Financial Help needed- inheritance
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Financial Planning - Financial planning in general. (Moderated) 

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Financial Help needed- inheritance Postal68 07-24-2007
Posted by Postal68 on July 24, 2007, 8:26 am
I have just come into a lump sum of money, unfortunately it was through an
inheritance.

But this amount is might be enough for me to give up my job and enjoy the
rest of my life doing what I want to do everyday.

I am looking for some opinions on ways to invest this to carry me for about
40 years(hopefully I live longer, but let's estimate.)

1) What is the best way to limit my taxation on this income?

2)How do I invest it ?

Should I use the money aggressively and try to make more money? any ideas

Should I play it safe and just use it to make some small money but I know
the risk will be limited? any idea?

Should I do a little of both?

I am totally new to this besides my current 401K plan, where my options are
limited as to what I can do with that money.

Thanks
Charlie


Posted by kastnna on July 24, 2007, 9:21 am
> I have just come into a lump sum of money, unfortunately it was through an
> inheritance.
>
> But this amount is might be enough for me to give up my job and enjoy the
> rest of my life doing what I want to do everyday.
>
> I am looking for some opinions on ways to invest this to carry me for about
> 40 years(hopefully I live longer, but let's estimate.)
>
> 1) What is the best way to limit my taxation on this income?
>
> 2)How do I invest it ?
>
> Should I use the money aggressively and try to make more money? any ideas
>
> Should I play it safe and just use it to make some small money but I know
> the risk will be limited? any idea?
>
> Should I do a little of both?
>
> I am totally new to this besides my current 401K plan, where my options are
> limited as to what I can do with that money.
>
> Thanks
> Charlie

I am sorry to hear that someone close to you has passed.

A few more details would help us with your questions. How old are you?
We need to be sure that 40 years is the correct time horizon. You can
expect to statistically live into your early 80s, but most financial
planners err on the side of caution and use 90-95 as a planning base.

Exactly how much money did you inherit? Is it safe to assume the
inheritance has already cleared probate and free of estate taxes? If
it was a large estate, are there any trusts or estate planning
vehicles that stand in your way? You will have drastically different
answers based on how much and how accesible the money is.

What is your current asset/liability profile? Mortgages, auto loans,
college tuition, credit card debt?

Lastly, how much do expect to need annually? It is common to hear
that you may need as much as 16-25x your expected annual income to
sustain yourself through an expected life span. Its overly simplistic
and we'll be able to provide better insight once we know more, but its
a decent starting place.


Posted by rick++ on July 24, 2007, 9:51 am
Its the same issue the newly retired face, so there
is a fair amount of literature on it, e.g. fidelity.com.
The process is called "income investing".

One strategy is to invest in in a balanced fund-
60-40 or 50-50 stocks and bonds anf only take out
4% a year. Over the long term this mix has returned
4% plus inflation.

The other is partial annuitization. Say buy an immediate
annuity using no more than one third of your inheritance.
These pay you a guaranteed income for life. However at
your age the payout is a smidgen over 30-year treasuries
or about 5.5% a year. And this is not inflation protected
which would cut this in fourth over 40 years.
You can also buy a term-annuity which pays out slightly more,
but might take you up to social security age that would
replace this annuity.
The other 2/3rds you invest in a balanced fund and use
as necessary. Some people like the idea of having some
of their income "guaranteed" and not subject to market
variations.

A third method of income investing is high income yielding
funds usually bonds or dividend stocks. These are sometimes
called "widow stocks" and used to be utiltiies with regulated
returns until utility deregulation came about in the Enron age.
The game is to beat the 30-year treasury (@5%).
You can probably believe the claims 3% above or less.
Anything higher may have considerable risk.


Posted by Don on July 24, 2007, 1:18 pm

>I have just come into a lump sum of money, unfortunately it was through an
>inheritance.
>
> But this amount is might be enough for me to give up my job and enjoy the
> rest of my life doing what I want to do everyday.
>
> I am looking for some opinions on ways to invest this to carry me for
> about 40 years(hopefully I live longer, but let's estimate.)
>
> 1) What is the best way to limit my taxation on this income?
>
> 2)How do I invest it ?
>
> Should I use the money aggressively and try to make more money? any ideas
>
> Should I play it safe and just use it to make some small money but I know
> the risk will be limited? any idea?
>
> Should I do a little of both?
>
> I am totally new to this besides my current 401K plan, where my options
> are limited as to what I can do with that money.
>
> Thanks
> Charlie
>


Posted by PeterL on July 24, 2007, 1:22 pm
> I have just come into a lump sum of money, unfortunately it was through an
> inheritance.
>
> But this amount is might be enough for me to give up my job and enjoy the
> rest of my life doing what I want to do everyday.
>
> I am looking for some opinions on ways to invest this to carry me for about
> 40 years(hopefully I live longer, but let's estimate.)
>
> 1) What is the best way to limit my taxation on this income?
>
> 2)How do I invest it ?
>
> Should I use the money aggressively and try to make more money? any ideas
>
> Should I play it safe and just use it to make some small money but I know
> the risk will be limited? any idea?
>
> Should I do a little of both?
>
> I am totally new to this besides my current 401K plan, where my options are
> limited as to what I can do with that money.
>
> Thanks
> Charlie



First of all I see a lot of people spend too much time worrying about
taxation. Your first question is about taxation, which shows me that
you worry about it too much.

In your situation you need to generate current income plus growth.
You need to speak to a couple of financial planners to first get some
general idea. The general recommendation is that you cab make your
money last a long long time if you spend no more than 4% of it every
year.

Without knowing more, I would suggest building a diversified portfolio
of stocks and bonds (say, 60% stocks, 30% bonds, 10% cash, plus or
minus 10% either way).


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