How can I stretch out a significant inheritance over my lifetime?

I'm 28 years old. I recently inherited $1,000,000, but after taxes, I'm guessing I will recieve around $500K. How can I make that money last without having to kill myself by working a 9-5 until I'm over 60 years old?

Financial Planning, Personal Finance
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5 days ago
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First of all, I would like to know more about why you think it will only be $500k after taxes.  If the deceased didn't have over 5.49 million, then there is no estate tax.  So the 1 million may not be taxable at all.  If some of the assets are in a retirement plan, then you must follow certain rules about minimum required distributions (MRDs) as a beneficiary, which could either be over 5 years or over your life expectancy depending on the circumstances.  Those distributions would be taxable as income to you at yoru tax rate including adding in the distribution.  Also, there is usually no tax on life insurance proceeds.  So it really depends on how the assets were titled and what type of assets they were, but you may have a lot less or even no tax to pay.  If the deceased had well over the 5.49 million, then estate taxes are very high and if your portion is, in fact, the net of the million, then you would receive a much lesser amount.  So you need to get with an advisor who understands estate taxes well to help guide you through this process & help you plan.

Having said all of that, how to invest the proceeds is another, separate question.  Many advisors will give you a "pie chart" based upon your age, risk tolerance, and "station" in life and simply hold for all environments.  I am an active advisor who doesn't subscribe to that philosophy 100%.  You age and needs are important, but it is also very important to determine how much risk is in the markets or specific sectors, and those risks changes over time. For instance, with the specter of rising interest rates, bonds are riskier than they were just a couple of years ago.  Stocks are also at least fully valued. Therefore, I believe you should invest but we have a sell discipline especially at these levels of valuation and interest rates.  If you were investing after a major correction or bear market, my answer would be different and a buy-and-hold pie chart would carry a lot less risk than now.

Either way, you need education and research (not products) so you can decide for yourself.  Whatever you do decide, you need to understand the strategy & philosophy, and it needs to make sense to you.

I hope this helps and wish you the best of luck, Dan Stewart CFA®

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