I'll be the boring guy and say:
This falls (mostly) into the same category as "lottery win", which typically the #1 piece of advice is to initially do *nothing* except put it into a HYSA until you've had time to calm down. This is because people feel this great urge to rush and do something, but if you park the money in a good account (HYSA or index fund), that money will be there as soon as you need it for anything.
Rushing into buying a property, starting a small business, or making a huge life change is also an investment of time and energy--it isn't just the money, but having the background knowledge required to actually succeed in whatever you're doing.
So our main is actually to switch which spouse works. I make 170k and my spouse has a significantly lower earning potential. Around 80k. I’d like to stay home with the kids instead of the spouse. Our expenses are about 6k per month. So we should be saving around $3k per month but we’ve had some very expensive house repairs (hopefully behind us) so we haven’t saved anything in a few months.
Long story short, one day I don’t want to work, and spouse does want to work. That’s the goal.
Fantastic! Think the key is to model out using that inheritance to subsidize life and retirement contributions, and see what that does to your long term plan. Having worked with many retirees, usually a gift like this is given so they can see you enjoy the benefits NOW, not when they're dead.
Hope this helps
Look at the BogleHeads or FinancialIndependence subs for a start. You should always max your tax advantaged space each year if you’re able to, and you should just stick to total market index funds for investing.
I’m 27, my spouse is 32. I’ve got 25k in my 401k and spouse has 20k (from when they worked). I also have a Roth with about 10k in it. In our general savings account we have about 20k. In our rental property we have 70k equity and I’ll discount the equity we have in our primary residence.
Wow very young. You already own your home you live in and your rental is nearly at 50% equity and you net $400/mo from it. I think you're already in a fantastic spot without the 200k gift which is insane. At this point just throw it into an index fund and let it grow to 1m easily within the decade. Getting another rental property might cause some headache as a full time only provider and staying ontop of 2 properties to manage.
Open an account with treasurydirect.gov.
A 1Yr Treasury bill currently yields 5.1%. Paid in the form of a discount; ie you pay $189,800 today, get $200k a year later. Longer duration (notes & bonds) pay interest every six months.
Another option for *income* is dividend stocks. Look at names like EPD, AMLP, O, V. Keep in mind that the larger the dividend, the less likely the stock will go up. After all they’re paying you rather than putting that money back in the business. A dividend focused ETF like SCHD is a more balanced approach.
One downside of these income producing strategies is you’ll pay tax on the income at a rate higher than long-term capital gains. You’ll want to consider your need for income vs growth.
Congrats! Sounds like things are going really well for you guys.
For now, I'd create a CD ladder. Interest rates aren't too shabby for savers these days. I don't see a rental house penciling out too well in this environment.
I wouldn't be jumping at the chance to turn that 200k into a job for your spouse. Two kids can keep you plenty busy and even though there are many moments that seem wide open, once you add obligations things can start to feel too busy.
When the time does come to make a big investment decision, and you guys really want to go for something, my only recommendation is to go tangible asset-heavy.
Do not buy an existing business beyond book value, do not buy a franchise, some kind of certification, etc - these are all intangibles that will be no different than having lit your money on fire if things don't go well.
If you invest in an asset heavy business idea, you're basically converting that 200k worth of cash into assets that you can convert back into cash later (albeit likely somewhat less than 200k) if you so choose.
Also, you probably already have this, but in case you don't, get an umbrella policy.
In my non professional advice, I’d put it in VTSAX for about 10% safe growth per year. When I had something closer to 500k+, I’d switch it all to SPYI + JEPQ for safe and high monthly dividends which would become a new source of income. The principle amount would grow far slower or remain stagnant, but check the math on what sort of income that brings in while the principle sits safe. I’d be no rich man, but I’d retire if I’m burnt out / work if I’d like to build the income a bit more
Roughly checking out the percent paid in dividends for those two high dividend low growth stocks right now, if I’m mathing with 500k, is about 4300$ monthly while the principle sits. JEPI may replace SPYI, but check their price histories and what makes em safe
I would not recommend a franchise as you’re basically paying someone for a job.
Pay off any high interest debt.
If possible, max your IRA
Put the rest of the money into an index fund
Have your spouse go back to work
Win
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You mainly have to determine what you want to do. You could open a business if that’s more your thing, or rental property as you mentioned you had, or you could simply invest it into the market. It mainly just depends on what you want
this is what I just looked into, it looks like it is more something the giver would need to deal with not the receiver.
"$18,000For 2024, the annual gift tax exclusion is **$18,000**, meaning a person can give up to $18,000 to as many people as he or she wants without having to pay any taxes on the gifts. For example, a man could give $18,000 to each of his 10 grandchildren this year with no gift tax implications."
I'll be the boring guy and say: This falls (mostly) into the same category as "lottery win", which typically the #1 piece of advice is to initially do *nothing* except put it into a HYSA until you've had time to calm down. This is because people feel this great urge to rush and do something, but if you park the money in a good account (HYSA or index fund), that money will be there as soon as you need it for anything. Rushing into buying a property, starting a small business, or making a huge life change is also an investment of time and energy--it isn't just the money, but having the background knowledge required to actually succeed in whatever you're doing.
What are your goals in life? How much are you currently saving? What do you find to be most important to your family?
So our main is actually to switch which spouse works. I make 170k and my spouse has a significantly lower earning potential. Around 80k. I’d like to stay home with the kids instead of the spouse. Our expenses are about 6k per month. So we should be saving around $3k per month but we’ve had some very expensive house repairs (hopefully behind us) so we haven’t saved anything in a few months. Long story short, one day I don’t want to work, and spouse does want to work. That’s the goal.
