£100K - difference of opinion on how it should be spent.

[Wrinkledretainer]

Name changed. We’ve inherited (dh parent) just over a £100k. Both late 50’s with good defined benefit pensions of many years and good max lump sums if we want to take it of £200k or minimum of £50k tax free if we want to keep max monthly pension. Annual pensions will be £85K with state pension included. One child at uni whom we have saved £40k for towards flat deposit. Fees via student loan but we pay maintenance/halls/rent cost.

Dh earns a third more than I do, combined income £95k. Debts £20k as we needed some house works. Mortgage still £170k as we lost a business and had to sell up so didn’t re-enter the property market again in SE until 6 years ago. House worth £450k.

Over the years we’ve travelled extensively around the world and spent a lot on holidays. I’d like to pay off the debts, put a patio in (5K), buy a £10-12k car as ours is on its last legs and then put the rest towards the mortgage. Dh wants to pay off the debts, put a patio in, get the car then spend the rest travelling more whilst we can.

In my scenario, paying off the debts and paying down the mortgage will mean we can save an extra £1200 a month. With his scenario, it would be an extra £600 a month. We only have savings of £15k taking out dc savings of £40k above.

I think the longer term plan is to move to the South coast but houses there will probably be about the same as where we are price wise.

Dh thinks we should live a little now as we’re getting older and health wise things are creeping up. He envisages we’ll slow down in our 70’s and the pension savings will accrue then. I feel we need to be more sensible now to build more of a cushion. If there is another inheritance, it’s only likely to be about £20k.

What would you do?

I’d rather get rid of all debt including mortgage before all else.
Then save along the way for the patio,car etc

With less interest to pay on the mortgage you can save quicker and use for holidays.

You’d be foolish to pay off the student loans.

I’d travel a bit - both my parents died early and they both regretted not travelling and waiting. Once they were ill, it was impossible to get travel insurance, even through specialist brokers.

It may be better to use the 40k you have saved for your DC to pay off some of your mortgage now if there are no penalties and then save again. Or use some of your pension lump sum when you get it for your DC’s house deposit instead if the timings work.

The £40k is comprised of the Govts child trust account which matured and dc received at 18 (£27k - paid in child benefit, birthday money plus a few top ups over the years) and £13k received from inheritance. Dc has this so it’s not our money. Dc is very frugal and has this in ISA’s/LISA. We pay for accommodation and top up his earnings for maintenance.

So we have no access to that money. We have around £16k in an ISA ourselves but ideally I’d want about £50k in savings.

To those saying it’s dh inheritance, you’re right but I think he’d be persuaded to my way of thinking but I can also see his point of view. We have travelled a lot when younger (not so extensively since had dc but still abroad a couple of times a year, occasionally long haul). We would like to visit Japan and Canada, both expensive trips and re-visit Norway.

Leaning towards paying off debt, laying patio, getting £10k car to last until retirement = £35k. Then £10k to savings . Then 60K off mortgage which will bring it down to around £117k. This will reduce the monthly repayment to around £800, possibly less, if we can get a good deal (repayable over 15 years). With the debt gone and monthly mortgage slashed we could save circa £1200 a month towards holidays/topping up savings/overpaying mortgage each month.

Hoping then that by the time we get to 65 we can retire or flexibly retire and access the lump sum to pay it off entirely or move to a cheaper area if possible.

Unfortunately our current car has done 170,000 miles and we’ve spent around £800 this year on repairs. It’s a trooper but we need something more reliable plus we like to drive to Europe but it’s not reliable enough to do that any longer.
We also need it for work.

You also don't need to spend it all at once or decide what you are going to do with all of it straight away. Give yourselves a few months to mull things over and work out your priorities. Maybe pay off the £20k straight away, put the rest into savings, use the interest it accrues to make little overpayments on the mortgage and wait to make the decision.

I wouldn't do the patio now for example I'd wait until next April. You're unlikely to get a tradie right away and then it's finished just ready for the winter.

There are a few places with defined benefit pension schemes like local authorities (or do you mean final salary schemes?). Career average schemes still offer a defined benefit but the accrual rate seems to be less than the old final salary rate (but I’m not a pensions expert!).

Good point, thanks.

We’re scared of frittering it away though!

I mean, I'd prefer your plan, but it's his inheritance.

I'm not surprised he wants to do something fun while he's grieving. He knows on a very visceral level in his bones that nothing is guaranteed.

