Personal Finance

I'm in my late 20s with over $5 million in the bank because of an inheritance - how should I managed such a large amount at my age?

Rich Duprey

Published: December 3, 2024 4:16 pm

At some level we probably all fantasize about being the idle rich, having so much money we can do what we want. Yet as enticing as it sounds, remember the old saying, be careful what you wish for because you might just get it. Without some purpose in life, what’s the use of lolling about without direction?

This was brought to mind because a Redditor on the r/fatFIRE subreddit finds himself in this exact situation. He’s still in his late 20s and already has it all.

He was blessed by an exorbitant inheritance that gives him a net worth of $5.3 million, less than $1 million of which is in two rental properties. The Redditor has no car payment, no credit card debt, and though he has a degree in finance, has zero student loan debt. His only debt is $700,000 in the rentals, but the income from them covers their cost though little else. The Redditor’s problem is he has no purpose in life.

What is the meaning of life?

The Redditor is estranged from his family, has good friends, but no interest in traditional family life. He’s knocked around in several jobs — none in finance as he has no desire for it — but found them unfilling.

He also has few expenses because he lives cheaply. He believes he could easily survive on a small, 1.5% withdrawal rate from his money as all of his interests are free or inexpensive. His one splurge is he likes to travel, but even then can find economical ways of doing so.

Despite this, he fears losing it all. The past few years of rampant inflation, the possibility of an underperforming stock market over the next few years, and the increasingly high cost of living makes him worry that with many years of living ahead of him, he could still lose it all.

Key Points About This Article

• Simply having a lot of money is not fulfilling in itself if there is no meaning behind it.
• We all have passions in life, and if we’ve been fortunate enough to achieve our financial goals early enough, it is paramount to find what you love and share it with others.
• Ensure that your money will last throughout your lifetime by investing in the stock market. 
• While market corrections can be hard, history proves they will washed away by the bull market that always follows.
• Also: Take this quiz to see if you’re on track to retire (Sponsored)

Finding what you value most

This brings to mind the biblical verse that says, “For what will it profit a man if he gains the whole world and forfeits his soul?” What good is all this money to the Redditor if he is so unhappy with it? It is clear he needs to find purpose and fulfillment in his life or he risks being wretched at heart. 

For someone like this, service to others may be the missing piece of the puzzle. Volunteering, for example, or combining his love of travel to help others in foreign lands, could be what he needs to be happy.  It sounds as though he needs something in which he has an emotional stake in to give him purpose, so building something for himself that helps others could be the reward he needs.

Yet he also needs to ensure his money doesn’t run out.

The best way forward

While the stock market could underperform for several years, the long-term trend remains higher. There are few periods in history where downturns last very long. There was the time during the Great Depression and the 2000s — the so-called “lost decade” — but most bear markets are measured in months while bull markets go on for years.

That suggests simply buying an S&P 500 fund like the Vanguard S&P 500 ETF (NYSEARCA:VOO) or SPDR S&P 500 ETF Trust (NYSEARCA:SPY) and holding for the long run will ensure his fear of losing it all is never realized.

Since 1928, the average bear market has lasted 15 months while the average bull market rally has lasted three years. Moreover, from 1970 on, bull markets tend to last more than six years on average. Even better, the losses of every single market correction throughout history have eventually been cleared away by a bull market rally.

Key takeaway

It is not enough to just have a lot of money. Your life has to have meaning too. While many people find work rewarding in itself, there are plenty of opportunities to find purpose beyond the 9-5 grind. Knowing what you find fulfilling and being able to pursue it is worth all the money in the world.