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cause there's 5% inflation per year and the 6% would be taxed. The best he would do is stay even, IF inflation does not worsen, which is a HORRIFICALLY bad assumption, given the very high rates of money creation by the Fed.
I would invest in myself. My education and expertise has proven to give me the greatest rate of return. If your friend is smart enough to get a degree and go to college, he will be in a very good position coming out (hopefully loan free).
The other option is to start a business, but I think at his age it will be tough to know what he wants to do. Plus keep in mind that just because he has the money to invest doesn't mean he SHOULD use it to invest.
I had more than that when I was 25....Believe it or not, it all from savings & working hard since I was 14. I used it to buy my first home which netted a nice sum when I sold it while the real estate was booming.
I know I'm not in the norm here, but I'd put $50K away (rainy day fund) and use the rest of the money to move to a far cheaper country -- say, Thailand -- and open up a guesthouse/beach bar/language school. I'd get that running until I could afford not to have to be there every day, and then use my time to explore the world. Or, if I had kids, I would use the profits to get them into a nice private school, while relaxing and checking into my office once in a while.
what would you do? Let's say you have either an associates or bachelor's degree, no debt to speak of, no real job experience or particular "specialty", but you are smart and able to pick stuff up.
would you start a business?
Work a low wage job (or best you could get obviously, which generally in todays world ain't much as a 20-something) and work on investing the 150k and building it?
Spend a little bit of it on something/s cool?
Travel the world for a while?
Real estate?
I've got a buddy who's inheriting some money, that's why I ask. I think he's going to be getting more at 30 and 35, some kind of delayed release trust thing. I guess that changes things, even if he blows the 150 now he'll get another shot at 30, & 35.
He asked me what I thought, I don't really know so I figured I would throw the idea out there and see what you guys think.
a one time 150k cash infusion shouldn't change anything. just invest it and continue to act as if you never got it.
He could travel a bit and then he could purchase a rental property or two and by the time he is 55 they will be paid off.
Does he work?
I believe the same amount again at 30 & 35. So a hefty sum all added up, but it's spread over 10 years, split into 3 "releases". Smart way to do it, keeps the 25 year old from blowing it all. Of course he isn't thrilled by it, lol.
Also should mention that in 40 years he will likely have inherited a whole hell of a lot or will be close to doing so, so investing the 150 now for retirement isn't as crucial for him as it would be for most.
He says that his 25 year old self wants to blow it all on material stuff, but the wise old man in his head wants him to use it to make more and be super frugal. Lol.
If he put the 150K into a retirement account, added nothing for the next 40 years, at a conservative 6%, he would have over $1,500,000....
You can't put that much in at once. The maximum contribution for an IRA is $5500 a year for people under 55 and for a 401k it's $17,500 (I think.) You'd have to put it into a taxable account and transfer it to a retirement account gradually, over 10-30 years.
You can't put that much in at once. The maximum contribution for an IRA is $5500 a year for people under 55 and for a 401k it's $17,500 (I think.) You'd have to put it into a taxable account and transfer it to a retirement account gradually, over 10-30 years.
Doesn't have to be in an IRA or 401K ???? There are other options....and so what if it's in a "taxable" account--it's still saving an growing for your retirement. You don't want to lock up all of your money in retirement accounts anyway--that is just not a sound financial plan....
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no, he would not
