Serious Money Advice Wanted (US)

[Barinthus]

I am about to receive a huge sum of money from a state government that was awarded to me as per a decision made by a state-appointed panel.

I don't want to squander this opportunity. What should I do? Stocks? Mutual funds? Stuff it in my mattress?

On the other hand, I am about to start graduate school and I don't want to miss out on financial aid. Ok I'm a greedy smuck who want my cake and others. I'm thinking of putting the money into a bank account (credit union if it makes any difference) which also happens to have my mother's name on it along as well as mine. Then I take my name off. I trust my mother explictly and I am not concerned about her screwing me over.

Would this work since I'm not 24 years old or younger so therefore would be considered financially independent for purposes of FAFSA?

So there are several parts here...

A. How do I make best out of this opportunity to make even more money? Or to retire comfortably? Or even make a nest egg for a house to take advantage of equity (I'm a California resident and house market here is nuts - I will never be able to afford a house on my salary).

B. How do I hide this money so I can still be eligible for college loans?

[chequita guevara]

You could put it in a retirement account, and then it shouldn't count against your wealth.

Your real problem is that you have to count it as income, so you'll get dinged on the Financial Aid there.

[One_more_turn]

You can put $4000 into a Roth IRA and let your money sit in a money market fund for now.

The good thing about the Roth IRA is that any future gains are tax-exempt. Since I assume you don't earn much income right now, open a Traditional IRA won't save you anything.

[Arrian]

Putting some of it in an IRA is a good idea, yeah.

I'm not even gonna try to give you investment advice... not my forte. But you could stick it in an ING savings account. They're paying nearly 4%.

As for hiding it... a) wrong; b) I've no idea.

-Arrian

[Ming]

Real Estate is the best investment... Over time, it will beat anything else except a lucky pick in the stock market. Granted, you must be careful what you buy (no swamp land in Florida) but there is no better way to invest in the future.

[Arrian]

Oh, Barth...

You are allowed to gift a certain amount of money per year... I think it's $10k. You could simply give your mom $10k. $4k into a Roth IRA... that's $14k. Anything left?

-Arrian

[Harry Tuttle]

If you put the money into an IRA or 401K I am pretty sure you can draw on that retirement account tax and penalty free to buy a personal residence, like say your first home. I'll have to check in on that, but that's probably one of the few things you can draw early on.

Besides that, well, you can always buy some nice treasury or muni bonds so you don't lose your shirt buying stocks. Real Estate can be a decent long term investment, but it also has a lot of pitfalls. If you buy something in the city or the suburbs make sure that the soil gets tested so you either know whether it's a brownfield or so you can sue someone when you discover that it's a brownfield. Environmental regs are getting tough these days.

[Apocalypse]

Roth IRA

[Arrian]

If it's a "brownfield" walk away. Or get it on the cheap and just accept the risk. Don't count on suing. The people who made it a brownfield could well be long gone (dead, bankrupt, etc). Plus, it's kinda cheezy to buy land on the cheap when you know it is contaminated and then demand money for cleanup... (I've seen that).

Sorry for the tangent.

-Arrian

[Zkribbler]

Re: Serious Money Advice Wanted (US)

Originally posted by Barinthus
I am about to receive a huge sum of money from a state government that was awarded to me as per a decision made by a state-appointed panel.

...

B. How do I hide this money so I can still be eligible for college loans?

Are you asking how you can hide the fact that you got state-awarded funds from the state?? Probably can't be done.

No-load mutual funds are the easiest way to invest, and because you're going to be in college, you probably won't have a lot of free time to be managing money. If you don't have an IRA, get one.

Ming's recommendation for [income property] real estate is also a good one but you could have tenant hassles etc.

Buying a residence--rather than renting--is also a good move.

[Japher]

roth IRA contributions are tax deductible

I think that if you "gift" money it is still viewed as ordinary income to you... could be wrong.

you might be able to establish some sort of trust with you and your mom on it, into which the payout will be paid. meaning the trust will earn the income, not you, and it wouldn't be until you access the money that it would viewed as income. I have no idea how this is done, I would consult and accountant. sometimes people set the trust in a life insurance policy or they even set the trust up on a peice of real estate.

[Harry Tuttle]

Originally posted by Arrian
If it's a "brownfield" walk away. Or get it on the cheap and just accept the risk. Don't count on suing. The people who made it a brownfield could well be long gone (dead, bankrupt, etc). Plus, it's kinda cheezy to buy land on the cheap when you know it is contaminated and then demand money for cleanup... (I've seen that).

Sorry for the tangent.

-Arrian

No, no, sue the company that tested the brownfield and found nothing. Suing the previous owner is unreliable.

[Arrian]

Suing the environmental consultant. Brilliant. Except environmental consultant types are getting some sort of carveout from environmental liability (I think).

-Arrian

[Colonâ„¢]

Originally posted by Ming
Real Estate is the best investment... Over time, it will beat anything else except a lucky pick in the stock market. Granted, you must be careful what you buy (no swamp land in Florida) but there is no better way to invest in the future.

You think so? IIRC real estate prices fell by 50% in Japan the past 15 years or so.

[Aabraxan]

Originally posted by Japher
roth IRA contributions are tax deductible

I don't think this is right. I'm not in the tax field, but I think you pay taxes on the front end with Roth IRAs. Then when you cash them out down the road, you've already paid taxes on the income (which you invested in the IRA) and the growth is tax-free.