How should my daughter invest her windfall money?
Hi Terry,
My daughter has come into some money from a car accident, roughly about $150,000.00 not a really a lot of money these days but a lot of money for a 26 year old. My daughter is a good women single and living at home with my wife and myself, so I do not that I have to worry about her throwing this money away, she works her 40 hours a week plus works teaching kids on Sat at a local park district. My question is what might be the best way to invest her money if there is a way, she has been talking about buying a condo or townhouse and just rent it out and continue staying at home with us or just live there herself. Or would it be better for her to invest the money in a Roth IRA or some kind of safe money market program, I did see episode you just had on Channel 9 about Wealthramp.com , not sure if this a good option for her either. I don’t want her to just leave it sit in a bank and be lucky to collect 1.5%. Just looking out for her because it would be nice to see something better come out of this money for her future.
Thank You for looking at this I would appreciate any info you can give us
Terry Says
Well, yes this is a windfall. I think this is a good time for a financial planner — not because of the amount of the money, but because of the potential of this money to grow for her future.
A planner would ask whether she is contributing to a 40l(k) retirement plan at work. That would be her first step — to max out any employee retirement benefits. They will be a deduction from her paycheck and lower her taxes.
If she’s already doing that, and assuming not a large income, she would then put money into a Roth IRA. She won’t get a deduction, but the money will grow tax free for her future. Next is the issue of investing the Roth IRA, which she could easily do by opening an IRA at Vanguard or Fidelity and putting half in their S&P 500 Index fund and half in their Equity-Income fund. That will reduce the risk somewhat, but the main thing is for her to understand she should contribute the max possible every year no matter what the market does. (And the money can come out of her savings, if she is eligible to contribute based on work income.)
Remember the old saying: Don’t let that money burn a hole in your pocket! There is nothing wrong with keeping a lot of that money on the sidelines. But she should put it in Treasury bills (read this recent article) where it will be safe, but earn slightly more.
Deciding to build a portfolio of rental properties is an interesting possibility — but it could involve future investments for upkeep of the property, finding good tenants, legal issues, etc. Probably she is too young to go in this direction unless she has a specific interest in real estate investing.
Bottom line: This is why you need a good, independent FIDUCIARY financial planner to discuss the specifics. Go to www.Wealthramp.com to search for one.
