Is it too late for me to invest my inheritance?
I'm 69 years old, of modest means, and have just inherited $200,000. Is that too late to put in some sort of investment vehicle? What advice do you have for late-in-life investing?
It's never too late. The question is: How should you invest?
Determining how to invest is a result of many other factors. Fortunately, I come across this situation often; if I were advising you as a client I'd start with understanding the other parts of your financial plan. Questions like these need to be asked and answered:
What are your sources of income in retirement?
What other assets do you have?
Are you covered by insurance for events like Long Term Care?
Do you have legacy/estate goals?
---and many others.
After understanding your financial situation and your objectives, this will give a timeline for investing that will be the framework for how you should invest.
I can't really give advice without knowing more details, but I can say this: as investment vehicles are concerned, I'd really suggest you prioritize liquidity in how you invest. This simply means that you have access to the funds in short notice if you need them. As we get older, the propensity to incur large expenses can increase, and the last thing I'd recommend is locking up a significant amount of your capital in a product that restricts your access to it.
As with all of my insight on Investopedia, my comments are general and for informational purposes only. You should certainly discuss any action with your tax and financial advisors before doing anything. If you don't have these professionals please feel free to send me a message and I may be able to provide definitive guidance after getting more information.
Adam Harding, CFP | Investments & Planning
While many people may advise you to invest that $200k in an annuity (because of high upfront sales charges), I would suggest a conservative to moderate ETF fund portfolio that balances risk with return potential. You can schedule regular withdrawals as needed while targeting some reasonable income and growth to fight inflation and retain your principal longer.
It is never to late to invest your money or inheritance. Here are the steps I would follow before investing those funds:
- See if you have any debt - pay it off first (especially "bad debt" like high interest credit card debt).
- Make sure you have a "rainy day" fund - at least 6 months of expenses if you are in retirement.
- See if you have an "income gap" - a shortfall between what you need each month from cash flow vs. your expenses and see if you can invest this money conservatively to get income (dividends or interest) to close that gap.
- For the rest, you can investment in a balanced allocation geared towards your longer term planning needs - maybe a hedge against inflation or as an additional "rainy day fund" to cover unexpected expenses like long-term care or nursing home care.
I hope this helps!
Not to be too vague, however it depends upon your goals for the funds. Are these funds you want to pass on to your heirs or receive some type of income from? Also one would need to assess your prior investment experience. The first issue that needs addressed before an investment direction, if any, can be ascertained is what are the goals for the funds.
If you work with an advisor who begins by making investment proposals before he or she desires to learn your goals and all pertinent background information is not someone you may want to work with.
Make sure that if you do seek professional guidance, that the advisor is a fiduciary.
Its definitely not too late and it probably should be invested in something. The big question is what.
The answer to this really depends on your financial needs. If you dont see yourself using the money any time soon, then you can invest in something a bit more aggressive that will most likely give you more return long term. If you think that you may need some of the money in less than 10 years, then whatever you need over the next 10 years you should take a whole lot risk with.
Most likely, you will find that some of the money you will want to use in the next 10 years, but some of it you wont need. This means you will want to create a portfolio that has a portion invested in pretty secure stuff that is easily accessible while some of it will be in more aggressive stuff that will fluctuate more, but probably net you more return.
So the first step here is think about what you really want use the money for and then work backwards from there.
If you need help thinking through these options feel free to shoot me a note or talk to any fee-only financial planner near you. Check out NAPFA.org if you want to find some folks close to you to chat with that you can trust. That website has only fee-only fiduciary advisors on it.
Good luck and let me know if you have further questions.