Best use for 1.6 million inheritance

[Anonymous]

Anonymous wrote:Don't pay down your house, you're likely getting negative interest on that. You are paying the bank less than it is appreciating. The money is better spent elsewhere.
I'd buy a second home, buy land, or ask a financial advisor to point me towards inflation proof investments.

That financial advisor will tell them not to buy land. Yikes.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Put 1/4 towards the mortgage, 1/4 to invest, 1/4 towards retirement, and splurge 1/4.

No. They have three children to put through college. They should not splurge a fourth of 1.6 million!

+1

$500k toward the mortgage (if you must)
$500k toward 529s
$500k toward brokerage
$100k splurge

[Anonymous]

Anonymous wrote:Enough with the low retirement savings. They have 2 million in their forties! Plus $800,000 in brokerage.

That is more than solid.

Compared to what we can infer their lifestyle to be... actually no. Not solid at all. They likely have a high income to send 3 children to private school and pay a large mortgage. Unless they're house poor and have a very frugal lifestyle, which I doubt very much, they are used to a certain style of living. 2M in late 40s might be enough if invested wisely. But again it might not, if OP and her husband wish to continue with an equivalent lifestyle during retirement, or if the funds don't grow because of poor investment decisions.

[Anonymous]

Why splurge any of it?

[Anonymous]

Anonymous wrote:Late 40s with such low retirement? I would invest it for retirement, OP.

This assumes that you can carry college costs solely on your income, as you've suggested.

I wouldn't pay down the house, unless you cannot cover college tuition and private school with your income. Of course this all depends on your mortgage rate, compared to rate of return you might get by buying at a low in the stock market. Expectations are that the stock market will hit hit bottom 3 to 6 months into the war in Ukraine, but we're not there yet, and there's a stagflation/recession looming for next year, so, the usual rule of thumb applies: don't try to time the market exactly, start buying solid company stocks if they've tumbled significantly from their 52 week high.

Seriously, only DCUrban would consider that low!

[Anonymous]

Inheritance is a separate property of the spouse who inherited it. Don’t invest in anything joint - you are gifting your spouse 50%. Is it what you want ?

I would buy a separate rental property or a brokerage account and put it into a irrevocable solid divorce proof trust with mine and kids names on it. Way too many divorces when kids are off to college in mid 50s….

[Anonymous]

I'm in a solid marriage and I wouldn't commingle the funds either. I certainly would not use the money to pay down the mortgage, and honestly when I hear stuff like this that the other spouse is pushing it kind of makes me wonder.

I'd put some of the money into investments. I'd probably set up some sort of funds for the kids.

I'd use some of the money for the family: plan a big trip, something you want to do but haven't been willing to spend the money.

I'd treat myself in some way, something that is for fun, whatever that means for you.

[Anonymous]

Anonymous wrote:Why splurge any of it?

I have to agree. If they're sending 3 kids to expensive private schools I can't imagine there is much left to splurge on. Inheritances of the size OP is talking about (generally) aren't meant to be splurged, they're meant to build financial security and opportunities for descendants. Don't ruin that OP. Add to it if you can (and it sounds like you can).

[Anonymous]

Anonymous wrote:

Anonymous wrote:Don't pay down your house, you're likely getting negative interest on that. You are paying the bank less than it is appreciating. The money is better spent elsewhere.
I'd buy a second home, buy land, or ask a financial advisor to point me towards inflation proof investments.

That financial advisor will tell them not to buy land. Yikes.

I'm surprised. If you can pay cash for it? Real assets are better protected against inflation. The housing market is scary. But population is growing and people will eventually need to go somewhere...

You really think something like this is a bad investment? Just picking a random link, no knowledge about this particular area:

https://www.landwatch.com/pittsylvania-county-virginia-recreational-property-for-sale/pid/411488130

[Anonymous]

OP, how much is left on your mortgage and what is your interest rate? During high inflation and low interest rates, it’s unwise to pay off your mortgage—there are many threads about this. Instead:
- Put $150k in the 5 year old 529
- Buy $40k of ibonds for the next three years to use for college for the older two kids.
- Set aside $100k in a savings account for the older two for college.
- Pay half of the private school tuition from the inheritance. If your spouse would like, dump the extra from your monthly budget into extra mortgage payments.
- Open a separate savings and brokerage account for the rest of the money. Starting in the fall, I’d consider investing $50-$100k per month into the market. Keep a good amount in cash for the short term—these are crazy times.
- Maximize pre-tax savings accounts before paying down the principal.

[Anonymous]

I really appreciate all of the advice.
I did not really realize our retirement savings is low but yes, that makes sense given our high cost of living.
I also did not realize that there was good reason to think about not commingling the funds. I am the lower earner by a drastic difference, so yes, I need to think about that.

[Anonymous]

If the inheritor is the vastly lower wage earner then most of it should go into solo investments to equal out the long term financial stability. There's a very large psychological benefit to knowing that your future is not financially dependent on your spouse.

Unlike others I would pay down some of the mortgage. Although the interest rate is presumably low the flexibility of having a paid off house is massive and would increase free cash flow.

[Anonymous]

Couldn't agree more about the OP's retirement accounts being solid. It is absolutely possible to save too much in a retirement account. RMD's, must pay ordinary income taxes, etc.

Inheritance money is tax free. Why place it in a retirement vehicle (outside of a Roth) and make it taxable again? Get the 529's to where you feel comfortable and beef up your after-tax investment accounts.

[Anonymous]

I would fully fund the 529s and put the rest towards retirement. I wouldn't pay off the house unless your mortgage is like 6%.

[Anonymous]

I would figure out a way to gift a sizable chunk of it to your kids. I received an inheritance in my mid 20s and it was life altering. We bought a house, and H and I both went to grad school - all investments which have paid off in spades and made us much more comfortable now in our late 30s. It's my number one financial goal to give my kids that same leg up early in adulthood.