A Redditor endured a tragic accident at work and ended up winning a well-deserved $840,000 settlement. He posted about it in the Personal Finance Reddit group because he’s looking for guidance on how to use the windfall.
The Redditor recently sat with a financial advisor to discuss optimal ways to use the money. He wants to buy a house and gift his parents money, and he estimates that will bring him down to $600k. Then, the financial advisor recommended investing in a mutual fund to get around $2k/mo from it. The financial advisor also suggested giving less to the parents so the Redditor can earn more per month with the mutual fund.
Is this good advice? I will share my thoughts, but it is good to speak with a financial advisor if you can.
Don’t Give Too Much to the Parents
Some of the comments mentioned that the parents shouldn’t be gifted money. The Redditor lost a leg at work and is disabled. The $840k is a one-time windfall that reflects the Redditor’s diminished earnings moving forward. He’s not required to be a philanthropist. Some people spend settlement money or inheritances as if they will receive something like it again in the future.
The Redditor has a great financial opportunity, and it came at a massive cost. The parents can still work, and the man is not obligated to provide financial support for them.
One of the comments told the Redditor to beware of people that make elaborate plans for your money. Another commenter followed up by saying, “Especially if *URGENT*.”
Prosthetic Legs Are Expensive
One commenter works in the prosthetics field and mentioned that a prosthetic leg is very expensive. The commenter also mentioned that you may need multiple prosthetic legs over your lifetime as your body continues to change. The commenter also mentioned that a young person may have to go through 20 prosthetic legs before passing.
It’s important for the Redditor to keep these high expenses in mind. That way, he may be more protective of his $840k instead of gifting a large portion of it to his parents. He may feel financially secure right now, but $840k alone isn’t enough to stretch into retirement. Trimming it right away will make it even harder to withstand financial challenges in the future.
The Financial Advisor Is Providing Solid Advice
We don’t know the mutual fund the financial advisor recommended, but it is fair to assume that the advisor assessed the Redditor’s risk tolerance and long-term goals before recommending a fund. Just make sure the advisor is a fiduciary who is required to serve in your best interest instead of an advisor who earns a commission when you invest in the fund.
The financial advisor also recommended giving less money to the parents, which was another great suggestion. The Redditor needs all of that $840k, and it will compound faster than $600k. It is wise for the Redditor to invest in himself instead of giving the funds to his parents.
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