What Happens When You Suddenly Become a Millionaire in Your 50s Thanks to Generational Wealth?
Written by
Dawn Allcot
Edited by
Cory Dudak
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You might be surprised to learn that most millionaires don’t accrue their wealth until they reach their 50s. A Fidelity Investments study revealed that the average age to become a millionaire is 58.5 for women and 59.3 for men. Some people achieve this goal by saving and investing their whole lives, while others are fortunate enough to receive an inheritance in what’s being called the Great Wealth Transfer.
A Ramsey Solutions blog post stated that $70 trillion worth of assets will be passed down over the next two decades. Becoming an overnight millionaire might seem like it will solve many of your financial worries — but only if you know how to save and invest it properly.
Follow these steps if you recently received a generous inheritance.
Sit, Think, and Let Yourself Grieve
In his blog post, Ramsey acknowledged that an inheritance also comes with the loss of a loved one. It’s okay not to make any money moves right away. “If you received a lump sum of money, it’s okay to just park the funds in a money market account for a few months. Take a deep breath. Take some time to mourn.”
Speak With a Tax Professional To Minimize Taxes
When you’re ready to move forward, Dave Ramsey recommended building a board of advisors to help you manage your newfound wealth. One of the first people on this team should be a tax professional to help you minimize estate taxes. The Tax Cuts and Jobs Act of 2017 exempts estate taxes for amounts under $13.61 million in 2024. But if you’ve inherited more than that, you’ll want to find a way to keep as much as you can through legal tax avoidance strategies. A tax accountant specializing in high-net-worth taxpayers can help.
Consult With a Financial Advisor
You’ll also want to consult with a financial advisor who can help you invest the bulk of your inheritance so it can continue to grow. The goal, of course, is to cover your retirement expenses and preserve your family’s wealth for the next generation.
“Financial planning tactics that you used in the past may no longer be sufficient, and a top wealth advisor who understands allocations and high-end strategies is a critical piece of your financial infrastructure,” a former spokesman with personal financial management firm Aquilance shared with GOBankingRates.
Evaluate Your Insurance Policies With Help From Experts
Having more money in the bank means you have more to lose if you get sued for any reason. You may want to evaluate your insurance policies for any risk gaps, or areas where you don’t have enough coverage. You may want to add umbrella liability insurance, and make sure your homeowners insurance covers any high-end purchases you might have made with your newfound wealth.
Additionally, you can leverage a life insurance policy as an alternative asset class, according to HubInternational.com. HUB Private Client is an insurance company specializing in high-net-worth individuals and families.
Pay Off High-Interest Debt
If you’re drowning in credit card debt, you’ll want to take a percentage of your inheritance and pay off those cards. It makes no sense to invest money, even at a 10% or higher return, if you’re paying 17% or more in interest on credit card debt.
Treat Yourself
Receiving a large inheritance can come with mixed emotions. After all, it likely comes with the loss of a parent or another loved one. It’s okay to use some of the money for fun. However, make sure you keep the spending under control.
In a blog post, Dave Ramsey suggested asking yourself: “Will this decision honor my loved one’s memory?” You might consider taking a trip to a place your loved one enjoyed or investing in one of their favorite hobbies. You could also donate money to a cause they cared about to honor their memory.
Working with the right people to create a wealth management plan can help set you up for a stable retirement and also grow your wealth for future generations.
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