The financial media is full of helpful articles about saving for retirement and making sure your retirement savings last your lifetime. But little is written about what to do when your retirement funds come to you suddenly while you’re still in your 20s.
This is the experience of someone who inherits, and if you are among those rare heirs, here’s a primer:
- Before you start comparing notes with your siblings and/or cousins who are likely to have received similar assets with similar terms, define for yourself what it is you received and what, if any, limitations or restrictions there are with those assets. Are the assets in trust? Are they shares of a family operating business? Do you have any authority over them, or are they being managed/monitored by others according to the trust terms or bylaws? If navigating the documents that contain this type of information is indecipherable to you, find a trusted advisor who specializes in this area. This advisor can act as an interpreter for you.
- Now that you know what you have, you must decide how you’re going to work within the systems that are inherent in the gifts, whether they be a family office, ownership and a family limited partnership, beneficiary of a trust(s), or other. If the structure requires you to work within your family or with another group, decide what role you want to play and work with the other family members/shareholders/beneficiaries to get organized and systematized so that the organization can run smoothly. If you are independent and not tied to systems like those described above because you received your funds outright, you can skip Step 2 entirely.
- Understand your options and boundaries regarding spending as it relates to your inheritance. If you inherited enough that you could spend more than your desired lifestyle dictates, explore what you want to do with the excess. Is this a legacy for now or later? Is your legacy for loved ones or for loved causes? If the amount you inherited is not enough to support the spending you would like to enjoy, decide how you will either supplement your income through paid work, or ratchet your spending down. The latter is hard to do. If this is what you opt for, however, set up a system that won’t leave you at the age of 80 without any financial resources left!
- Monitor, maintain, adjust, perfect, and be nimble. The unexpected is to be expected over the years. Change will happen. In spite of glitches and upsets, you will thrive because you’ve done proper planning. As my good friend Victoria Labalme would say, “Risk forward!”