3 million inheritance. What should this affect things
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Anonymous
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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. |
Anonymous
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$3M is a nice nest egg at 35. What you do from here, IMHO is to have a fee only advisor assist in an asset reallocation, I'd probably continue to max 401k, but I'd also ease off the other savings (assuming you have them).
I'd look to get rid of any bad debt - if you have it - and by bad I mean > 5% interest. I'd probably keep my mortgage given that rates are so low you probably make more in interest in the market than you pay. Private for the kids sounds nice, but unless there's a compelling issue to resolve, I'd stay in public (assuming your public isn't awful). Realistically, that $3M could easily be $10M at your retirement. I'd aim for that and then one day - as in 30 years from now - look at generation skipping trusts, etc. |
Anonymous
| They usually say if you receive a windfall, to sit on it for a year before you make any big purchases. Definitely start a 529 college savings plan for your kid immediately. Also, consider that in DC or MD the state estate tax will be 16% on the amount over $1M, so $320k (maybe that was already paid). For a typical DC private school, I did the calculations for my son recently, and indexed for inflation, it's around $300k for just K-8. Private high school will be like $35k/year in today's dollars. $3M may seem like a tremendous amount, but it's amazing how fast it can be eaten up if you're not prudent. |
Anonymous
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OP here. This money is post tax. I think advice the o wait a year is a good one. Those private school numbers are staggering. No idea it cost that much. DCs seem to be getting an adequate education in public at this point.
We have no debt apart from mortgage and our rate is very close to 4%. We have 2 children and would love to surprise them with a nice nest eggs once they are the same age. We contribute to (not max out) 401k and save some post tax. DH wants to treat the money as retirement - basically leave it alone, allow the interest to compound and live off what ever pay out it gives in 30 years, along with whatever the 401k gives us. I'm not sure whether it is better to save at source (401k) or post tax College (at least undergrad) for both kids is covered for now. |
Anonymous
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I agree about sitting on it for a year. I would consider moving if it meant better public schools and better commute options (accessibility and length). However, if you are currently in a neighborhood you like with decent public schools and commutes- stay there. There are too many excellent public schools to go private in this area without a specific reason beyond newly acquired affordability (people with more money spend more and there will be additional pressures).
This is what I would do (after your year is up). We are at a different lifestage (early 50's and children in HS). We would not move as we are already in a decent neighborhood for commutes and schools and we have been here 17 years and have established friendships. I would however, go through our house/yard improvement wish list. I would build in small indulgences in the house to make our lives more comfortable (nicer bathroom fixtures, better lighting, get better pots and pans) and I wouldn't worry as much about pay back for eco projects (geothermal heating and cooling, tankless hot water heaters, a few more solotubes, weekly gardener, solar panels). |
Anonymous
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Max out the 401ks. It reduces your tax liability and is savings for the future. I actually don't understand why you wouldn't be doing that already, unless you needed to shore up your emergency funds.
Get recommendations for a portfolio manager (aka "wealth advisor") to handle the investments. Do some thinking about what level of risk you wish to have. In theory you can take up to 4% annually without digging into principle. We feel more comfortable with 2% so that we are still building principle, yet can enjoy some extras between now and retirement. Figure out what you would like those extras to be. Sprucing up your home. A memorable vacation. Private school. Talk to a tax specialist and/or investment advisor about 529 accounts. I don't recall the reasoning, but they are not great idea for everyone. And congrats! You now have 75% of your retirement savings. |
Anonymous
| Just wanted to say that yes, that IS a lot of money by anyone's standards, OP, even DCUM. Its a ton of money, and I hope it brings you and your family comfort and security. Be well. |
Anonymous
| Build a massive house clpse in, You will love it. |
Anonymous
| Build a massive house clpse in, You will love it. |
Anonymous
| Build a massive house clpse in, You will love it. |
Anonymous
Yes, no kidding. |
Anonymous
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Get a financial advisor.
In some cases - a 529 is a good decision - but I don't know it if it is the right decisions with that amount of principal. But the financial advisor will not tell you how to spend it. That is for you to decide. What are YOUR dreams? Is it to live comfortably in retirement? Have a small cottage in the mountains? Take a year off and travel around the world with your children? You need to define these - and the advisor will make recommendations on how to accomplish them. |
Anonymous
| It's a good start |
Anonymous
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Anonymous
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I'm anon from 5:41.
I would NOT listen to the people saying you should still max out your 401k at this point. I wouldn't stop 401k all together, but you should put just enough in that you get your employer's matching, but don't put in much more. You have $3M to invest. Get a wealth advisor now; they will put it in a well-diversified portfolio, and it should double every 10 years. This is just standard market return calculations by the experts. Along the way, you can have the portfolio pay you a monthly amount. You're 35 years old so when you're 55, it will be $12M. Why would you max a 401k and let the government tell you when you can take the money out. You'd have to wait 10 more years to touch that money or face steep gov't penalties. It's a silly place to put your money if you may retire in your early to mid 50s. Live well NOW (I'm not saying imprudently). Life won't be as fun when you're old and decrepit. A similar thing happened to me, so I speak from experience. I received $1.5M (now it's $1.8M) at age 38 and the above is basically what I'm doing, and after long meetings with my financial advisor, he said it's easily obtainable, and my plan includes private for my preschool age girl (only child). |