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Greetings placeman:
...we just inherited enough money to pay for her remaining three years of school. The inheritance is for retirement ultimately. We are both 50.

Is using the inheritance to pay tuition, and repaying it as we go by maxing out on tax deferred income each year, the sensible financial decision? Or should we invest the inheritance as a lump sum and continue to pay as we go.

A few questions come to mind; how many more years until the two of you plan to retire? If you wanted to invest the inheritance for retirement, what type of account did you plan to contribute this to? Do you already have a specific investment(s) already researched and picked out?

The answers to these questions and several more, could help you with this decision. Since you were able to pay for the first year of school out of pocket, will you be able to do this for 3 more years? If so, that would be 3 years longer that you could then have the entire inheritance invested, instead of slowly replacing it over that same 3 year period. On the other hand, if you wanted to DCA (dollar-cost-average) this money into an investment rather than invest it in a lump sum, repaying it would make sense.

I'm assuming by the subject title of this question that if you use the inheritance to pay the tuition, the out of pocket money would then be contributed to your 403b, right? That also makes sense.

I'm thinking it will depend on how you had planned to invest the inheritance as a lump sum. as I mentioned earlier. Maybe others can help more than I could, but my short answer is, it depends.

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