3 million inheritance. What should this affect things

[Anonymous]

I would wait a while to make any big decisions also, with the caveat that I would take out maybe $5-10k for a really nice vacation somewhere with childcare. But I haven't had a really nice vacation for 10 years...

[Anonymous]

Do your employers give you the option of a ROTH 401k? Do you have any traditional IRA accounts? What state are you in (for 529).


I would max ROTH 401ks if given the option, as it is unlikely your income tax bracket with go down any time from now into retirement. The reason for the ROTH would be three-fold (1) tax free growth - you don't have to pay tax on the gains, (2) it allows a larger amount in a tax advantaged account compared to a traditional pre-tax account (because 17.5 post tax is worth more than 17.5 pre-tax), and (3) contributions can be taken out at any age without tax or penalty, earnings can be taken out beginning 59.5 years old.

3M is a lot of money and will add a lot of income (interest, cap gains, etc) that will be taxed every year, so I would look for ways to move as much as you can to tax advantaged accounts (401k, IRAS, 529). Max the 401k (ROTH 401k if you can), maybe look into back door ROTH contributions as well to move another 11k/year to tax advantaged. Do a ROTH conversion for existing traditional iras (since your tax rates will only go up from now into retirement - convert ASAP).

If you expect to have college expenses and your state plan is decent, front load your 529 contributions if you expect to need it. This would give you an immediate return from the deduction, as well as tax free growth.

And - Congratulations, hopefully this relieves some financial stress and gives you the peace of mind knowing you can most likely retire very early, live well in retirement, and pass significant wealth on to your family hopefully for generations to come!

[Anonymous]

Anonymous wrote:Do your employers give you the option of a ROTH 401k? Do you have any traditional IRA accounts? What state are you in (for 529).


I would max ROTH 401ks if given the option, as it is unlikely your income tax bracket with go down any time from now into retirement. The reason for the ROTH would be three-fold (1) tax free growth - you don't have to pay tax on the gains, (2) it allows a larger amount in a tax advantaged account compared to a traditional pre-tax account (because 17.5 post tax is worth more than 17.5 pre-tax), and (3) contributions can be taken out at any age without tax or penalty, earnings can be taken out beginning 59.5 years old.

3M is a lot of money and will add a lot of income (interest, cap gains, etc) that will be taxed every year, so I would look for ways to move as much as you can to tax advantaged accounts (401k, IRAS, 529). Max the 401k (ROTH 401k if you can), maybe look into back door ROTH contributions as well to move another 11k/year to tax advantaged. Do a ROTH conversion for existing traditional iras (since your tax rates will only go up from now into retirement - convert ASAP).

If you expect to have college expenses and your state plan is decent, front load your 529 contributions if you expect to need it. This would give you an immediate return from the deduction, as well as tax free growth.

And - Congratulations, hopefully this relieves some financial stress and gives you the peace of mind knowing you can most likely retire very early, live well in retirement, and pass significant wealth on to your family hopefully for generations to come!

All of this. With that much money you should be thinking of the most tax advantaged way to have it grow.

[Anonymous]

Don't listen to people saying to put so much into 401k or ROTH. That is what people do who expect to retire at age 65+. You've got money now. If/when you decide to retire early (say age 50 or 55) that 401k/ROTH money will be locked up or face big penalties. Don't let tax avoidance cramp your life.

[Anonymous]

Heard a great quote from Dave Ramsey (a radio host who talks about how to invest money and how to get out of debt.) He says, "Money is neither good or bad, it just makes you more of what you already are."

So think about it that way, OP! It's just a tool. It's a tool that can provide you with immense security (or immense pleasure right now) or a little of both…personally, I'm a big delay gratification person, so I invest carefully. I like security. It's your chance to get out of worrying about how you will live in your old age! Congrats!

[Anonymous]

Anonymous wrote:Don't listen to people saying to put so much into 401k or ROTH. That is what people do who expect to retire at age 65+. You've got money now. If/when you decide to retire early (say age 50 or 55) that 401k/ROTH money will be locked up or face big penalties. Don't let tax avoidance cramp your life.

With $3million, there will be plenty left in non-retirement accounts, even if OP and spouse but max in 401Ks ($35,000) and backdoor Roth annually ($11,000).

[Anonymous]

Keep it separate from your joint money. And for all of you saying not to max retirement accounts, you're all NUTS. This person just inherited 3M! Retirement contributions should be maxed to shelter as much as possible from taxes.

[Anonymous]

Anonymous wrote:Keep it separate from your joint money. And for all of you saying not to max retirement accounts, you're all NUTS. This person just inherited 3M! Retirement contributions should be maxed to shelter as much as possible from taxes.

yes, yes, yes

[Anonymous]

I am around the same age but we have a net worth of around $8m. I think you should max 401k and convert everything you can to a Roth (over time). First retirement accounts are protected from creditors for the first few million. Second Roth principal contributions and rollover amounts can be accessed any time without penalty ( after an initial 5 year period). I also would pay off the mortgage primarily for bankruptcy protection although you need to check your states homestead rules.

Definitely buy umbrella insurance and review other policies asap. You need at least $3m coverage.

[Anonymous]

Anonymous wrote:I just came into around 3 million dollars as an inheritance, which we are putting in a situation where the principal is protected. I realize its not much money in DCUM circles but feels like a heck of a lot to me. I'm 35, HHI 200K. We are reasonable savers - live modestly.

How will/should this changes things? Should we continue saving at the same rate? Think about private school for the kids? CAn't help feeling a little guilty as well when so many families are struggling.

I think that's a lot of extra money almost anywhere.