Sun. Feb 23rd, 2020

How to Retire on a $200,000 Inheritance – Yahoo Finance

How to Retire on a $200,000 Inheritance  <font color="#6f6f6f">Yahoo Finance</font>

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If you’re lucky enough to have received an inheritance from a loved one, there are many things you could do with it. If you’re hoping to stretch it far enough, you’ll want to avoid spending it. Instead, you could:

  • Find a financial advisor to manage your investments
  • Invest in the stock market yourself through an online brokerage
  • Put it in a high-yield savings account
  • Max out your retirement accounts

These options aren’t mutually exclusive, and there’s a good chance you can pursue a combination of these strategies. Here’s what your money could look like depending on what you choose.

So what kind of returns can you expect? The average return rate on stock market investing is 10%. But since the market swings up and down much more than savings account APYs, you might experience both extreme growth and massive loss. Let’s be conservative with our estimates.

Say you’re 45 with plans to retire in 20 years. If you took your entire $200,000 and put it into an online brokerage, here’s what you’d get in return after no extra contributions and a 4% rate of return:

  • After 1 year: $8,000
  • After 10 years: $96,049
  • After 20 years: $238,224

Keep in mind that this method is on the lower end of average. If you did somehow average 10% annual returns after 20 years of investing, you could cash out with $1,345,500. That’s your original $200,000 investment more than six-fold.

Note that these figures come from earnings alone and don’t account for fees or any other contributions you make to your account.

  • In the first year, $4,000
  • After 10 years, $43,798
  • After 20 years, $97,189
  • So if you’re 45 and planning to retire in 20 years, you earned almost $100,000 extra dollars on your inheritance. But keep in mind that APYs can go up or down and the lender you choose for your account might have different account minimums and fees. And also consider that inflation will cut into some of the value of your savings interest.

  • 401(k) limit: $19,500
  • Catch-up contribution: $6,500
  • IRA limit (traditional and Roth): $6,000
  • IRA catch-up contribution: $1,000
  • If you’re 50 years of age and older, you could contribute upwards of $33,000 a year to both your work-sponsored retirement plan and your IRA. It would take you six years of maxing out your contributions with your $200,000 before you ran out of money to contribute.

  • Getting a hefty inheritance is nice, but if you aren’t sure what to do with it, it would be a good idea to get the insights and advice of a financial advisor. Finding the right financial advisor who fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in five minutes. If you’re ready to be matched with local advisors who will help you achieve your financial goals, get started now.
  • If you’d like to get an idea of whether you’re going to be able to retire on $200,000 this calculator can give you a good idea of your prospects.
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