I know someone who worked hard all his life and died a few months after retiring. He was such a lovely man too, and really looking forward to spending time with his family.

If he's happy to pay off the debt etc and not spend the whole amount on travelling... I think that's a good decision.

PS I don't know why you're planning on giving £40k to DC when you're worried about money. I wouldn't have accepted such a gift from my parents.

Thanks Xanthic. Pls see post below re; £40 k to dc. We weren’t able to access it plus he has inherited something too.

Martin Lewis advice is out of date and very very misleading. The terms on which your dc will have borrowed money will be vastly different from that old advice. So many people base decisions on it and it upsets me. I wish he would retract or update it.

It’s your husbands money he needs to make the decision

Sorry to be pedantic but the Widow's pension is now a bereavement payment that is paid for just 18 months so you can't factor that in (albeit hypothetically) as an income for life.

Had this exact conversation with a friend yesterday, they mentioned a similar situation of a couple who squirrelled away all their life, then when they finally started to spend - she got dementia, and didn't want to leave the house, he had a stroke and ended up in a home.

Im with DH. Do the stuff now, travel now, live now, because you don't know how many happy healthy wake ups you have left. Wait til 70 and maybe one of you has pre dementia, one has gangrenous foot and cant travel - who knows, it could be anything. Live now.

When my Dad retired he got a good lump sum. He wanted to travel with my Mum. My Mum put it off until later as she was caring for her Mum. Dad died unexpectedly within a year and I know my Mum spent the rest of her life regretting not going on that extended holiday with my Dad. I'll health and even death often comes unexpectedly. It's your DH inheritance and you agree on how to spend most of it. Let your DH take you on a few lovely holidays. You can pay off mortgage from lump sum. You should have life insurance on mortgage anyway to pay off mortgage if one of you does. My sister lost her DH at 41 to a massive heart attack and his life insurance paid off mortgage so my sister could at least cut back her work hours to be there for her DC more.

Agree
Op you say your DH wants to travel now before it's too late
Have you considered what you would do if you are too ill to work until 67?
How would you pay your mortgage off?
Also you are counting on SP -I wouldn't be surprised if it was means tested by then

As it is you are paying until 72 -unless the overpayments knock a couple of years off

From late 70s, most people's spending drops massively, not counting care home fees.

On the other hand a poor old age will be very long indeed.
All this spending "just in case" is a bit ridiculous when you have 170K mortgage

" wait until 70 and "
As it stands Op will still be paying a mortgage then ...

I don’t think the state pension will be means tested by the time we retire but who knows (thinking of the Waspi women).
If we were too ill to work, we’d put in for ill health retirement to access pensions early (not guaranteed it would be agreed of course but, given our ages now, it’s likely). Fingers crossed, although we have some niggly issues, neither of us has chronic illness yet but, again, it’s an unknown which makes me cautious.
We won’t be paying the mortgage past retirement age hopefully as we’ll use the pension lump sum to clear what’s left and/or plan to move to a slightly cheaper area. If we do end up staying put, as long as the monthly mortgage is around £300 then that would be fine. Our income will be around £65k net (£85k gross).

We both have death in service cover and small life insurance which will cover the mortgage.

I am about to get given 100k (in my case parent is alive but has decided to give us early inheritance)

Our plan is
Clear credit cards (14k)
Pay off mortgage (60k)
Holiday next year (8k)
Remainder into s&s isa

With the savings from not paying the mortgage we will save for Holiday following year and the isa money will be for general house improvements/ car when it bites the dust.

Ours is slightly different in that it enables us to be completely mortgage free but I agree with others that you need to split it. Ask him to come up with a plan of what travelling he wants to do and how much it would cost? Maybe assign that plus 10k to the holiday fund and put remainder into mortgage

Live a bit now!

I agree with he gets the greater say as the moneys come from his side.
i would also add re the travelling, he's right. I'm a bit older than you at 60, my husband (71) died in May 3 months after being struck down by a horrible aggressive cancer. You simply don't know what the future holds for you both, so go travelling whilst you're fit and able to.

@Wrinkledretainer Even with state pension included your annual total predicted pension amount seems quite high considering you have had time out from paying when you were running your business . I assume you are still paying in to some type of pension at now ? .
Make sure you 100% sure of your totals before you make any decisions with the inheritance money .

It may not apply to your parent but if her assets would be subject to inheritance tax and she dies within 7 years or she needs care ( deprivation of assets ) you may be required to pay back some or all of the money .