Dear Helaine: I am almost 62 years old and my husband just passed away. He had a life insurance policy for $50,000. My only debt is the mortgage on our home, which has a remaining balance of $110,000. My monthly payment is a little more than $1,100, and that includes my escrow account covering my property taxes and homeowner's property insurance. I am paying an additional $300 to $400 a month toward the principal.
I am able to live on my current income. After I retire, my pension, 401(k), Social Security and other savings will also leave me enough to live on. I am questioning what I should do with the $50,000. Should I pay down the house mortgage, or put it in another investment account so I can add to my monthly income when I retire? -- Moving Forward With Life
Dear Moving Forward: I want to start by saying I am so sorry for your loss. I'm glad you are moving forward, but I am going to suggest you start by taking a step back.
Give yourself time to grieve. Your life has been irrevocably altered because you lost someone you loved very much. If you make a decision about this immediately, you could very well make the wrong one.
It's possible that a year from now you'll decide you don't want to remain in this home, and you'll want to make a new start. So don't put the money toward your mortgage immediately. Set it aside in a one-year CD, where it will remain secure. If at the end of that period you still love this residence and don't see retiring elsewhere, ask yourself a few more questions: Is this a home I could age in place in? What kind of work will the home need so that is possible? Some of the $50,000 might need to be earmarked for that purpose, or for needed renovations and other home repair maintenance.
I am not against you putting the money toward paying down the mortgage once you answer all those questions. There is a good argument to be made that you should reduce the period of time you will owe money on the home in retirement. The less in the way of monthly bills you'll need to pay when you cease work, the better it will likely be for your finances -- and for your peace of mind.
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