Receiving an inheritance is a mixed blessing. Obviously, receiving a lot of money can improve your financial situation. At the same time, you are left coping with the loss of a loved one and you must try to figure out how to effectively manage money or investments that have been left to you — which can sometimes be more difficult than it seems if you have a house to clean out and sell or a stock account you aren’t sure what to invest in.
This is the situation that a Reddit user is currently facing right now. The Redditor received over $581,000 from his father, and he doesn’t know what to do next. Here’s what happened, along with some suggestions on how the poster can make the most of his inherited assets.
A large inheritance can be a financial windfall
The Reddit poster explained that his father left him a home valued at approximately $200K to $240K which will be transferred to his name in a few weeks when probate is complete, as well as a $3,000 vehicle and a brokerage account that’s valued at $358K that will also be transferred into his name soon. The brokerage account has a mix of individual stocks, mutual funds, fixed income assets, and a small cash account where the money from dividends is deposited.
The poster was in pretty decent financial shape before the inheritance, with $25K in savings, a home valued at $240,000 that he owes $123K on with a loan at 4%, and a vehicle worth between $22K and $28K that he owes only $8K on. He also has $80,000 in his 401(k) and does not have any other debt. So, he has an opportunity to take this $581K windfall and do something with it to set himself up for a more secure future.
Managing the inheritance wisely is essential
Unfortunately, many people who receive a large inheritance end up wasting the money quickly, and they find themselves either back where they started from or worse. Since the original poster (OP) is taking the time to carefully consider what to do with these funds, hopefully, that will not wind up being his situation.
Several other Redditors offered some helpful suggestions, with perhaps the most helpful being to just keep the money safe and do very little with it for six months so that the OP has time to deal with his grief and to research his options. The universal consensus was also that the OP should not tell people about the money, so he doesn’t find himself faced with greedy people who either want to take some of the funds for themselves or who give him bad investment advice. Many also warned him against buying any kind of whole life insurance coverage, as salespeople for these policies can be pretty persuasive in situations like this.
Since the OP doesn’t have much debt, and his mortgage is at an affordable rate, it seems like the best thing to do would be to invest the money and, depending on the interest rate, perhaps pay off the $8K car loan so he can save himself the monthly payment and the interest costs. Some of the money is already invested in a mix of different stocks, but unless the OP wants to pay attention to actively managing a portfolio, he may be better off switching those funds to an S&P 50o index fund so he doesn’t have to think about his investments at all. The S&P 500 has consistently provided a 10% average annual return with minimal risk and no hands-on involvement required.
The OP also has to decide what to do with the house. Some suggested renting it and hiring a property manager, and that could make sense if the OP wants to diversify, but if his goal is to just keep things as simple as possible, opting to sell the house and buy an index fund with that money could also be a solution.
Since this is a large sum of money, it could also be a good idea for the OP to talk with a financial advisor who can hlep him decide what’s best to do with the funds given his individual goals, risk tolerance, and short-term and long-term financial plans.
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