I received some money as an inheritance from my grandfather a bit ago, and since I got it, I’ve been trying to decide what to do with it. Should I use it to buy something physical–a new sofa, or something like that? Or maybe put it toward a family experience–a trip somewhere, perhaps? After much hemming and hawing, I decided to invest it, which is something I think my grandfather would have heartily approved of. My first inclination was to put it all into a single stock, but after speaking with my financial planner brother, I decided that was a bad idea, and I ended up opening a Roth IRA. Why did I do this? For a couple of reasons.
- First, there was a minimum amount required to open a Roth IRA, and this minimum amount happened to be the exact amount I had inherited, thus making it so that the inheritance really truly allowed me to do something I wouldn’t have been able to do otherwise.
- Second, Roth IRAs are non-taxable when you start to use them at retirement.
- Third, you can withdraw the principal (not the interest) at any time, penalty free.
I put the Roth IRA into an ETF, which is another something my brother suggested. What kind of ETF? An international EFA. I debated trying to figure out what all the letters meant, but in the end I decided to go with my brother’s recommendation. After all, he does it for a living. I’m just a librarian. I’m not planning on touching that money for the next thirty some odd years or so. Who knows how much it’ll be worth by then? The idea of being able to use it years later and still remember my grandfather at that point . . . that appeals to me. Thank you, Grandpa!