I Came Into a $500,000 Windfall – What Should I Do With It?

There may come a point in your life when find yourself on the receiving end of a pile of cash. It could be a bonus, a whopper of a tax refund, or something else.

In this Reddit post, we have someone in their 40s who recently came into a $500,000 windfall. They have about $700,000 invested in various accounts already, plus a healthy emergency fund.

They’re eager to retire early, and they earn $230,000 a year. They also have no debt aside from their mortgage, and they have $200,000 in home equity.

The poster is wondering if they should use the money to pay for home upgrades without having to borrow. They like the idea of paying for renovations directly to avoid borrowing at a time when rates are high.

But they mention that they’re also interested in retiring early. And they may be more likely to meet that goal if they take their $500,000 windfall and invest it. But ultimately, they’ll need to balance their near-term goals with their long-term goals to make the right call.

It’s a matter of priorities

There’s nothing wrong with spending money to update a home. Your home is where you spend much of your time, and it’s okay to want to make that space more comfortable.

Plus, upgrading your home could increase its resale value. So you might get some of your investment back.

On the other hand, the poster needs to realize that if they use their windfall for home updates, they won’t be able to put their $500,000 to work in the stock market. That could get in the way of their plans to retire early. So they’ll need to ask what’s more important — their near-term comfort or their long-term goal of early retirement.

And there’s really no wrong answer. It’s just a matter of what they want more.

If they put the $500,000 into an S&P 500 ETF today and leave it alone for 15 years, it could be worth around $1.6 million. That assumes an 8% yearly return, which is actually a few notches below the index’s average.

On the other hand, if they invest their $700,000 similarly, in 15 years, it could be worth $2.2 million. And better yet, if they add $12,000 a year to their portfolio during that time, they could be looking at $2.5 million.

Put another way, the poster here may have more than enough money to retire a bit early based on what they’ve saved already. So using their $500,000 for home upgrades isn’t a reckless decision by any means.

But the poster will need to decide if they’ll be comfortable retiring early on $2.2 or $2.5 million. Although that’s a lot of money, if it needs to last longer, the poster may be worried.

A financial advisor can help

Whenever you come into a notable sum of money, it’s a good idea to get a professional’s input. This holds true whether you’re talking about $50,000 or $500,000 like the poster above.

A financial advisor can help explain what that money can do for you in different ways. They can also help you weigh your different goals against each other so you’re able to figure out how to put your windfall to the best possible use.