What to do with inheritance
Question: When my Mother passed away she left each of my siblings and I an inheritance. She raised 5 children on her own, worked as a nurse, saved and sacrificed SO MUCH for us that now I feel so paralyzed by the responsibility of managing and not LOSING this inheritance. I am afraid to invest it but know that a regular savings account will yield so little. And then the taxes come in to play….It will be approximately $75,000. I am 58 and married. I am kind of dreading when I receive this amount (within the next month.) I know I should be happy with this economy being so difficult for so many, but I feel so nervous and so sad still about receiving this. Any suggestions? BTW, I have listened to your show for YEARS and trust your suggestions. Thank you very much. Lee Ann, Fairfield, OH
Answer: Your mother sounds like an amazing woman. My advice is to park the money in something safe.
That means investments backed by the full faith and credit of the federal government, from U.S. Treasury bills to FDIC-insured bank certificates of deposit to credit union savings accounts. I would also stay short-term and not reach for a higher yield by buying long-term securities.
Yes, you’ll make very little interest, especially after taxes. But considering all the uncertainties in the market and economy it’s sensible to trade the preservation of the inheritance for a low interest rate.
There is no rush to act. It might take you a year or 5 years to decide what to do with the money. And that’s okay. I would relax and realize that at some point it will come to you what to do with the money and it will be there when you decide. One suggestion for thinking though your choices: Imagine what your mother would want you to do with some or all of the money? What would please her or continue her legacy? If you took a fabulous vacation with your family? Gave it away to worthy causes? Getting rid of all and any debts in your family? Investing in your ongoing knowledge and education?
You could also use the time–again, there is no rush–to explore whether you’d like to create a diversified portfolio with greater growth prospects out of this money. Of course, with the possibility of earning a higher return comes increased risk. Theer are a number of good books to recommend but I’ll highlight one: The Little Book of Common Sense Investing by John Bogle. He is the founder of the mutual fund giant Vanguard. I once nominated him for the Nobel Prize in Personal Finance. (Well, if the prize actually existed he should get it.)
Meanwhile, while you think it over, your money will be safely tucked away.
We’re here to help you navigate this changed world and economy.
Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.
In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.
Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.