I’m 46 years old, single and live paycheck to paycheck — but I’m about to inherit $650K from my mom who recently passed away. Where should I start investing first to build wealth?

Say, for example, a single 46-year-old woman is struggling to get by financially. But when her mom passes away, she receives a $650K inheritance. How can she invest that money to build meaningful wealth without squandering her mom’s life savings?

Before investing your inheritance

A 46-year-old still has several working years left before retirement. Say, for example, she wants to retire at her full retirement age of 67 so she can receive 100% of her Social Security benefit. That means she’s planning to work another 20 years — and she still has some time to leverage the power of compound interest.

First, however, she’ll have to consider any potential tax liabilities. There’s no federal inheritance tax, but six states have imposed one, including Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania (though Iowa is phasing it out in 2025).

Inheritance tax is separate from estate tax, which is based on the total value of the deceased’s money and property. Inheritance tax is paid by the heir, while estate tax is paid by the estate of the deceased.

If she also inherits a traditional IRA from her mom, as a non-spousal beneficiary she’ll have to withdraw money based on whether the IRA owner passed before or after their required beginning date which is when their required minimum distributions (RMDs) would have started.

These RMDs will be taxed as income. If the traditional IRA has a high balance, she could end up paying a big chunk of tax. With brokerage accounts, she’ll also have to consider the tax implications of capital gains, dividends and interest payments.

Before she invests anything, she may want to use some of the inheritance to pay off any outstanding debts, like a student loan or credit card debt. She may also want to build an emergency fund with three to six months’ worth of living expenses in an easily accessible high yield savings account. If she has a mortgage, it’s her call whether she wants to pay it off or pay it down. Some people would prefer to get rid of their mortgage debt, while others may prefer to invest that money for a higher return.