What to do with a death benefit?

[tom4018]

Usually don't talk much about finances but wondered what others would do in this situation.
A retirement system pays a $5,000 death benefit. If I put it in an "inherited" IRA there is no tax due but if I take cash I pay 20% taxes.

My question is would you do the IRA or take the cash and pay off debt? I hate giving up the 20% and thinking about putting it into an IRA. Planning on talking to my mutual fund guy and seeing if it can be rolled in a IRA that way as the bank only pays about 2% on their IRA CD's.

 

[Farm Fence Solutions]

So you can have $4k now, or someone else can have $5K when you're dead?

 

[tom4018]

So you can have $4k now, or someone else can have $5K when you're dead?

No, I can get $4,000 now or $5,000 into an IRA, someone else died and I am the beneficiary. So would you pay off debt and lose the $1,000 or put another $5,000 away for retirement?

 

[Bright Raven]

So you can have $4k now, or someone else can have $5K when you're dead?

No, I can get $4,000 now or $5,000 into an IRA, someone else died and I am the beneficiary. So would you pay off debt and lose the $1,000 or put another $5,000 away for retirement?

Put the $5000 in retirement.

 

[Farm Fence Solutions]

So you can have $4k now, or someone else can have $5K when you're dead?

No, I can get $4,000 now or $5,000 into an IRA, someone else died and I am the beneficiary. So would you pay off debt and lose the $1,000 or put another $5,000 away for retirement?

Put the $5000 in retirement.

C'mon Ron, you don't even know what the debt is costing. 25% on credit cards? 4% on what's left of a mortgage? How much can you make with the cash? It seems that we need more detail.

 

[tom4018]

No, I can get $4,000 now or $5,000 into an IRA, someone else died and I am the beneficiary. So would you pay off debt and lose the $1,000 or put another $5,000 away for retirement?

Put the $5000 in retirement.

C'mon Ron, you don't even know what the debt is costing. 25% on credit cards? 4% on what's left of a mortgage? How much can you make with the cash? It seems that we need more detail.

Without looking I think the highest rate is 5.1% on a equity loan we used to build a shop/garage.

 

[Workinonit Farm]

Retirement or paying debt, depends on the debt and at what interest rate the debt is at.

 

[Caustic Burno]

Usually don't talk much about finances but wondered what others would do in this situation.
A retirement system pays a $5,000 death benefit. If I put it in an "inherited" IRA there is no tax due but if I take cash I pay 20% taxes.

My question is would you do the IRA or take the cash and pay off debt? I hate giving up the 20% and thinking about putting it into an IRA. Planning on talking to my mutual fund guy and seeing if it can be rolled in a IRA that way as the bank only pays about 2% on their IRA CD's.

Are you sure that is taxable until it meets the death tax threshold.
Life insurance is not taxable, it wasn’t on dads 9k paid out from his retirement account in 02.

 

[tom4018]

Usually don't talk much about finances but wondered what others would do in this situation.
A retirement system pays a $5,000 death benefit. If I put it in an "inherited" IRA there is no tax due but if I take cash I pay 20% taxes.

My question is would you do the IRA or take the cash and pay off debt? I hate giving up the 20% and thinking about putting it into an IRA. Planning on talking to my mutual fund guy and seeing if it can be rolled in a IRA that way as the bank only pays about 2% on their IRA CD's.

Are you sure that is taxable until it meets the death tax threshold.
Life insurance is not taxable, it wasn’t on dads 9k paid out from his retirement account in 02.

The form the retirement system sent says it is. It was not a life insurance policy.

 

[Caustic Burno]

Usually don't talk much about finances but wondered what others would do in this situation.
A retirement system pays a $5,000 death benefit. If I put it in an "inherited" IRA there is no tax due but if I take cash I pay 20% taxes.

My question is would you do the IRA or take the cash and pay off debt? I hate giving up the 20% and thinking about putting it into an IRA. Planning on talking to my mutual fund guy and seeing if it can be rolled in a IRA that way as the bank only pays about 2% on their IRA CD's.

