Morning Blend on Mater Dei Radio: “Inheritance Decisions”
We can’t rely on inheritance to fund our retirement, but if you find yourself receiving a chunk of money, what should you do with it?
What’s The First Thing I Should Know?
Do not leave your inheritance sitting in cash. As the funds settle over time, it’s tempting to wait until all of it is in your possession to do something about it. The problem arises when the money is all there, and you still don’t do anything with it. Clients often find it difficult to go and reallocate it elsewhere.
It’s not uncommon to have a hard time with changing the way the investments were once allocated when there parents were alive. Maybe your parents told you to keep a particular stock. That’s okay to keep some shares! But having your entire portfolio allocated to one stock, or a few, to honor a parent, can end up causing more damage than good.
Is There A Financial Threshold to Keep In Cash?
Once your emergency fund is covered, you can expand past cash. The goal is earning interest, which cash won’t help you do.
For inherited IRA’s, you’ll have a lower cash balance since these are specifically meant for retirement. Say, you inherit some money from a checking or savings account, you may want to keep some of this in cash!
Is There A Way To Maximize How The Money Is Utilized?
Rollovers are slippery slope. You must exercise extreme caution when completing these. If you aren’t careful in depositing the funds to a like for like account type, you can face taxes and penalties. A Trustee to Trustee transfer is the best route possible to avoid issues. Ideally, it’s sent from one holder to the other so it never touches your hands.
If a balance is small enough, a company may kick a 401k from their plan, just sitting in cash. You want to take action and invest the money appropriately.
Listen to the interview
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