MW My husband will inherit $180K. I think we should invest the money. He wants to pay off his $168K mortgage. Who's right?

By Quentin Fottrell

'He has $15,000 in investments and $5,500 per month in disability income'

Dear Quentin,

My husband is 61 and I'm turning 60 soon, and I don't work. He has $15,000 in investments and $5,500 per month in disability income. Half of that income disappears in four years. His outstanding mortgage has 25 years left on it. The monthly payment is $1,800 with a 3.5% interest rate, but he pays private mortgage insurance of $1,500 per year. The house is his separate property, and my name is not on the deed.

He is inheriting a chunk of money (roughly $180,000). His thought is to pay off the mortgage, about $168,000. My thought is to hire an investment counselor and invest the whole thing. Or, even better, we invest it ourselves through an online stock-trading platform. What's the wisest thing to do with the money? I know full well I have zero say in what he chooses to do with his inheritance, but I would like some guidance on what he/we should do.

I need some clear thinking here.

The Wife

Related: Americans are 'doom-buying' coffee, olive oil and soap. What's the one thing I should stockpile to avoid tariff price hikes?

Dear Wife,

You face two issues: the halving of your husband's income, which I assume refers to private disability income, and his monthly mortgage payments. When the former occurs, he would end up paying 65% of his monthly income on his mortgage. He should aim to at least halve that and bring it down closer to 30%. For that reason, I suggest paying off at least half of his mortgage with this inheritance, if not $100,000. It's a nice, round figure. The good news is that a 3.5% interest rate is phenomenal.

That would leave your husband with $80,000 to play around with. Put a portion in a high-yield investment account or CD, and leave at least $5,000 in a checking account for emergency expenses. The S&P 500 SPX, Dow Jones Industrial Average DJIA, small-cap Russell 2000 RUT and Nasdaq Composite Index $(COMP)$ have been reeling in recent weeks from President Donald Trump's "reciprocal" tariffs. So be prepared for more volatility.

If you feel confident about the long-term future of U.S. equities, as history would suggest you have a right to feel, you could also invest a portion of your inheritance ($10,000 to $20,000) in an exchange-traded fund that tracks the total market, the S&P 500 or some other diversified index, perhaps a Vanguard Total Stock Market ETF VTI. This will hopefully go without saying, but please don't buy individual stocks.

No leeway for financial risks

In the meantime, health-permitting, it's worth considering part-time work to increase your income and savings. It's also a good time to think about your respective estate plans. Hopefully, you can renegotiate the private mortgage insurance as you gain more equity in the house. When it comes to investing, you and your husband don't have a lot of leeway to take big financial risks. You need to increase your nest egg, but you must preserve what you have at all costs.

"Funds that are needed in the near-term may warrant an investment strategy that is less volatile and risky," said Teresa Greenip, senior wealth manager at Aspirant. "On the other hand, if you do not anticipate spending the funds for many years or even decades, you may be able to tolerate more risk, as you will have a longer runway to recover from market fluctuations."

When it comes to investing, you and your husband don't have a lot of leeway to take big financial risks.

"Think of the payoff of your mortgage as having a guaranteed rate of return equal to the interest rate on your mortgage," she added. "If that interest rate is higher than the return target of your portfolio, it may make sense to pay off all or some of the mortgage. If you're receiving a mortgage interest deduction on your taxes, be sure to factor this in, as it reduces the effective interest rate on your mortgage."

For safer havens, look at shorter-duration bonds, consider mutual funds and exchange-traded funds, with a maturity of less than five years; Treasury inflation-protected securities $(TIPS.UK)$ - inflation-protected bonds issued by the U.S. Treasury. Morgan Stanley also cites possible upside in "value-oriented and defensive sectors." So-called "defensive" sectors include non-discretionary consumer goods, utility and health-care stocks.

Given that we are going through uncertain economic times, with the double threat of inflation and a possible recession, you could also invest a portion of this inheritance in gold, which passed the $3,000-per-ounce mark for the first time last month and continues to increase. Gold doesn't always rise when there's geopolitical uncertainty or instability, but it's generally regarded as a safe haven in turbulent times. Gold futures (GC00) currently hover at $3,325.

Balancing stocks, bonds and cash

Charles Schwab has some advice for a couple like you facing your retirement years. "At the start of every year, make sure you have enough cash on hand to supplement your regular annual income from annuities, pensions, Social Security, rental, and other regular income," it says. "Hold the money in a relatively safe, liquid account, such as an interest-bearing bank account or money market fund."

From the 1960s through to the present day, the average peak-to-peak recovery time for a diversified index of stocks in bear markets was roughly 3 1/2 years, Charles Schwab $(SCHW)$ adds. "So it's wise to keep two to four years' worth of living expenses in short-term bonds, certificates of deposit, or other reasonably liquid accounts. This way, you'll have access to cash during a downturn if you need it, without selling stocks." For those who can afford it, that is.

In your and your husband's age bracket, Charles Schwab says a portfolio with a "moderate" risk would comprise 60% stock, 35% bonds and 5% cash/cash investments. When you reach 70-79, move to a "moderately conservative" portfolio of 40% stock, 50% bonds and 10% cash/cash investments) and, for 80 and above, a "conservative" mix of 20% stocks, 50% bonds and 30% cash/cash investments.

This $180,000 should help reduce your costs and improve your peace of mind.

April is National Financial Literacy Month. To mark the occasion, MarketWatch will publish a series of "Financial Fitness" articles to help readers improve their fiscal health, and offer advice on how to save, invest and spend their money wisely. Read more here.

Related: 'My house and car are paid off': I have $1 million in stocks - so where do I invest $100,000?

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.

The Moneyist regrets he cannot respond to letters individually.

More columns from Quentin Fottrell:

'The whole thing feels predatory': My grandma, 97, pays $170 a month for a $10,000 life-insurance policy. Should we stop payments?

I held power of attorney for my late brother. Can I withdraw money from his bank account to give to his favorite charity?

I'm administrator of my sister's estate. Her bank won't tell me the names of her beneficiaries. Is that legal?

Check out The Moneyist's private Facebook group, where members help answer life's thorniest money issues. Post your questions, or weigh in on the latest Moneyist columns.

By emailing your questions to The Moneyist or posting your dilemmas on The Moneyist Facebook group, you agree to have them published anonymously on MarketWatch.

By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.

-Quentin Fottrell

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

April 21, 2025 10:09 ET (14:09 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.