Today I found out I inherited $1,200,000

3 words: separate bank accounts

inheritance does not go into common assets unless you mush assets together.

41 with live-in, no kids wrote:

My live-in girlfriend is pretty excited about it. I can't help but think she will push for marriage.

Why did you tell her about it?

Sloetry in Motion wrote:

While you might need someone to help you navigate your tax situation, do not pay anyone to help you invest it. Go read Bogle's Common Sense Investing book and put your money into index funds. The amount you will save in the long run compared to using a financial advisor and regular mutual funds is staggering.

the problem with this is that there is a learning curve. even the smartest, most motivated people take time to learn how to invest, and do very poorly their first few years. Most of the problem is managing the fear and greed.

Since this is a large nest egg, I would not want to use it as a learning tool. I would give 95% of it to a low cost professional, and keep 5% for yourself. Read books and invest the 5% as you see fit.

Compare results after 5 years. If you can do as good a job as a professional, then take it all back and do it yourself.

If you are like most beginners, you will do very poorly, selling low and buying high. Learning those lessons with a small amount rather than a large amount would be excellent.

I am utterly shocked nobody has suggested the fantasy of half of the Letsrun community: going full time as an athlete.

The cash will allow you to take a good few years at it, go to an anti-aging Doctor to put you on the trendy PEDs of the moment & you will achieve your long time dream of being a local running hero & reep the benefits of this at your prime (gift vouchers for local running stores, cut in the county paper, loads of s-ex with women in their mid-40s, etc).

If you put all of it in a low cost, diversified index fund (S&P 500 or total stock market index) you will out-perform the vast, vast majority of professional advisors. The math is impossible to ignore and the information on how to do this takes an hour or two to read.

see, this is the problem with amateurs advising and making their decisoins. (not: I am a certified financial planner and MBA).

yes, you are right that over 50 years the SP500 willl beat almost all professionals.

but are you saying that is the right fund for everyone? 90 year olds? 15 year olds? people who have just received a once in a lifetime inheritance? No? so how much stock? how much bond? do you really want a fairly undiversified fund like the sp500 to be the only stock fund? For 10 years ending 2009 it was perhaps the worst major index on the planet. Is that ok for everyone? or maybe shoudl most people own some foreign stocks, small stocks, real estate investment trusts, etc....

Certainly you should invest it and forget it.

Work for a few more years (15-ish). Take good vacations, and then retire well.

Also, might be a good opportunity to start a family.

We don't need to guess his age. He's 41.

And, no, it's not over 50 years that an index fund like the S&P will outperform most professionals. It, on average, outperforms 85% of them every year. Over 50 years the number of other funds that outperform it is essentially zero. Once you take into account other factors like advisor cost and taxes, a broad based index fund will absolutely crush other funds.

agip wrote:

the problem with this is that there is a learning curve. even the smartest, most motivated people take time to learn how to invest, and do very poorly their first few years. Most of the problem is managing the fear and greed.

Since this is a large nest egg, I would not want to use it as a learning tool. I would give 95% of it to a low cost professional, and keep 5% for yourself. Read books and invest the 5% as you see fit.

Compare results after 5 years. If you can do as good a job as a professional, then take it all back and do it yourself.

If you are like most beginners, you will do very poorly, selling low and buying high. Learning those lessons with a small amount rather than a large amount would be excellent.

This is outstanding advice. I'm retired, but I held the CFP designation for 32 years. I'd suggest a fee-only CFP. Not only will you make rookie mistakes if you try to do it yourself, it is REALLY hard to make objective decisions when you have real money on the line. Emotions come into play too much. You don't want to admit you made a mistake so you hold on to a bad investment on the way down. You miss a bottom and chase an investment only to buy it at the top. I've seen this way too many times. Work with a CFP.

true, but it will lose 50% a few times in a lifetime and if that happens when OP is trying to retire, it could ruin his life.

look, I buy only index funds, for the reasons you cite. But the point is that buying the sp500 and holding it for your entire life is not a solid strategy. It is not diversified and it is very volatile.

anyone who was 100% in the sp500 and then retired in 2002 or 2009 after it fell 50% knows owning one fund is not smart.

or if this were 2009 and he had put all his money in the sp500 10 years ago...and had no earnings at all while emerging markets doubled, europe had solid gains, us small caps had large gains, bonds, real estate, etc...all made lots of money...he too would say 'man, i should have diversified'

Your first mistake was telling the gf about it. Now all she sees in her $$$ eyes are exotic vacations, fancy dinners, designer hand bags, etc.

The S&P 500 is not diversified? I would disagree.

Unless you are a believer that you should also invest in foreign markets (Europe, BRIC, etc. but considering one lives in the US, that's more risk, not less).

