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How to Invest an Inheritance Towards Your Retirement

Inheriting a large sum of money can either be a blessing or a curse. While receiving sudden wealth is a great start towards a financially healthy future, the statistics show that many who receive a windfall inheritance end up worse than when they started by grossly mismanaging their wealth.

If you’ve received an inheritance (or plan to receive one), see our tips on how to invest an inheritance towards a successful financial future:

Take your time

It might seem counterintuitive, but the first thing you should do when receiving wealth is nothing. As I’ve stated before, our wealth is strongly tied to our emotions, and suddenly having a windfall inheritance is likely to make your emotions go haywire (especially if that wealth is tied to the loss of a loved one).

By allowing your emotions to cool, rather than getting swayed into rash, emotional decisions, you can ensure you make rational decisions that lead to long-term success.

Evaluate your current goals

After you’ve allowed some time to cool down, the best way to utilize an inheritance is to revisit your current financial picture, and examine the best ways to utilize this extra wealth into your retirement road map.

For instance, if you’re a few years away from retirement, and still scrambling to fund your Roth IRA, using your inheritance to fully fund it could be a smart path towards a successful retirement. This is also a perfect opportunity to re-examine your goals in light of this wealth (like if you’re currently in debt), and create new ones going forward.

Pay attention to taxes

When determining how to invest an inheritance, you should always keep tax efficiency in mind. Hasty action could turn that inherited nest egg into an expensive omelet. For instance, cashing out an inherited IRA could result in hefty tax penalties if you’re under age 59 and a half.

Utilize a trusted financial advisor

As fiduciary advisors, we’re legally bound by design to make decisions with your best interests in mind. If you’re wondering how to invest an inheritance, we can help you craft a portfolio to turn your dreams into financial realities. Ever mindful of tax-efficiency, we work closely with your tax and legal experts to ensure your inheritance is used effectively.

If you’d like to learn more about our services, don’t hesitate to contact us today.