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How to invest an inheritance

Dec 27, 2010 | | Comments Comments Off

ear Liz: I’m writing to get some help on what to do with $300,000 that I have recently inherited. My husband and I are in our early 50s. We owe $180,000 on our home at 5% interest, with seven years left on our 15-year loan, and have no other debt. We have a combined $225,000 in retirement accounts and about $15,000 in a regular savings account. Does it make sense to pay off or pay down our mortgage with the inheritance or just keep it in savings?

Answer: You need to take a small chunk of that money and invest it in a session or two with a fee-only financial planner who can review your entire situation and give you personalized advice.

In all likelihood, the advice won’t be to pay off the mortgage. You’re on track to have your home loan paid off before retirement age, and most people have better things to do with their money than pay off a low-rate, often tax-deductible debt.

It doesn’t make much sense to let your inheritance languish in a savings account, however, when you’re likely to need more money for retirement. A planner can help you come up with an investment allocation that takes somewhat more risk but that should bring you greater returns.

You can get referrals to fee-only planners from the Garrett Planning Network at http://www.garrettplanningnetwork.com and from the National Assn. of Personal Financial Advisors at http://www.napfa.org.

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Categories : Financial Advisors, Q&A