Are you sure that is taxable until it meets the death tax threshold.
Life insurance is not taxable, it wasn’t on dads 9k paid out from his retirement account in 02.

The form the retirement system sent says it is. It was not a life insurance policy.

10-4

 

[Jogeephus]

Personally, I'd bite the bullet and pay the tax and put the $4000 on my debt. Generally speaking if I make $5000 I only get to keep $3000 so I'd be getting a $1000 bonus toward paying off my debt.

 

[Son of Butch]

$3000 into IRA
$800 (1000) debt reduction
$800 on Eagles at 10-1 to repeat as Super Bowl Champs

Not that I'm a Philly fan, but as defending champs I think they should be getting more respect.... 8-1

New England 6-1
Eagles 10-1
Rams 10-1
Steelers 10-1
Vikings 10-1

 

[ddd75]

someone probably paid a fortune for that 5k policy.

my FIL has one for my wife.. i think he pays like 50/month and she will get like 6k when he dies.. i think he's been paying on it for 20 years now.

My wife and I both have million dollar polices only costing us 30/month each. This is where a good financial planner comes into play.

 

[tom4018]

someone probably paid a fortune for that 5k policy.

my FIL has one for my wife.. i think he pays like 50/month and she will get like 6k when he dies.. i think he's been paying on it for 20 years now.

My wife and I both have million dollar polices only costing us 30/month each. This is where a good financial planner comes into play.

Nothing was paid for this, just a benefit of the retirement system. I am sure it is factored into what someone draws per month though. When she retired it was $2500 and then it doubled but her monthly check didn't change.

 

[M-5]

someone probably paid a fortune for that 5k policy.

my FIL has one for my wife.. i think he pays like 50/month and she will get like 6k when he dies.. i think he's been paying on it for 20 years now.

My wife and I both have million dollar polices only costing us 30/month each. This is where a good financial planner comes into play.

Nothing was paid for this, just a benefit of the retirement system. I am sure it is factored into what someone draws per month though. When she retired it was $2500 and then it doubled but her monthly check didn't change.

WHat would she do ???? that's the best way to go about it. If she would have went on a shopping spree then cash it out and buy something that reminds you of her. If she would have squirreled it away then do that.

 

[tom4018]

someone probably paid a fortune for that 5k policy.

my FIL has one for my wife.. i think he pays like 50/month and she will get like 6k when he dies.. i think he's been paying on it for 20 years now.

My wife and I both have million dollar polices only costing us 30/month each. This is where a good financial planner comes into play.

Nothing was paid for this, just a benefit of the retirement system. I am sure it is factored into what someone draws per month though. When she retired it was $2500 and then it doubled but her monthly check didn't change.

WHat would she do ???? that's the best way to go about it. If she would have went on a shopping spree then cash it out and buy something that reminds you of her. If she would have squirreled it away then do that.

That’s a way to look at it that I haven’t yet. Thanks. One thing about posting something is it makes you think of other things.

 

[Bestoutwest]

Nothing was paid for this, just a benefit of the retirement system. I am sure it is factored into what someone draws per month though. When she retired it was $2500 and then it doubled but her monthly check didn't change.

WHat would she do ???? that's the best way to go about it. If she would have went on a shopping spree then cash it out and buy something that reminds you of her. If she would have squirreled it away then do that.

That’s a way to look at it that I haven’t yet. Thanks. One thing about posting something is it makes you think of other things.

I was kind of thinking along those same lines. It's nice to pay off debt, and depending on your age adding to retirement can be a good idea. But $4000 to buy something you've always wanted isn't a horrible idea.

 

[shaz]

Take 4000 and by some cows?

 

[1982vett]

Take 4000 and by some cows?

Yeah....turn it into more obligation and work... :lol:

 

[tom4018]

Take 4000 and by some cows?

The way this year is going I would need to buy hay.