Personal Finance

My husband just inherited $100k and looking for the best retirement account to put it in so we aren't tempted with it - where should we stick it?

Maurie Backman

Published: January 13, 2025 3:09 pm

Key Points from 24/7 Wall St.

• Tax-advantaged retirement plans like IRAs and 401(k)s have contribution limits and can only be funded with earned income
• If you want to earmark part of a $100,000 inheritance for retirement, a taxable brokerage account is a good place to invest.
• Think about your financial goals before committing your entire inheritance to a tax portfolio.
• Retiring early is possible, and may be easier than you think. Click here now to see if you’re ahead, or behind. ^(Sponsor)

In the next 20 years, Americans are expected to inherit a whopping $84 trillion. If you’re lucky enough to be a part of that trend, then it’s important to manage your windfall carefully.

Such is the situation for this Reddit poster. Their husband just inherited $100,000 after his father passed away, and they’re looking to make the most of that money. They’re interested in putting some of it away for retirement but also have the goal of buying a house. Here’s what I would suggest this couple do with their newfound money — and what you may want to do if you end up in a similar situation.

Put your funds to good use

Many Americans worry about not having enough money to retire on, so using an inheritance to save for the future is definitely a smart idea. Normally, I’d suggest turning to a tax-advantaged savings plan like an IRA or 401(k) to set money aside for retirement. But there are a few issues there.

First, these plans can only be funded with earned income. An inheritance does not fall into that category. So while the people in question can certainly contribute to an IRA or 401(k) from their paychecks, you can’t use an inheritance to max out these accounts.

And speaking of maxing out, the amount of money inherited here goes well beyond the annual contribution limits for IRAs and 401(k)s. In 2025, IRAs max out at $7,000 for savers under age 50 and $8,000 for those 50 and older, while 401(k)s max out at $23,500 and $31,000, respectively. (With 401(k)s, there’s an exception for employees aged 60, 61, 62 and 63, who can contribute up to $34,750).

Since the Reddit poster above wants to put about half of their inheritance into a retirement account, I think their best bet is to open a taxable brokerage account and invest the money there. They won’t enjoy the IRS benefits that come with funding an IRA or 401(k), but they can continue to fund those accounts out of their paychecks.

The poster also wants to reserve some of their inheritance for buying a home. I’d advise putting that portion into a regular savings account, and shopping around for one that’s paying around 4% to earn some nice interest on that cash while doing their house hunting. I wouldn’t recommend CDs, though, if they expect to purchase a home soon, since there can be an early withdrawal penalty for cashing out a CD before it matures.

Talking to a financial professional is a good idea

Any time you come into a large sum of money, it’s a smart idea to sit down with a financial advisor and get their input on how to manage it. A financial advisor can help you map out your goals and find the best place for your newfound money based on what those look like.

Also, a lot of people find themselves in a position to invest for the first time once they inherit money. But if you don’t know what you’re doing in that regard, you could end up making a big mistake by investing either too conservatively or taking on too much risk in your portfolio. So it’s good to get some guidance early on.