Receiving an Unexpected Inheritance in Retirement

Doug Goldstein Profile Investment Services-396 (600x)
Doug Goldstein May 16, 2024

Share This:

We all wish that one day we’ll get a call that a distant family member, who lived a long and happy life, left us a large inheritance. What would you do if you inherited a substantial sum unexpectedly? The financial decisions that follow such an event are crucial.

Join Goldstein On Gelt host, Douglas Goldstein, CFP® and discover some considerations for managing newfound wealth in retirement, including the balance between capital growth of the inheritance and preservation, generating a steady income, and reducing risk. Learn some critical steps retirees must take to secure their financial future.

Some key takeaways:

  • Assess the needs of your portfolio based on current priorities and risk tolerance.
  • Understand how the new wealth can change your portfolio’s balance.
  • Seek a financial advisor who tailors a plan to your needs and risk tolerance

Navigating an Inheritance During Retirement: A Practical Guide

Picture this: You’re comfortably settled into your retirement, your days filled with leisure and newfound hobbies, when out of the blue, you receive an inheritance. It’s an unexpected windfall that promises to secure your financial future—if managed wisely. But where do you begin? Let’s explore how you can handle this boon with care and confidence.

Step One: Take Stock of Your Financial Landscape

Before you let the excitement take over, pause and evaluate your current financial situation. How does this inheritance fit within your existing retirement plan? It’s not just about adding a couple of zeroes to your savings account; it’s about integrating this amount in a way that supports your long-term financial health without overwhelming you. Start by assessing your income needs, your regular expenses, and how long you expect your current funds to last.

Step Two: Align Your Investments With Your Current Needs

As a retiree, your financial priorities have likely shifted from growing your wealth to preserving it. It’s crucial to review the inherited assets—whether they’re stocks, bonds, or real estate—and ensure they align with your current lifestyle, which is presumably more focused on stability than risk. For instance, if the inheritance includes high-volatility stocks, consider rebalancing by investing in lower-risk options like bonds or bank deposits that offer steady, predictable returns.

Step Three: Rebalance Towards Income-Generating Investments

Transforming part of your investment portfolio into one that generates income can be a strategic move. This might include dividend-paying stocks, real estate investment trusts (REITs), and other assets that provide regular payouts. Such a shift not only offers a steady income stream but also helps preserve the core of your inheritance, allowing you to maintain your lifestyle without depleting the principal amount too hastily. Remember, these are not specific investment recommendations but rather ideas to discuss with a financial professional.

Step Four: Consult With a Financial Advisor

Handling an inheritance, especially a significant one, can get complex. It’s wise to seek guidance from a financial advisor who can offer personalized advice suited to your situation. They can help you understand the tax implications of your new assets, suggest appropriate investment strategies, and plan for future needs such as healthcare or family support.

Step Five: Regularly Review Your Investment Portfolio

As the market fluctuates and your personal needs change, it’s important to keep a close eye on your investments. Regular reviews and adjustments will ensure that your portfolio continues to meet your financial objectives and stays within your comfort zone regarding risk. This proactive approach can help you maximize the benefits of your inheritance.

Step Six: Honor Emotional Connections

Inheriting assets from a loved one is not just a financial transaction; it can also be an emotional journey. Acknowledge these feelings and let them guide your decisions about the inheritance. While it might be meaningful to keep certain assets as they are to honor the benefactor, ensure that they align with your financial goals and risk tolerance.

By carefully considering these steps, you can ensure that your unexpected inheritance supports your retirement dreams in a meaningful and sustainable way. It’s all about making your money work effectively for you, in harmony with both your current financial scenario and your aspirations for the future.

Note: This article is for educational purposes only and not to be taken as specific financial, legal, or tax advice. Always consult a professional for guidance tailored to your circumstances.

If you’re not already receiving updates on new episodes, sign up now, and as a special bonus, receive Doug’s free ebook The Retirement Planning Book.

Watch Receiving an Unexpected Inheritance in Retiremen on YouTube.

Featured on:
Arutz Sheva
The Jewish Press
Available On:
Apple Podcasts
iHeart Radio
Sponsored By:
Profile Investment Services