leave approx $500,000 - $600,000. Is that ok or is that a ridiculous plan that is costing too much. I don't want to be in over my head. We are not flashy or wild spenders but we do want a nice home. We would like to take a couple of vacations a year, we are not into luxury cars,etc . I plan on investing in index funds and maybe 15-20% in stocks. So, with 2 pensions,S.S. coming soon and the inheritance whenever that happens, can we buy our dream house for approx $600,000 or should we spend less on a house? I would truly appreciate any input.

Dottie57
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Re: Inheriting and buying house,

Post by Dottie57 » Wed Apr 12, 2017 9:03 pm

Are you inheriting right away? Or does the money come when your mom passes?

In either case, let the money sit (ayear or so) and really review what you want.

Extended Travel?, more unique experiences? Charities. Vacation home? Winter home? New furniture?

What do tou want for the rest of your lives.

And if you are receiving money, think about delaying SS since it is a great lifetime source of money. It increases your cash flow every month you receive SS.

P.S. Do you really want the pita that is a house. I hate yard work and therefore live in a condo.

Dontwasteit
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Re: Inheriting and buying house,

Post by Dontwasteit » Wed Apr 12, 2017 9:27 pm

This is when mom passes which I hope is years from now. I should have mentioned we want to move to a 55+ community where the HOA fee covers lawn care, snow shoveling, trash, Etc. My figures were a bit off, maybe total of 1,200,000 including my Co-op. We wouldn't buy a vacation home or the like but we would take a couple of nice 2 week vacations per year. Other than that we really don't require or want much.I have plenty of time to think it through. Thanks for your reply.
P.S. I don't really see a problem with purchasing the $600,000 home...I don't worry too much because we will both have pension incomes too. My wife worries that $500,000-$600,000 left after the house purchase will not be enough. Of course we want to leave our daughter a nice inheritance even though she will make it on her own.

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BL
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Re: Inheriting and buying house,

Post by BL » Wed Apr 12, 2017 9:39 pm

Don't count your inheritance before it happens! Things can happen and they can live forever, almost. It is not becoming to salivate over the potential death of a parent.

Live your life as you have been doing and planning. Consider having the higher earner delay SS as long as possible if you have enough to spend down. this guarantees the longest-living survivor the best COLA-adjusted annuity money can buy, to cover the possibility of living far beyond life-expectancy. Do you have retirement accounts and taxable savings?

Zott
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Re: Inheriting and buying house,

Post by Zott » Wed Apr 12, 2017 9:52 pm

If you're willing to move to the Jersey Shore (northern area), you can purchase a nice 1500 square foot home in a 55+ community, for about $200,000 to 300,000. It's a nice, convenient lifestyle, close to beaches and about 70 miles south of Manhattan.

BUBear29
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Re: Inheriting and buying house,

Post by BUBear29 » Wed Apr 12, 2017 9:53 pm

Dontwasteit wrote:This is when mom passes which I hope is years from now. I should have mentioned we want to move to a 55+ community where the HOA fee covers lawn care, snow shoveling, trash, Etc. My figures were a bit off, maybe total of 1,200,000 including my Co-op. We wouldn't buy a vacation home or the like but we would take a couple of nice 2 week vacations per year. Other than that we really don't require or want much.I have plenty of time to think it through. Thanks for your reply.
P.S. I don't really see a problem with purchasing the $600,000 home...I don't worry too much because we will both have pension incomes too. My wife worries that $500,000-$600,000 left after the house purchase will not be enough. Of course we want to leave our daughter a nice inheritance even though she will make it on her own.
Depending on where you buy.....please consider property taxes and insurance costs!!!
There is no dignity quite so impressive, and no one independence quite so important, as living within your means.

Dontwasteit
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Re: Inheriting and buying house,

Post by Dontwasteit » Wed Apr 12, 2017 10:05 pm

BL...My mom is the best and lives across the street from me for the last 25 years. We "hang" all the time. I wish her many years to come. She is an amazing woman. She saved my life when I was much younger and was always in my corner. But time marches on (Hey, how can I be 60yo)! She's going on 88 and can go another 10 but who knows what the future holds. Since I just got the word on this future inheritance of course I'm all "jacked up" and just for now dreaming a bit. One thing...it is very nice to know that we won't have to worry down the road.

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Watty
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Re: Inheriting and buying house,

Post by Watty » Wed Apr 12, 2017 10:27 pm

Unless she has some terminal disease then there is a reasonable chance that your mom could live to be over 100 and by the time you inherit the money you might be too old to take on something like buying a large house. There are also permutations like your mom could outlive you and then your wife could end up not inheriting anything so you need to be careful about spending as if you will get a large inheritance some day.

It is unlikely but she could also spend ten years in an expensive nursing home and that might use up a lot of the money.

I would just keep your current plan and not assume that you will get an inheritance. If you do get an inheritance then one of the things that is suggested in the "Managing a Windfall" wiki is to wait a year before making any big investments, that would give you plenty of time to figure out most of the questions you were wondering about.

https://www.bogleheads.org/wiki/Managing_a_windfall

It would not work for everyone but one option would be to have your mom buy a house now that you could all live in together. One day you could then inherit the house.

If you were thinking of buying a $600K house now with about a $300K mortgage that would mean that you would have about a $1,500 a month mortgage payment and property taxes. You did not give enough details but with two pensions, two Social Security checks , and likely some retirement savings that might be doable even if you never get an inheritance but you would would need to look at the numbers carefully.