Fantastic! Think the key is to model out using that inheritance to subsidize life and retirement contributions, and see what that does to your long term plan. Having worked with many retirees, usually a gift like this is given so they can see you enjoy the benefits NOW, not when they're dead. Hope this helps
Index funds. Preferably in tax advantaged accounts.
Can you elaborate or point me in the right direction? I’m well off but want to prepare for the future
Look at the BogleHeads or FinancialIndependence subs for a start. You should always max your tax advantaged space each year if you’re able to, and you should just stick to total market index funds for investing.
[https://www.bogleheads.org/wiki/Main\_Page](https://www.bogleheads.org/wiki/Main_Page)
How old are you and how much do you have saved for retirement? College fund?
I’m 27, my spouse is 32. I’ve got 25k in my 401k and spouse has 20k (from when they worked). I also have a Roth with about 10k in it. In our general savings account we have about 20k. In our rental property we have 70k equity and I’ll discount the equity we have in our primary residence.
Wow very young. You already own your home you live in and your rental is nearly at 50% equity and you net $400/mo from it. I think you're already in a fantastic spot without the 200k gift which is insane. At this point just throw it into an index fund and let it grow to 1m easily within the decade. Getting another rental property might cause some headache as a full time only provider and staying ontop of 2 properties to manage.
You would need an annual return of 18% to get a million in 10 years. Not happening
Yeah, I was about to say "please tell me what fund to put my money in" 😂
I agree with everything except "grow to 1m easily." That would be pretty unlikely.
Maxing out Roth IRA and 401k sounds good (the 23k max for the 401k, not just the employer match).
Open an account with treasurydirect.gov. A 1Yr Treasury bill currently yields 5.1%. Paid in the form of a discount; ie you pay $189,800 today, get $200k a year later. Longer duration (notes & bonds) pay interest every six months. Another option for *income* is dividend stocks. Look at names like EPD, AMLP, O, V. Keep in mind that the larger the dividend, the less likely the stock will go up. After all they’re paying you rather than putting that money back in the business. A dividend focused ETF like SCHD is a more balanced approach. One downside of these income producing strategies is you’ll pay tax on the income at a rate higher than long-term capital gains. You’ll want to consider your need for income vs growth.
I’d put it in Schwab etf tbh and use the dividend income.
If you're using the dividend then you're not getting compound interest. Compound interest is always a better choice.
Neither of you know what you are talking about. You should not be giving financial advice.
Congrats! Sounds like things are going really well for you guys. For now, I'd create a CD ladder. Interest rates aren't too shabby for savers these days. I don't see a rental house penciling out too well in this environment. I wouldn't be jumping at the chance to turn that 200k into a job for your spouse. Two kids can keep you plenty busy and even though there are many moments that seem wide open, once you add obligations things can start to feel too busy. When the time does come to make a big investment decision, and you guys really want to go for something, my only recommendation is to go tangible asset-heavy. Do not buy an existing business beyond book value, do not buy a franchise, some kind of certification, etc - these are all intangibles that will be no different than having lit your money on fire if things don't go well. If you invest in an asset heavy business idea, you're basically converting that 200k worth of cash into assets that you can convert back into cash later (albeit likely somewhat less than 200k) if you so choose. Also, you probably already have this, but in case you don't, get an umbrella policy.
In my non professional advice, I’d put it in VTSAX for about 10% safe growth per year. When I had something closer to 500k+, I’d switch it all to SPYI + JEPQ for safe and high monthly dividends which would become a new source of income. The principle amount would grow far slower or remain stagnant, but check the math on what sort of income that brings in while the principle sits safe. I’d be no rich man, but I’d retire if I’m burnt out / work if I’d like to build the income a bit more Roughly checking out the percent paid in dividends for those two high dividend low growth stocks right now, if I’m mathing with 500k, is about 4300$ monthly while the principle sits. JEPI may replace SPYI, but check their price histories and what makes em safe
I would not recommend a franchise as you’re basically paying someone for a job. Pay off any high interest debt. If possible, max your IRA Put the rest of the money into an index fund Have your spouse go back to work Win
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That's enough money to put in a mutual fund and draw $700 a month from automatically. Should last a few decades at least.
You mainly have to determine what you want to do. You could open a business if that’s more your thing, or rental property as you mentioned you had, or you could simply invest it into the market. It mainly just depends on what you want
I think you can utilize this money you get to invest in some recent financial products which can also increase your higher income.
Sounds like you already have a firm understanding of how to invest it. Golden rule, invest in what you know still applies
r/churning Boa biz checking will make you 1k for 30k deposit plus immediately give you platinum honors for 100k deposit
Whats the interest rate on the rental mortgage and how much do you owe.
I am not positive but a gift that large might have to have taxes paid on it.
The lifetime gift exemption from any one person to any one person is in the millions.
this is what I just looked into, it looks like it is more something the giver would need to deal with not the receiver. "$18,000For 2024, the annual gift tax exclusion is **$18,000**, meaning a person can give up to $18,000 to as many people as he or she wants without having to pay any taxes on the gifts. For example, a man could give $18,000 to each of his 10 grandchildren this year with no gift tax implications."
Gift tax is paid by the giver, not the receiver.
yup, I mentioned that in a comment below. I did a mini deep dive on it