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What would you do differently if you knew that you were going to be inheriting a lot of money? This is a question that a Reddit poster asked recently, after he discovered that he and his wife are going to be receiving millions when his parents pass away.
What do you wish you knew before inheriting potentially life changing $?
byu/Maleficent_Cut_4344 ininheritance
Since he wants to be ready for the inheritance that he knows is coming, he asked others who had already received a substantial financial gift what advice they might have or what they wish they knew in advance before the payment came. Fortunately, Reddit users came through with some helpful suggestions.
Image source: Getty Images.
Finding out that a big inheritance is coming can be life-changing
The Redditor who started the thread explained that he and his wife are both in their 50s. His parents, who are in their 70s, informed him that they will be leaving him 45% of their $5 million estate, including $3 million in retirement accounts, $500,000 in savings, and a $1.5 million home.
The original poster (OP) and his wife have already been budgeting and saving, and they were anticipating retiring in seven years when they hit their own target retirement account balance. Their medical needs will also be taken care of by an employer when they retire early, which he described as a nice bonus since he doesn't have to pay for individual insurance coverage.
So, now he's trying to figure out what to do. He said he thinks they may spend around 10% of the inheritance in the first few years after receiving it, then leave 90% of the money behind to build generational wealth for his kids. But he wants to know what others who had received a big sum would do to see if his plan would work, if there are steps he should be taking now, or if they would do anything differently.
Should you make plans in advance for a big inheritance?
A number of Reddit posters chimed in with a smart suggestion for the OP, advising him that he should talk with a professional about his situation. After all, $2.5 million is more money than most people will have in their lifetime, and unfortunately, a lot of people do end up spending an inheritance too quickly if they don't know how to manage it. The OP has the potential to set up future generations with financial security if he makes the right choices, and a financial advisor could help him to do that.
That may be an especially good idea, as the OP has indicated that he and his wife plan to spend as much as 10% of the inheritance in the first few years. It's a bit of a red flag that they are already planning on spending money that they won't get potentially for some years, and a large amount of it, too. Once they start spending, they may get used to living that lavish lifestyle, and it may be hard to cut back. Or they may make commitments and make expensive purchases, like a big new house, that come with ongoing costs.
Other posters also shared concerns about the potential for the OP to squander the inheritance, so they suggested making a careful and detailed budget to ensure that the money doesn't end up simply slipping through the poster's fingers. Focusing on long-term growth strategies and spending a small amount at a time, at a safe withdrawal rate, could allow the OP to make the most of the inheritance both for himself and for his kids, rather than just jumping into spending 10% of the money right away in the first couple of years.
The reality is that $2.5 million, and potentially more if the money grows, can make a big difference -- but only if the money is truly used wisely. So the OP needs to think carefully about what his goals are for the funds and make a plan to achieve them.