You might look at waiting to buy until your wife is about ready to retire. At that point you could consider moving to a less expensive area of the country or if you wanted to stay in the same area you might be able to get a much more affordable house by moving 30+ minutes farther out. In many cities once out get out of an easy commute range the home prices drop sharply.

For a couple it often makes sense for one of them to not Social Security until they are 70 in order to get larger check for the rest of their lives. It would be good to be cautious about you both starting Social Security earely.
Dontwasteit wrote:We would like to take a couple of vacations a year, we are not into luxury cars,etc .
You can spend a lot on vacations but your really don't need to so I would think that you would be able to fit travel in your budget right now.

One of the nice things about Europe is that there are many nice small inexpensive hotels. A budget hotel in Europe is likely to be a small family run hotel on a side street with less than a dozen rooms that is clean and safe. In the US a budget hotel is likely to be a Motel 6 that has seen better days that is right on the highway. Except for airfare I can travel in Southern Europe for a lot less than I can in the US. We went to Spain last year and stayed for about three weeks but we never paid over $100 a night for a hotel. It took some research in the large cities to keep in that budget but all the places were fine and about half of them could be classified as being very nice including condos on a golf course and within walking distance of a beach popular beach. One of the keys is to go in the shoulder seasons when the weather is still good but the rates are a lot lower.

On some of the less well known Greek Islands like Naxos or Paros the hotel rates drop sharply in the middle of September and you can very nice mid range hotels near a beach for less than $50 a night and the weather should still be wonderful.

Being in NY you should be able to get great airfares.

Dontwasteit
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Re: Inheriting and buying house,

Post by Dontwasteit » Thu Apr 13, 2017 6:03 am

I have NO plans to do anything until if and when I inherit. Very true that my mom might outlive me and that in 10 years I might not even want a house. Of course anything can happen to wipe out my moms money. I was just wondering if people think it's ok to spend $600,000 on a house and have about the same in investments.

Dontwasteit
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Re: Inheriting and buying house,

Post by Dontwasteit » Thu Apr 13, 2017 6:31 am

Watty... For years mom goes to Spain with friends from Jan through mid March. Get this (I guess this is how they acquired so much money)...They stay at an efficiency hotel (Studio with kitchen). Here it comes...$38 per day with breakfast included for two! That's how she rolls.

finite_difference
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Re: Inheriting and buying house,

Post by finite_difference » Thu Apr 13, 2017 7:11 am

1. Don't spend money you don't have. Until it's sitting in your bank account pretend it doesn't exist and cherish your parents. (Money is just money.) Not saying you aren't already doing this.
2. Don't forget to factor property taxes into account. I've heard they can be rather expensive in some places.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

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dm200
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Re: Inheriting and buying house,

Post by dm200 » Thu Apr 13, 2017 7:14 am

My mom just informed me that I will be inheriting approx. $1,000,000- $1,200,000...I had NO idea! My parents live frugally. When the time comes
Wait until you get it. Lots of stuff can happen in even a short time.

retiredjg
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Re: Inheriting and buying house,

Post by retiredjg » Thu Apr 13, 2017 7:24 am

Don'twasteit, I think it is fine that you are dreaming of what the future might bring. Look at all the options you want and consider what you want and don't want. But don't try to make any decisions now. It's too soon. And things will surely change between now and then. Your wants and needs are likely to be completely different.

Once your wife retires and SS is coming in, you will have a better idea of what you can afford and not afford. If the pensions/SS cover your expenses, I don't see any reason not to buy a nice house somewhere if the money really does come your way.

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dm200
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Re: Inheriting and buying house,

Post by dm200 » Thu Apr 13, 2017 9:19 am

Some, relatively minor, things I would do or consider include deferring the SS past age 62 to increase the income for life.

While probably unlikely as you state the situaition, it is possible that the amounts states and the details stated may not match all of the facts.

Dottie57
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Re: Inheriting and buying house,

Post by Dottie57 » Thu Apr 13, 2017 9:39 am

Dontwasteit wrote:Watty... For years mom goes to Spain with friends from Jan through mid March. Get this (I guess this is how they acquired so much money)...They stay at an efficiency hotel (Studio with kitchen). Here it comes...$38 per day with breakfast included for two! That's how she rolls.

I want to know where she goes! I want a warmlace to go for the winter and Spain sounds great!

Dontwasteit
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Re: Inheriting and buying house,

Post by Dontwasteit » Thu Apr 13, 2017 10:58 am

Dottie57...It's not warm in Spain that time of year. You would usually need a jacket and forget the pool and beach, too cool. That's why it is so cheap.

bloom2708
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Re: Inheriting and buying house,

Post by bloom2708 » Thu Apr 13, 2017 11:12 am

I agree. Nice to dream, but not worth spending much time thinking about it now. My grandma just turned 107. I remember when she turned 90 and we were going to have our first kid. We said "it will sure be nice grandma gets to see the kids grow up bit.." 17 years later... :shock:
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

fishmonger
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Re: Inheriting and buying house,

Post by fishmonger » Thu Apr 13, 2017 11:20 am

Might be an uncomfortable conversation, but do you know the mix of funds for this $1-1.2M? Could have a substantial impact on the amount you "net."

My 91 year old great uncle passed away last year, and I inherited a six figure sum as part of his trust. However, he invested mostly in savings bonds, so there were years (sometimes decades) worth of interest for us to pay tax on

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