What should I do with small inheritance

[fishsticks2629]

Hello all,

Recently I was given a small inheritance ($50,000) by one of my lovely late family members. I just started a surgical residency that will last for 8-9 years (including research and fellowship). I have $360,000 in student loan debt with almost all of it being in various federal loans. I do not own a home and am renting.

I put the amount into a savings account with  a 0.03% interest rate. Any advice if  I should do anything else with the funds?

Advice is greatly appreciated.
Thank you!

[Zaphod]

fishsticks2629 wrote:

Hello all,

Recently I was given a small inheritance ($50,000) by one of my lovely late family members. I just started a surgical residency that will last for 8-9 years (including research and fellowship). I have $360,000 in student loan debt with almost all of it being in various federal loans. I do not own a home and am renting.

I put the amount into a savings account with  a 0.03% interest rate. Any advice if  I should do anything else with the funds?

Advice is greatly appreciated.
Thank you!

Click to expand...

Have you refinanced your student loans? If not I'd do that asap.

Otherwise you have lots of options, pay down some of loans or take advantage of decreased income and this money to max out as much as possible your tax deferred and match and then Roth.

At the very least get a savings account at 1%.

[VagabondMD]

I have oft heard the advice that when you get a big financial windfall, the first thing you should do is do nothing. This may not qualify as a "big windfall"'but given your current negative net worth it probably should.

$360,000, to me, is a mind-boggling amount of student debt. (I graduated med school in 1991, and the entire cost of my (private) university and (private) med school was about $90,000.) Unfortunately, $310,000 does not seem that much different than $360,000! Nonetheless, I might put $10k in the bank (1% at Ally) in an emergency fund and put the other $40k toward my highest interest loan(s).

i sincerely hope that you see some return on your educational investment (both the time and the money).

Good luck!

[The White Coat Investor]

fishsticks2629 wrote:

Hello all,

Recently I was given a small inheritance ($50,000) by one of my lovely late family members. I just started a surgical residency that will last for 8-9 years (including research and fellowship). I have $360,000 in student loan debt with almost all of it being in various federal loans. I do not own a home and am renting.

I put the amount into a savings account with  a 0.03% interest rate. Any advice if  I should do anything else with the funds?

Advice is greatly appreciated.
Thank you!

Click to expand...

https://www.whitecoatinvestor.com/what-to-do-with-a-windfall-friday-qa-series/

A couple of small tips:

# 1- I'd first of all put it in a high yield savings account paying 1%. That'll give you an extra $500 a year if nothing else.

# 2- What is your student loan plan? If you plan to pay them back yourself, then you might as well get started and throw some money at them.

# 3- If you don't plan to pay back your student loans, or aren't sure, then consider gradually moving it into retirement accounts, specifically Roth accounts. For example, you could put $18,000 into a Roth 403b if you have one now for 2016 (just defer our entire income in there and live on the windfall) and 2017. You could do a personal ($5500) and spousal (another $5500) contribution to Roth IRAs for each year too. Then instead of $50K in a taxable account, you have $50K in Roth accounts. That assumes you've paid off all your other debt and have an emergency fund and all that.

[ShadowDoc]

IMO if you're locked in for PSLF or other program for loan forgiveness, you might put it in an online 1% account and direct the auto-debit from this lump sum. It would carry your payments until probably PGY7ish. You'll be making a little more at that point, making the last few years easier, and in essence your 50k has made 70% of your loan payments; something I'm sure your family member would be proud of.  If you aren't going for loan forgiveness I would follow WCI's Roth instructions.

[G]

Gosh, I'd consider that more than a small inheritance!  I like a four tiered approach (actually, about the same as WCI above) assuming you have no credit card debt:  1) emergency fund in high yield savings, 2) Roth for at least one year , 3) pay off some student loans, 4) treat yourself to a nice dinner and have a toast to the loved one who passed.

Maybe if you're lucky, you'll be able to pass on that Roth as a part of your estate.

[TheGipper]

I vote:

1) Skip Savings account unless you have absolutely no emergency fund.

2) Fund Roths (don't we all wish we started Roth IRA contributions and/or Roth 401ks earlier?).  We should all be trying to fund our kids Roths as soon as they get summer jobs and making it a priority for the Roth space to get filled every year, no exceptions, no excuses.

3) Throw the rest at student loans if you don't anticipate forgiveness.  Plenty of time for other investments later.