Did My Wife Make a Huge Mistake by Investing Her Inheritance?


Dear Penny,

My wife and I are middle class or maybe upper middle class. I make pretty good money. I pay all of our bills, mortgage, both cars, insurance and healthcare bills (which is $2,000 per month). She is a social worker and only makes enough to cover her personal needs and spending money.

We have a modest savings account (about $50,000) and a small retirement account ($200,000). We also have some real estate holdings, which will fund our retirement when liquidated in 15 years. We are in our early 40s.

She inherited about $60,000 from her grandfather. She asked me what I thought she should do with it. I told her that she should do whatever she wants with it. But I told her my advice is to come up with a plan. She should figure out how much she would want to save. She had mentioned putting some in our son’s college fund and some travel. My advice was not to waste it and to have a budget and stick to it.

Without telling me, she put about $40,000 into an IRA and $10,000 into our child’s college account (529 plan). So about $50,000 of the $60,000 she put into accounts that we can’t get to for 20 to 30 years.

Knowing her grandfather well, that is not how he would have wanted her to spend the money. He would have anticipated her traveling and spending it on stuff that makes her happy, not locking it up for years.

This all happened this calendar year. My question is: Is there a way to get the money out of the IRA without paying a penalty? A financial mulligan?

-S.

Dear S.,

Is this really about what Grandpa would have wanted? Or are you saying that you’re disappointed that your wife isn’t spending her inheritance on fun stuff?

Regardless, it sounds like your wife followed your advice. She didn’t let the money go to waste. Investing money when you don’t have a pressing need for it sounds like a solid plan.

And to be clear, this is her decision, not yours. Inheritances are treated as separate property, ie,…



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