Also, of course you can invest in bonds (less than 1% return if you chose safe ones) or gold (pure speculation if you ask me).

Real Estate is over valued right now.

So what's left?

Yes, the market fluctuates. The problem is that you nor any other financial advisor can predict these fluctuations, so you're left having to look backwards to point at times where things went bad. And you charge a fee to do so.

Let's see what Warren Buffet says about this strategy:

"My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard's. (NASDAQMUTFUND:VFINX)) I believe the trust's long-term results from this policy will be superior to those attained by most investors -- whether pension funds, institutions, or individuals -- who employ high-fee managers."

The other guy! wrote:

The S&P 500 is not diversified? I would disagree.

Unless you are a believer that you should also invest in foreign markets (Europe, BRIC, etc. but considering one lives in the US, that's more risk, not less).

Also, of course you can invest in bonds (less than 1% return if you chose safe ones) or gold (pure speculation if you ask me).

Real Estate is over valued right now.

So what's left?

here's some reading on the sp500. It is not diversified because it is just US, just megacap, and led around by just 20 or so gigantic stocks.

your other views are just opinions.

So much horrible advice in here. In sounds like you must be doing decently already, so unless you plan on quitting your job/changing to a more enjoyable career, I would focus on enjoying the money, Yes, you should put some away for retirement, but the whole "invest it and act like you don't have it" nonsense is just sad.

Do you really want to live like your father? Counting pennies your whole life just to hand it down to someone who doesn't need it?

You live once, enjoy it.

mellow seeds wrote:

So much horrible advice in here. In sounds like you must be doing decently already, so unless you plan on quitting your job/changing to a more enjoyable career, I would focus on enjoying the money, Yes, you should put some away for retirement, but the whole "invest it and act like you don't have it" nonsense is just sad.

Do you really want to live like your father? Counting pennies your whole life just to hand it down to someone who doesn't need it?

You live once, enjoy it.

If he invests all of it right now, he can safely live off of 4% of it ($48,000) per year and never have to work another day in his life. I'm not saying he shouldn't spend at least some of it right now. I'm just throwing out numbers.

41 with live-in, no kids wrote:

I am 41 and owe a little on my three bedroom house and have a few car payments left. But now suddenly I'm rich. The weird thing is that its from my dad and I had NO IDEA he had that kind of money.

He always lived like he was barely middle class.

So what do I do now? My live-in girlfriend is pretty excited about it. I can't help but think she will push for marriage.

1) Only marry this woman if you wanted to before and if you think she wanted to before.

2) A few car payments left? Just finish them up at this point. Small potatoes.

3) Other than a nice celebratory meal or a less than $2,000 small vacation, I would not immediately spend ANY of that money.

4) Contact Vanguard (as others have said) and invest in a non-retirement mutual fund or collection of funds.

5) With your INCOME, now that you have this safety net, do all you can to either pay that house off quickly or sell it and move to a house you would prefer (don't go nuts here), and do what you can to pay that off quickly.

6) At a minimum now, you should (with your INCOME) be fully funding an IRA (Roth or traditional). If you wanted to also fund a 401k if your company has one, then do that too. If the company provides a match, at least get up to that level.

I do not know exactly how much you will have left when all is said and done, but let's look at what just $600,000 untouched can bring you if invested and you average just 7% return until age 65.

By age 50 you would have $1,103,075.53

By age 55 you would have $1,547,120.49

By age 60 you would have $2,169,916.52

Let's look at age 60 and assume you got a little less than 7% and round it down to $2 million.

Let's also assume you have ZERO retirement income now but will do $5,500 per year in an IRA also until age 60 and also getting 7% return. That amount is $233,981.11. Let's round that down to $200,000, and let's say you will spend $100,000 per year for 2 years until you are 62. That allows the other money to grow for 2 more years. That $2 million is now $2,289,800.

Take 4% of that, and that is $91,592 that first year. With money still invested, it should go up from there on average every year. If you felt you needed it, you COULD take early SS at 62 to the tune of probably at least another $30,000, or just wait and get more later.

AND, none of this includes anything your girlfriend potential wife might contribute. Don't consider her a contributor until you're married.

So, are you "rich"? As others have said, no.

I used VERY conservative numbers, especially with the starting point, so you could actually have MORE than this.

Good luck.

Sloetry in Motion wrote:

Let's see what Warren Buffet says about this strategy:

"My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund..."

That's not how Buffet made his money.

Sloetry in Motion wrote:

If he invests all of it right now, he can safely live off of 4% of it ($48,000) per year and never have to work another day in his life. I'm not saying he shouldn't spend at least some of it right now. I'm just throwing out numbers.

Yes, but that's some pretty frugal living. Assuming he made more than 4%, he would get a little raise each year, but not much of one until he's 62 and could take SS.