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nmguy's avatar

How would you spend a $100k inheritance?

Asked by nmguy (528 points ) March 24th, 2014

I will inherit a little over $100,000 within the next year or so and have no idea of what to do with it. I have no major debts, have reasonable mortgage payments, and live within my means. What would you do if you were in my position?

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23 Answers

gailcalled's avatar

Your tag says “Investments”? So which is it? Save or spend?

How old are you?
How secure are you in your earning ability? How secure are you in your job or profession?
Do you have a family? Kids? How old? College in their future?
What state are you in?
Will you have to pay any taxes on the inheritance?
Are you generally a conservative guy financially?
IRA? 401 K? Investments of any kind?

gailcalled's avatar

Is this a little windfall? If so, do you want to do something one-off like take a nice trip or redo your kitchen?

Seek's avatar

Me?

I’d hit a real estate auction and buy a house for next to nothing, then fix it up the way I like it. Then I’d hit a repo auction and buy a car for next to nothing.

I could make 100K do a lot for me.

In YOUR position… I have no idea. Haha. I’ve never been that secure.

XOIIO's avatar

I would give some to the people who answer this question.

RealEyesRealizeRealLies's avatar

I’d sell everything and take three years off to hike across the globe, blog about it, sell advertising and photographic artwork to travel magazines and patrons. Would probably put $20G aside just for advertising.

Hypocrisy_Central's avatar

Form a non-profit that helps the ” less than thou.”

bunnywok's avatar

Spend like half on it on stuff you always wanted to buy, the other half should be put aside for future emergencies and maybe some investments.

pleiades's avatar

I’d buy an AMP, a plane ticket to SF, book some recording time, open my own record label, tour the world, buy my wife all the shoes she wanted and buy my son a library of music, science, literatrue and all kinds of books

idk that’s my late night list it may change in the morning

cookieman's avatar

Seeing as I have a kid to put through college and I’d like a tiny chance to retire someday, I’d bank that money.

Stinley's avatar

I would buy some property and rent it out.

JLeslie's avatar

How old are you? Do you have savings?

If I had inherited it 10 years ago I would have just put it in savings. Today I would spend about $10k on something I have wanted to do for a while, a mini business idea. I probably am going to do it anyway. I also want to buy a condo, so that would help with the purchase, but I probably am going to do that anyway also. So, basically, I am going to put it in savings. The $100k wouldn’t really alter any plans I already have.

I never splurge when I get a windfall. I do splurge sometimes, but it isn’t based on windfalls, I base it on my overall financial situation.

How about travel? There are some travel things I would like to do, but the cost is higher than I want to spend. Maybe with an unexpected $100k I would splurge on it. That would use up about $7k maybe.

elbanditoroso's avatar

Invest 80%. Play with the other 20%.

ARE_you_kidding_me's avatar

Pay off the mortgage and invest the rest.

nmguy's avatar

Looks like I need to clarify my situation. Here are some facts that might affect suggestions:

* I’m 69 and retired
* My retirement income is adequate and has a 1.4% COLA
* I have no debt
* My monthly mortgage is $1,800
* I have Medicare
* I’m financially conservative
* I’m in the process of moving from New Mexico to San Diego, CA

gailcalled's avatar

Do you have a Medicap insurance plan?

Are you selling the house with the $1,800 mortgage? Do you want to downsize your living facility? San Diego is high-rent country; might you need more for affordable housing?

It seems that the answer lies with your own temperament.

Do you want to add that $100,000 to your estate? (The small yearly income it will kick off if invested is really negilble and needn’t be factored into your decision.)

Or would you and the family love a blow-away and memorable vacation to Hawaii.

Have you always dreamed of owning an avocado farm? My uncle had one for years outside of San Diego.

(Vanguard Ca. long-term tax-free bond fund. VCITX)

Stinley's avatar

Thanks for the additional info. I don’t really know how things like this work in the US (I’m from UK) but would the obvious thing to consider not be paying off your mortgage? (That seems like a massive amount of money to be paying out each month to me.) You could then have a bit more disposable income to enjoy your retirement.

janbb's avatar

I’m all about financial security and comfort in my old age so I would probably invest just about all of it. If San Diego is more expensive in terms of housing costs, etc., I might use some or all of it to absorb those extras.

Cruiser's avatar

I would set up a trust fund with my kids and or grandkids as beneficiaries if you don’t already have that. I love the water and if I was moving to San Diego a boat would definitely be on my shopping list and so would a 1968 Camaro convertible to cruise up and down the coast.

Wealthadvisor's avatar

Years ago, $100,000 was like inheriting $1,000,000. Today it is not really that much when in comes to extra money. If you were to save it at a rate of 1.5% and just withdrawal $10,000 a year, the money would last 10 years and you would have some interest left.

Since you are retired and have Medicare for your health insurance, you do not indicate if you have a Medicare supplement that covers the portion that Medicare does not. You might consider using the interest to pay for a Medicare supplement.

The one thing you do not want to do at your age is to pay off the mortgage unless you can’t sleep at night because you have one. Paying off the mortgage causes two problems.

1. You lose the tax deduction of the interest. If you don’t itemize, then this is not a concern. But if your income is high enough to cause your social security to be taxable, then the mortgage interest can offset some of the tax hit.

2. If you pay off the mortgage, then all your liquidity is tied up in your house. If you need money in an emergency, you would have to either sell the house our borrow your own money to make in liquid. If you are selling your current home, I would add the equity, if any to the inheritance and give you a small nest egg to invest based on your risk profile and use the dividends and interest to supplement your mortgage payment or annual income. The first $250,000 of gain on the sale of a home is capital gain tax free, $500,000 if married, if you have lived in your home for 5 out of the past five years.

You do not have to worry about adding the $100,000 to your estate, since the first $5,340,000 is estate tax free. California does not have an inheritance tax, so your $100,000 would be tax free.

You do not have to set up a trust for your children or grandchildren unless you want to. You could add an insurance policy placed in an irrevocable life insurance trust and have your heirs a beneficiaries. Even at age 69, if your health is good, you can fine a reasonable premium for insurance if you want to leave tax free money to heirs.

Since you say you are conservative, you should find a financial planner that fits your savings and investment profile and talk to them about a balanced portfolio. You should talk to a few planners, (most have the first hour of consultation free.) There are ways to make this extra $100,000 work for you.

ibstubro's avatar

I would buy a new car, and start traveling more.

Probably take at least $10,000 and hide the cash somewhere. The banks aren’t paying any interest and the government doesn’t need to know you have the money.

JLeslie's avatar

With that additional info I would consider paying off my mortgage.

Another idea put some in stocks that throw off dividends consistently (I want to do this myself).

Do you have insurance for if you every become disabled and need home help? Thank goodness my grandma had taken out that insurance. At yoru age maybe just setting aside the money yourself is better than taking out the insurance. I would put aside $50k for that. Spend it if you ever need help. Help with healthcare, help to have someone cook for you, delivery, clean your home, etc. if you have children who will come to your aid if you ever need help, that money will be there to give them a break at times and know you are cared for.

Darth_Algar's avatar

I’d go on a cross-country trip hitting every strip club I could find.

Dr_Lawrence's avatar

I would invest the money to make sure I have the modest income supplement I will need to live with dignity when I reach age 65. That will guarantee that I will not have to depend on my children or anyone else.

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