I Received a Sizable Inheritance How Should I Invest It?
I Received a Sizable Inheritance How Should I Invest It?
Lee Huffman Wed, January 18 2023
When a loved one passes away, you may receive an inheritance. This money is a token of the person’s appreciation for you and often represents a lifetime of savings. When you’ve received a large sum of money, there is a temptation to splurge on dream vacations, shopping and other fancy items. While it may be okay to spend a portion of it that way, the best option is to save and invest the money for your future. Here’s how to invest your inheritance to become set for life. A financial advisor can give you valuable guidance on how to make the best use of an inheritance.
Six Ways to Invest Your Inheritance
There are almost infinite options to invest a large sum of money from an inheritance. The options that you choose will largely be determined by how much of an inheritance that you’ve received, your current financial position and what your goals are. The following six possibilities are some of our best tips to create lifelong wealth for you and future generations.
Contribute to an IRA
Many people wish that they could contribute to an individual retirement account (IRA) each year, but daily bills often get in the way. With an inheritance, this is your opportunity to contribute to your IRA. The maximum contribution for 2021 is $6,000 per person ($7,000 if you’re 50 or older). If you have a spouse, you can also contribute to their IRA, even if they’re not working.
There are two different types of IRAs to choose from, traditional or Roth. Traditional IRAs offer a tax deduction today, but withdrawals will be taxed in retirement. If you have a workplace retirement account, income limitations apply. Roth IRAs are a popular choice because they provide tax-free withdrawals in retirement and there are no required minimum distributions as you get older. Just keep in mind that you don’t get a tax deduction for the contribution and there are income limits for high earners.
Max Out Your Company Retirement Plan
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