Widow looks for best use of life in­sur­ance money

The Times-Tribune - - BUSINESS - BY HE­LAINE OLEN To Ask He­laine A question, email her At Askhe­[email protected] com.

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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