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You can invest in index funds in the stock market and U.S. Treasury Bonds at Treasury Direct. These are two good investments categories. I would not retire before 50 years old, and I would look at giving some money to those less fortunate, that have very little to nothing. Not all people have parents giving them $850,000 as inheritance. You are very blessed, and can bless others that are poor or have little to nothing. I do this with a couple non profits that help people. One is the County Food Bank, that helps people down and out with meals.
If it was me, I would put the money in money markets, T-Bills or high yield savings until a few months have past by. This would include continuing to work. Take some time adjusting from the shock of a lost parent and the shock of getting a lot of money.
I would learn how to use a retirement calculator to see if I could retire.
I would learn some basics of investing and talk with several people. Even read books. Find the positives and negatives of each type of investment.
After educating yourself and seeing what the retirement calculator shows ... plus, getting over the shock ... I would then start taking some changes.
Before you quit your job, make drastic financial moves talk frankly with your mom's financial adviser.
Your mom must have been a smart lady to accumulate all the wealth for each of her children to receive $1m.
You need to educate yourself about finances so you understand what the experts are telling you.
A million is a good start, but managing it correctly is what will make or break you financially.
Personally, I wouldn't use Edward Jones or any storefront 'advisor.' You need to work with a professional who has sole fiduciary responsibility to you, and not with anyone who wants to sell you investments they are peddling.
Generally-speaking, you'll want low-cost, no-load, index funds that cover the market, so you have exposure to all the stocks and don't have to stock pick anything. Nothing fancy or exotic. I recommend going to fidelity.com.
I'm a 47 year old single guy with no children. My mom just passed away on Christmas Eve, and now I am inheriting about $850,000. When her house sells I will probably receive another $50,000. Right now I'm completely debt free, my house is paid off, and I currently have about $75,000 saved up. So all together I should end up with a grand total of about $975,000.
So now I need to figure out what I should do next. I'm praying that it's enough for me to quit my dead end job, which I absolutely hate, and go into retirement at age 47. But I'm not sure how realistic that is.
I don't know very much about investing or retirement planning, but I'm wondering if maybe I should invest at least the $850,000 portion into mutual funds. 6% yearly interest on that would give me another $50,000 per year, so maybe I could just live off of the interest? For what it's worth, I currently spend about $25,000 per year in total expenses. So if I quit my job right now, and maintained my current lifestyle, then I assume that it would probably be enough to last me for the rest of my life.
My brother suggested that I also look into annuities, which I know nothing about. Would that be a better idea than investing in mutual funds? I'm open to any advice that I can get. What does everyone think that I should do? Is there any way that I can quit my job and retire now?
I'm sorry for your loss. I would not rush into any decisions, take your time and research.
You haven't told us what kind of accounts the 850k is in. If in IRA, then you'll have 10 years to pull the money out. If it's a Roth IRA, then you can just transfer it all at once, but if it's traditional you need to structure it so as to reduce the taxes.
I would speak to the EJ representative, but I would also speak to an independent CFO as what options are at your disposal. If your expenses are truly 25k annually, then multiply that by 25 to get the number you'd need for the 4% rule. If you want to be more concerned, then multiply by 30x. These are general rules so have your cfp to run your own numbers.
For healthcare, you have the option for the exchange. If you keep your income low enough, then you can qualify for tax credits to get they plans at lower cost or even free.
Personally, I wouldn't use Edward Jones or any storefront 'advisor.' You need to work with a professional who has sole fiduciary responsibility to you, and not with anyone who wants to sell you investments they are peddling.
Generally-speaking, you'll want low-cost, no-load, index funds that cover the market, so you have exposure to all the stocks and don't have to stock pick anything. Nothing fancy or exotic. I recommend going to fidelity.com.
Well, he can't be all that bad since he made millions for his mom.
An important pitfall to avoid, if the OP wishes to retire early, is to avoid the temptation to pursue money, for money's sake. Having come into a windfall, it is only too easy, having one's appetite whetted, to desire more.
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Originally Posted by mysticaltyger
3. You gotta look into health insurance in your state if you quit your job. The plans go by your income and don't take savings/investments into account. So a 30k or 35K income probably would still get you a decent health care plan at reasonable cost. But definitely get this squared away before you quit your job.
A crucial point! Fortunately the OP is unlikely to generate so much investment income, as to crash-out of the ACA subsidy-qualification ceiling. The substantially limits costs, and renders at least the concept of early-retirement plausible.
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Originally Posted by mysticaltyger
I'll also say that quitting your current job and taking the time to find one you like better, might be the best route for you. ...
Very likely so. One might regard "early retirement" at age 47, not as permanent cessation of remunerative labor, but as a pause, an interregnum to regroup and reconsider how one might consider trading labor-for-lucre in the future.
Don't make any big changes to your life for a year.
Start reading how to invest so that you can safely retire early.
Your reading will give you a clue about how much you need to support yourself through investments.
The biggest hurdle to early retirement in the US is self-paying for health insurance until you hit Medicare age.
The most expensive years of healthcare policy costs are from late 50s age to Medicare age (that age eligibility may be going up).
Your age 47 means your healthcare policy is very affordable but when I was in my 60s my policy cost $1300/month with $7500 deductible. That cost will have gone up a lot 10 years later because of Covid.
Retirement doesn't have to be 100%. You could work part-time if you find something of interest to you, especially if they offer a healthcare policy. I know several people who do/did this until they hit Medicare age.
We inherited money to retire early like you. Still doing great 23 years later.
One last tip: don't tell your friends about your inheritance. And don't lend money to anyone except direct family in emergency situation.
Even though your house is paid off I think you need to put together a spreadsheet / schedule for common replacements (appliances, roof, fencing, landscaping, air conditioning, HVAC, etc.). You want to have a realistic idea of what can and will happen over time. https://www.nachi.org/life-expectancy.htm
I would project the cost of healthcare over time too.
I would look at social security and see how many more years it would take to get your 35 years in.
If you hate your job I would get a new/better one. I would take a break and regroup for sure at some point.
There are many threads on annuities on CD and you can see the arguments for and against. Same for investing and almost any other financial subject. I would hire a fee based investment advisor along with educating yourself to start to get an idea of what direction you want to head.
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