Inheritance Tips
Course Section
Let’s face it, we’ve all thought about the possibility of inheriting some money at one time or another. Newspaper stories speculating about the coming huge transfer of wealth to the baby boom generation only fuel the fire. But the inheritance picture may not be so rosy. You’ll want to make the most of any inheritance you do receive.
Don’t Count on It
Despite wishful thinking and optimistic news reports, inheritances are not likely to bail out boomers who haven’t been saving for retirement. AARP’s new study, In Their Dreams: What Will Boomers Inherit? (2006), finds that about one-fifth of boomer households have received inheritances. And only 15 percent still expect to receive one. Further, of the boomer families who have received an inheritance, the median value was about $64,000. While this is a nice chunk of change, it’s not likely to solve all of your financial and retirement needs.
Save, Save and Save
Since you can’t count on an inheritance, save enough money to retire comfortably. Find out how much you need to save now for a secure retirement. To save on taxes while growing your retirement fund, participate in the retirement accounts where you work (401ks) and IRAs. Start saving today.
Inheritance Tips
If you do receive an inheritance, make the most of it. Here are some tips:
- Don’t Do Anything - Losing a family member is difficult. Take some time to grieve. In the meantime, park the money in a stable, liquid account such as a money market account. You can afford to take a couple of months to deal with your emotional needs rather than rushing into investments that you may regret later.
- Don’t Blow It – When you receive an inheritance, you may feel rich. It’s OK to spend some of it on yourself, but don’t blow it all on a boat or a trip that you really can’t afford.
- Make a Plan – So what are you going to do with the money? Make a plan. It forces you to really think about what you want to do.
- Pay off Debt – Consider paying off high-interest consumer or credit card debt.
- Invest for the Future – Think about using the money to build a secure future. Figure out how much you need to save for retirement and invest wisely.
- Inheriting IRAs – If you inherit an IRA, you can continue to take advantage of tax-deferred savings as a beneficiary. The rules are different for spouses and non-spouses, and traditional and Roth IRAs. Check with an estate attorney.
AARP Resources
In Their Dreams: What Will Boomers Inherit?
Read more from AARP’s report on boomer inheritances.
Talking With Your Parents About Estate Planning
Get tips on how to talk with your parents about estate planning.
 |
Because your Money Matters, get more tips and action steps on Estate Planning - PDF file |
Additional Resources
What You Need to Know When You Inherit a 401k
Find out what to do if you inherit a 401(k) account.
Inheriting an IRA
Make the most of an IRA if you inherit one.
