Transcript
Brian (0:07)
I'm inheriting $300,000. How do I not screw this up?
Bo (0:11)
Brian, I am so excited to talk about this because sometimes life throws us these curveballs that we're not expecting and sometimes the curveballs are pretty good and we want to figure out, okay, I've got this once in a lifetime opportunity. What do I do and how do I navigate it? I love that we can answer those kind of questions. Matter of fact, I love that we can answer all of the question that you guys send. It's one of our favorite things to do every Tuesday morning at 10am Central. So we want to answer the questions that you care about. So with that, Megan, I'm gonna throw it over to you.
Megan (0:44)
Great. We're gonna start off with a question from Peter M. He says, I'm 28 and on step six of the foo. I will inherit $300,000 soon and I'm unsure where to put the money. I would like to retire early. So should it be in a taxable account, index funds, or a target retirement account? What do you guys think?
Brian (1:04)
This is exciting.
Bo (1:05)
So it's one. Peter, this is a unique opportunity. A lot of folks don't have a situation where they get to inherit some level of wealth. And so it sounds like you're in a position where you are. It's really interesting. And your question doesn't state this, hey, I'm going to inherit $300,000. My immediate first question is, okay, how is that money currently structured? Because most often when there's an inheritance, you might inherit some checking accounts and savings accounts or maybe there's a piece of property that got sold. But oftentimes there are things like IRAs or Roth IRAs that you inherit as a beneficiary that what you're supposed to do is you're then supposed to open an inherited IRA or an inherited Roth IRA and you roll the assets into that. And then there are certain required, distribute required minimum distribution requirements on those assets. I'm going to guess by the question that he's talking about inheriting $300,000 after tax. Because obviously if you're inheriting anything inside of a tax structure like a 401k IRA or Roth IRA, it likely makes the most sense to open up an inherited account to put that money in so you can continue either with the tax deferred growth or the tax free growth from now for the next 10 years. So I would not think about using any of that money immediately to go cash it out, pay taxes and do something on. I let that money Keep rolling. But he poses an interesting question. What does he do with the money that comes to him after tax that 300,000 first.
Brian (2:34)
Peter, you know, typically inheriting money is after the loss of somebody. So first we're sorry for the loved one that you've lost. But it is, it's one of those things where I always think about with inheritances. There's a legacy component of this too, is what a cool thing for somebody's discipline or hard work to, to kind of pay it forward and give you an additional opportunity for the future. And I think this one even has an extra special sweetness in the fact that you're already at step six of the financial order of operations, which everybody knows by the time you get to. Or if you haven't, I'd invite you to go to moneyguy.com resources or if you even want to go, a deep dive. And what I'm about to talk about is step seven, hyper accumulation. I really think that this book puts an exclamation point on what that step is and how to leverage that to the most. But it is one of those things where you're going to be able to hit the 25% savings rate just off of not only your good discipline, but also the little bump that this inheritance is going to give you. But then beyond that, you're going to move into step seven. And that's why I think that like I said, this is a blessing with a legacy component that you get to move into step seven. And the key thing about hyperaccumulation is that you say all the other steps were how do I maximize, keep my life out of the financial ditch and avoid the traps like high interest debt. Step seven is the first one that says how are you actually going to in the long term use these assets? So this is going to be a great time to pause. You don't have to get in a hurry on this because that's the other thing I tell people when you inherit money is measure twice, cut once. You can be very mindful of making good decisions with this. You said you're retiring early. For me, that does mean like maybe an after tax account might really be a good thing. But then as you go through your checklist mentally of what the long term goals, you said early retirement or opportunity to early retire. That is an after tax. But then you need to think about are there other lifestyle things that you and your family have talked about to pay it forward with this legacy is that are you going to be moving to a different house or are you Going to change careers because this allows you to have more flexibility and resources. Make sure you're just looking at all of those intermediate goals, meaning in the next six to 10 years, 10 years and beyond as long term goals. And you balance that out and then you structure your accounts in step seven to go ahead and start taking action to reflect those goals.