Cash Inheritance to investment

Investing
#1

I hope you can help me with this inheritance question. I appreciate your time and expertise and haven’t been able to find answers on Google.

I just inherited a $22k cash from my grandpa (thanks g-pa!) And would like to invest all of it for retirement. My husband has a 403 b and Roth IRA, I have a rollover 401k from a previous employer and a Spousal Roth IRA. We are up to match for the 403 b.

My plan was to use the inheritance to max out the Roth IRAs, then ideally put the rest in my husband’s 403 b…following your steps for investing. However, I don’t think we are able to send a check to his 403 b, it has to come from his paycheck. How should I do this? Should I have his paychecks temporarily sent 100% to his 403 b and live off of the inheritance for a few months? Or Can I just transfer the funds to my rollover 401k? The inheritance is tax-free aside from capital gains (it was in the form of precious metal which we just sold) so I feel like I can’t put it in a pretax account but honestly have no idea.

Thank you in advance!

#2

Hi Jennifer!

Normal disclaimer of “I’m not a tax professional” applies, but workplace retirement programs (like a 403b and 401k) require by law that contributions are made directly from payroll deductions. So you’re right: You can’t just make a deposit.

But you do have this nice chunk of post-tax change from grandpa that you want to invest. So I would do exactly what you suggest. You and/or your husband, crank those payroll contributions all the way up. That will make your paychecks tiny for a while, while your 403b and 401ks get pumped full of tax-deferred money. Meanwhile, you live on the grandpa money. That effectively converts that already taxed grandpa money into those nice tax advantaged investment accounts. Make sure you have enough to pay the capital gains. (Although, I believe inheritances often reset the “basis” on any investments, essentially eliminating any capital gains if you sell right away… probably worth running by a CPA as it could save you a bunch of cash) :slight_smile: