The theme this week on the Retirement Quick Tips Podcast is: What to do with a $300,000 inheritance

Today, I’m talking about the importance of making a plan for inheritance dollars. Often you can’t plan for this in advance, since it might make you feel too icky to plan what to do with your inheritance when mom and dad are still alive. Also, you don’t know for certain how much you will receive, which brings me back to a point I made earlier in the week about waiting 6-12 months before you make any major decisions…which of course, allows you ample time to plan. 

When I was in my mid-twenties, one of my former employers was involved in a large class action lawsuit. I had nothing to do with this lawsuit and wasn’t affected by it in any way, but just by filling out some paperwork which took all of 10 minutes, I received a check in the mail for several thousand dollars about 6 months later. 

That was a pretty sweet windfall, especially for someone in their mid-20s with a modest income. I dreamed up all the ways I would spend this unexpected and unearned injection of cash…nice vacation, some new golf clubs, new clothes and shoes. We just bought our first home, and it would have been nice to upgrade to some better countertops. I put it into savings and didn’t spend it right away, but I didn’t have a plan for it either. 

What happened to that money? I don’t remember. I gradually used it for and it dwindled down and it’s long gone. 

Because I didn’t have a plan for these assets, I didn’t do anything meaningful with the money. The same thing can happen with an inheritance.

So how do you plan for an inheritance? You don’t have to plan for this in advance. Since you don’t know the timing or the amount, it’s usually not worth planning on, and counting on an inheritance can be very detrimental to your motivation to save and invest wisely. 

Also, you can’t count on an inheritance. According to statistics, the average inheritance is  significantly lower than the expected inheritance. Much of it could be used for end of life health care and other expenses, parents live to 100 and use up more assets, funeral expenses, etc. 

But again, if you’re waiting 6-12 months after receiving an inheritance to do anything significant, then you’ll have plenty of time to plan thoughtfully then. 

Tomorrow, I’ll bring everything together that I’ve discussed this week in a case study. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast. 

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance