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The so-called “massive wealth transfer” is already underway, with more than $68 trillion slated to pass from baby boomers to their children.
But while millions of Americans expect to receive an inheritance within the next 10 years, 58% of those adults expect new wealth, according to recent data from New York Life. He says he feels uneasy about handling it.
Daniel Miura is one of them. When she inherited her $10,000 check from her grandmother nine years ago, she didn’t know what to do. The then 19-year-old simply left her own money in the bank for several months. It didn’t feel like her, she told CNBC Make It.
After consulting with a trusted bank teller, Mr. Miura decided to purchase a certificate of deposit. This is a savings product that allows you to earn interest in lump sums for a certain period of time. Looking back, Miura says buying a CD may not have been the wisest financial move for her now that she sees value in risky investments such as stocks. But the purchase was a learning opportunity, she says.
“This was my first investment at 19,” says Miura, now 28 and a certified financial planner. “I did what I thought was safe for me.”
As a CFP, Mr. Miura helps clients tackle their own inheritance and wealth transfers.
“A lot of our customers go through the same thought: ‘I got my check, now what do I do?'” It usually costs $10,000 or more,” she says. And in many cases, it sits dormant in the bank until it’s decided what to do.
According to a recent survey, adults expecting an inheritance expect to receive an average of $738,724. New York Life Wealth Watch Survey. Newly inherited wealth can take many forms. Of those expecting an inheritance, 58% expect to receive cash, 43% expect real estate and 28% expect investments.
If you’re one of the many Americans who don’t know how to manage the windfall, here are four tips for keeping your inherited wealth financially smart.
Whether it’s money, stock, or property, many adults who receive an inheritance feel guilty. They don’t want to spend money on the “wrong thing” or make poor investments, Miura said.
“It’s not as simple as investing in an index fund and that’s it. A lot of people are so confused about what investing looks like that they’re afraid to invest and they’d rather not touch their money.” It’s okay.” Do the wrong thing and lose [it all],” she says.
The fear and guilt about how to manage an inheritance is perfectly justified. Miura’s best advice to anyone receiving an inheritance is to leave it alone. However, it is only for a short period of time.
“I advise my clients to keep their money in the bank for six months. You can move it to a high-yield savings account, which carries about 4-5% interest, but at the moment It’s in pretty good shape.”
Leaving the property alone allows us to take the time to think and discuss meaningful ways to put our inheritance to good use.
Learning how to manage an inheritance doesn’t have to be done alone. One of Miura’s top tips for those inheriting money from a loved one is to connect with people you can trust.
Whether that means finding a financial advisor or seeking guidance from a therapist, Miura says it’s important to take the time to discuss both money and the emotions that come with it.
”[You] There is no need to make hasty decisions. Let her do what makes an impact for her,” she says.
Knowing what an inheritance means and how it affects your finances and taxes will help you manage your wealth later.
To find a financial advisor you can trust, check out Make It’s 6-step guide to choosing the right financial professional for you.
Some Americans who receive an inheritance believe that wealth may help improve their financial situation, according to a New York Life research report. Among the ways adults who receive an estate plan put their assets to work include paying off outstanding debts (37%) and replenishing retirement savings (35%).
“If you don’t have an emergency fund equivalent to three to six months’ worth of spending yet, set aside an emergency fund,” Miura says. Next, pay off the high-interest debt.
Once you’ve got what you need, Miura-san advises setting aside money for fun. Putting 5% of your wealth into pursuing “something memorable and meaningful,” she says, is a smart idea.
Then, “Invest the rest according to your financial goals,” says Miura.
Ultimately, Miura says the massive wealth transfer should get adults talking about money and inheritance.
One of the “troublesome” things about baby boomers is that they “don’t talk about money,” Miura said. “Money is a taboo topic that no one wants to talk about. But we have to talk about it.”
Whether you are inheriting or inheriting, talking about money is as important as ever. “Let’s start formalizing the conversation about money, because the more normalized the conversation about money, the easier the transfer of wealth will be,” says Miura.
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