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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 5741  
Subject: Re: 500k inheritance, young, no financial experi Date: 2/12/2008 4:34 PM
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With the benefit of your knowledge and experience, what would you do in my position?

Answered last...

What should I be most concerned about? How can I best educate myself (beyond this site, of course)?

Do a lot of reading. Be patient. Be most conerned with making decisions that are hasty not well informed. You have enough income from other sources, don't be a rush to do anything specific with this money.

What is the best short term way to store 500k until I have a long term plan? Money market accounts? CD's?

Money market. You could also do some of the FDIC internet bank accounts. I would not do a CD. I would not do a one-year treasury as someone else recommended. Don't tie up your money while you decide. If you reach a decision in the next three months, you would have to wait another nine months to get your money out of the Treasury and the CD.


If it is helpful to know my goals, I would like to retire early and be able to live comfortably.

Honestly, I would largely forget about this. Forget you even have the money. Work what you normally would, retire as if you don't have this money - and you will find that your life is better for doing so. One of the biggest mistakes people make when they inherit money is changing their lifestyle based on that new money. I see it every year - and typically the money doesn't last - or the flip side, they get to greedy with their desire to turn 500k into 2 million over night.

You have been given a gift. Treat it as such. Respect it, protect it, and in the end, it will reward you for doing so.


So I would like to grow this 500k to the point where it can provide an annual income that I can draw upon without touching the principal. If I could grow 500k to 2 million over a period of five or ten years (is that even realistic?), it would give me 100k/year at a very conservative 5%. Is that the right way to think about things, or should I be going about this differently?

5% income without locking it into an annuity is not likely. 500k to 2mil is even less likely over that time frame. I would assume a growth of 7-8% average with a well diversified acct. If you indeed want 100k a year from it, you may want to focus on 2.5mil and not 2mil.

To get 500k to grow (taxable) to 2.5mil, it will take you the better part of 20 years, if not more.

Find a good 403b provider and start maximizing contributions. Start maximizing a roth IRA.

Consider seeking the advice of a fee-only planner.
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