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Since you cannot count on an inheritance, it is best to save enough money to retire comfortably. To save on taxes while growing your retirement fund, participate in the retirement accounts where you work (401ks) and IRAs. Start saving today! If you do receive an inheritance, make the most of it. Here are some tips:
- Don’t Do Anything - Losing a family member is difficult. Take some time to grieve. In the meantime, park the money in a stable, liquid account such as a money market account. You can afford to take a couple of months to deal with your emotional needs rather than rushing into investments that you may regret later.
- Don’t Blow It – When you receive an inheritance, you may feel rich. It’s OK to spend some of it on yourself, but don’t blow it all on a boat or a trip that you really can’t afford.
- Make a Plan – So what are you going to do with the money? Make a plan. It forces you to really think about what you want to do.
- Pay off Debt – Consider paying off high-interest FACS or credit card debt.
- Invest for the Future – Think about using the money to build a secure future. Figure out how much you need to save for retirement and invest wisely.
- Inheriting IRAs – If you inherit an IRA, you can continue to take advantage of tax-deferred savings as a beneficiary. The rules are different for spouses and non-spouses, and traditional and Roth IRAs. Check with an estate attorney.