Small inheritance - now what?

[Anonymous]

I am executor in a relatives estate and am getting a small inheritance (under 200k). I make settlement on their house that I sold next week. They had no children and I am the only person involved in the estate.

Most of the money will be saved for us to put towards a new house in next few years and the rest is going into 529 for each of my 2 children.

I want to put aside 10k to invest. Just something on my own. Is it even worth it for this small amount? Or should I just put into savings?

When I get the check I’d like to make sure it goes into a high yield savings account. I read about CIT that has about 5% interest. Would it be a good idea to put the money there for the time being?

We have almost zero credit card debt. We pay off the one card that we have each month. Affordable current mortgage with substantial equity in the our current home and one car payment. I have prepaid the inheritance tax.

I welcome all advice and ideas!

Investing 101 😂

[Anonymous]

I would go look at bogleheads generally and specifically the wiki on windfalls.

Not sure what CIT is

[Anonymous]

Cit.com

[Anonymous]

I would invest all 200k and continue living and saving the way we were.

[Anonymous]

Typical order of operations for a windfall

1) pay off high interest debt e.g. credit cards consumer toys that depreciate like jets skis boats etc
2) Round out emergency reserve (3-6 mo worth of expenses)
3) fund one off goals - 529s are a good one since it doesn't have to come from payroll. Can you fund a Roth IRA or a backdoor Roth this year? Any one-off house renos that will increase the value of your home? Any one off trips that will dramatically enhance the quality of your life (visit relatives in foreign country etc)
4) pay off "good debt" like 30 yr fixed low rate mortgages. The reason to do this is just peace of mind and risk management, not wealth maximization

[Anonymous]

Anonymous wrote:Cit.com

You can find online banks with good rates but honestly I’d be more inclined not to chase the absolutely best rate bit to park it at vanguard in their money market— that was paying close to 5% recently

[Anonymous]

Anonymous wrote:Typical order of operations for a windfall

1) pay off high interest debt e.g. credit cards consumer toys that depreciate like jets skis boats etc
2) Round out emergency reserve (3-6 mo worth of expenses)
3) fund one off goals - 529s are a good one since it doesn't have to come from payroll. Can you fund a Roth IRA or a backdoor Roth this year? Any one-off house renos that will increase the value of your home? Any one off trips that will dramatically enhance the quality of your life (visit relatives in foreign country etc)
4) pay off "good debt" like 30 yr fixed low rate mortgages. The reason to do this is just peace of mind and risk management, not wealth maximization

I agree on #1 and #2. Your #4 makes zero sense. I would do the following:
3') Allow yourself one perk, like a nice family vacation, during which you will be thinking fondly of your relative
4') Put everything else in an index fund (like VTSAX) and forget about it until you reach retirement

[Anonymous]

“I agree on #1 and #2. Your #4 makes zero sense. I would do the following:
3') Allow yourself one perk, like a nice family vacation, during which you will be thinking fondly of your relative
4') Put everything else in an index fund (like VTSAX) and forget about it until you reach retirement”

+1

[Anonymous]

Learn to invest. Invest it. The two happen at the same time. It will double 3-4x. It could be three million by the time the kids are in early 30s.
No new home and definitely no to 529s.

[Anonymous]

529s are a great tax saving vehicle. They are pretty flexible especially if you have multiple kids or send kids to private schools

[Anonymous]

Anonymous wrote:

Anonymous wrote:Typical order of operations for a windfall

1) pay off high interest debt e.g. credit cards consumer toys that depreciate like jets skis boats etc
2) Round out emergency reserve (3-6 mo worth of expenses)
3) fund one off goals - 529s are a good one since it doesn't have to come from payroll. Can you fund a Roth IRA or a backdoor Roth this year? Any one-off house renos that will increase the value of your home? Any one off trips that will dramatically enhance the quality of your life (visit relatives in foreign country etc)
4) pay off "good debt" like 30 yr fixed low rate mortgages. The reason to do this is just peace of mind and risk management, not wealth maximization

I agree on #1 and #2. Your #4 makes zero sense. I would do the following:
3') Allow yourself one perk, like a nice family vacation, during which you will be thinking fondly of your relative
4') Put everything else in an index fund (like VTSAX) and forget about it until you reach retirement

Paying off a mortgage is a very conservative thing to do. Doesn't necessarily maximize wealth, but it does dramatically lower risk. If OP or her spouse loses their ability to work, it's extremely nice to have zero debt.

[Anonymous]

I wouldn't call "under $200k" a small inheritance! When I saw the title I thought it was gonna be 20 or 25k.

But yes the Vanguard money market fund is a good idea as a starting point. Earning 5.25%, mostly state tax free. Let it sit there until you figure out exactly what you want to do with it.

[Anonymous]

Anonymous wrote:I wouldn't call "under $200k" a small inheritance! When I saw the title I thought it was gonna be 20 or 25k.

But yes the Vanguard money market fund is a good idea as a starting point. Earning 5.25%, mostly state tax free. Let it sit there until you figure out exactly what you want to do with it.

Ha! Exactly what I was thinking. And I’m someone with money in the Vanguard money market fund, till interest rates decrease at any rate.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Typical order of operations for a windfall

1) pay off high interest debt e.g. credit cards consumer toys that depreciate like jets skis boats etc
2) Round out emergency reserve (3-6 mo worth of expenses)
3) fund one off goals - 529s are a good one since it doesn't have to come from payroll. Can you fund a Roth IRA or a backdoor Roth this year? Any one-off house renos that will increase the value of your home? Any one off trips that will dramatically enhance the quality of your life (visit relatives in foreign country etc)
4) pay off "good debt" like 30 yr fixed low rate mortgages. The reason to do this is just peace of mind and risk management, not wealth maximization

I agree on #1 and #2. Your #4 makes zero sense. I would do the following:
3') Allow yourself one perk, like a nice family vacation, during which you will be thinking fondly of your relative
4') Put everything else in an index fund (like VTSAX) and forget about it until you reach retirement

Paying off a mortgage is a very conservative thing to do. Doesn't necessarily maximize wealth, but it does dramatically lower risk. If OP or her spouse loses their ability to work, it's extremely nice to have zero debt.

Assuming OP refinanced during the pandemic, putting money in a HYSA is risk free and still comes out ahead of paying down the mortgage.

[Anonymous]

Op, whatever you do, please put the money in an account under your name only. This can be a safety net for you in the future and you can use it to pay for college if necessary down the road. But the minute you commingle the funds, your husband has a right to the funds. Even if you have been together forever, I would still put in a separate account.