Mar 20, 2025
In the next 20 years, Americans will inherit an estimated $72 trillion as boomers pass down their accumulated wealth to younger generations in a phenomenon dubbed the Great Wealth Transfer.
That means there will be a lot of people like you who are surprised — even if pleasantly so — to be inheriting money and unsure about how best to manage it.
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This problem stems from a lack of communication around estate planning. A 2024 Edward Jones report found that more than one in three Americans have no plans to talk about their estate with their families, even though 48% plan to leave an inheritance.
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You were unprepared for this windfall, but it’s good to be thoughtful about how you're going to manage the money going forward so you don’t waste this opportunity to improve your life now and in the future.
Here are some options to explore.
Invest in your retirement
If you’ve inherited a large sum of money, one thing you could do is to put it into an investment portfolio that’s earmarked for retirement.
A 2024 CNBC survey found that 40% of Americans are behind on retirement planning and savings, while 21% of current retirees have no savings at all to live on.
You don’t want to rely on Social Security in retirement, because those benefits only replace 40% of your paycheck if you’re an average earner. Plus there’s a possibility of Social Security cuts in the not-so-distant future.
Investing your inheritance now could give you greater retirement security, and help you build a legacy for future generations.
It’s important to maintain a diverse mix of assets in your portfolio. If you’re years away from retirement, you might keep the bulk of your portfolio in stocks, with a smaller portion in bonds.
For instant diversification, consider investing in S&P 500 index funds, giving you exposure to the 500 largest publicly traded companies. For the bond portion of your portfolio, consider a mix of corporate bonds, Treasuries, and municipal bonds for tax diversification.
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Address your family's most pressing needs
There’s nothing wrong with using proceeds from an inheritance to improve your life and that of your family — right now. So think about your most pressing needs.
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If you’re living in cramped quarters, you might use some of your money to finish off your home’s basement for extra living space. Or you could buy a larger home.
You can also invest in your children’s education. A December 2023 Discover survey found that 70% of parents are worried about not having enough funds to cover their children's education.
You could put some of your inheritance into a 529 plan toward your children's college education, allowing it to grow tax-free.
Consult a financial adviser
Whenever your financial situation changes substantively, it’s a good idea to consult a professional. A financial adviser can guide you through some of the best ways to invest your inheritance to meet your goals — and advise you on tax and legal implications.
For example, income from certain assets could bump you into a higher tax bracket. An inherited IRA might be subject to the 10-year rule, meaning you have to withdraw all the funds within 10 years of the original account owner’s death.
With that kind of guidance, your surprise inheritance might additionally surprise you in all the ways it can multiply abundance in your life.
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Maurie Backman has been writing professionally for well over a decade. Since becoming a full-time writer, she's produced thousands of articles on topics ranging from Social Security to investing to real estate.
