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How to Retire on $200000 Inheritance (Ultimate 2022 Guide)

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By Forrest | Last Updated: August 2, 2022

If you have a large inheritance, it’s essential to manage your money correctly so you can retire when you want and reach your goals.

In this post, I’ll explore how to retire on $200,000 inheritance, some of the best compounding interest investments, and much more. Let’s get started!

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How to Retire on $200k

How to Retire on $200k

If you want to retire with a $200,000 inheritance, there are a few things you’ll want to consider. Remember, when putting together a retirement plan for your money, always be sure to consult a financial advisor.

Pay Off Debt

Paying off high interest debt, like credit card debt, personal loans, or even a mortgage, should be your top priority.

Not only will this save you money in interest payments, but it will also free up more money to invest in other areas down the road.

If you have any debts with interest rates greater than 5%, this should be a priority for your retirement planning.

Stick to a Budget

While $200,000 is a large amount of money, it can be difficult to retire on this sum if you’re not used to living on a budget.

Create a budget and stick to it so you can make the most of your inheritance.

This can take some time to get used to, but it’s important to be mindful of your spending so you don’t run out of money too quickly.

Save for Emergencies

It’s important to have an emergency fund regardless of how much money you have.

A good rule of thumb is to save up 3-6 months of living expenses in case of an unexpected event, like a job loss or medical emergency.

This will help you cover your costs if you’re ever in a tight spot and can’t rely on your inheritance to get by.

Keep Social Security in Mind

Don’t forget that you might have some social security benefits waiting for you when you retire.

If you have a $200,000 inheritance, you might not need to rely on social security as much, but it’s still a good idea to factor it into your retirement plans.

Don’t Forget About Taxes

When you inherit money, whether from a family member or through an estate, you may be responsible for paying taxes on the inheritance.

Be sure to consult with a financial advisor so you know how much you’ll need to set aside for taxes.

Best Methods to Retire on $200k Inheritance

Below are some of the best investment options you can use to retire with a $200,000 inheritance. Below are some great ways to invest $200k.

Invest in Real Estate

Invest in Real Estate with Fundrise

Investing in real estate is a great way to build long-term wealth and generate passive income.

With Fundrise, you can start investing in high-quality residential and commercial real estate projects for as little as $10.

In addition, they’re giving new investors $10 completely free for a limited time making it a great option for any investor.

Another great bonus is that you can open retirement accounts within Fundrise.

This means you can start saving for retirement without having to pay any taxes on your earnings until you withdraw the money.

Real estate can be a great way to invest your retirement savings and generate income because it’s a tangible investment.

How much money can you make?

Average returns for Fundrise tend to be around 10% annually, but some years have been much larger.

For example, in 2021, the average return on Fundrise accounts exceeded more than 20%!

If you’re looking to invest your inheritance and don’t know where to start, check out Fundrise.

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Invest $200,000 in Index Funds

Invest in Index Funds

Another great way to invest money is in the stock market through index funds.

If you have a large amount of money, investing in the stock market can be a great way to grow your wealth.

However, it’s important to understand that the stock market can be volatile, and you could lose money if you don’t know what you’re doing.

That’s why investing in index funds is a great option for beginner investors.

Index funds are a type of mutual fund that tracks a specific market index, such as the S&P 500.

This type of investment is diversified, which means it’s less risky than investing in individual stocks.

In addition, index funds typically have low fees, which means you can keep more of your money.

How much money can you make investing in the stock market?

Your returns will vary by year, but on average you can earn around 7% annually on your money.

This means that a $200,000 investment will yield around $14,000 annually on average.

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Open an IRA or 401k

Opening retirement accounts like an IRA or 401k can be great ways to build your retirement portfolio and take advantage of tax incentives.

You can open a retirement account like an IRA through many online brokerage platforms.

When you open an IRA, you can choose to invest in a wide variety of investments, including stocks, bonds, and index funds.

With a 401k, your employer will typically offer a selection of investment options, and you can choose how to allocate your money.

Some employers also offer matching contributions, which can be a great way to grow your retirement savings with free money.

For example, if your employer offers a 3% match, they will contribute $3 for every $100 you contribute, up to a certain amount.

This can be a great way to accelerate your retirement savings for the future.

Invest in Small Businesses with Mainvest

Invest in Small Businesses

Did you know it’s possible to invest in small businesses?

This can be an awesome way to diversify your retirement savings and generate passive income.

By using a platform like Mainvest you can start investing in small businesses around the country with as little as $100.

Mainvest has target returns of anywhere between 10% to 25%, making it one of the more lucrative options to grow your inheritance money.

However, with greater reward comes greater risk.

Keep in mind that small businesses are more likely to fail than larger businesses, so you could lose your investment.

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Invest in Bonds

Invest in Bonds

Bonds are some of the safest investments you can use to grow your money.

With a bond, you’re essentially lending money to a government or corporation in exchange for interest payments.

The interest rate you earn on a bond depends on the type of bond and the current market conditions.

For example, government bonds typically have lower interest rates than corporate bonds.

How much money can you make?

The average return on investment for a bond is around 3% to 5%.

While the returns may not be as high as other options, bonds are a safe investment that can help you grow your money over time.

This means that if you invest $100,000 in bonds, you can expect to earn around $3,000 to $5,000.

Start a Business

Starting a business can be a rewarding experience that can be a great way to use your $200,000 inheritance.

Of course, starting a business can be risky because there’s no guarantee you’ll be successful.

However, if you have a great business idea and are willing to work hard, you could end up making a lot of money.

There are many different types of businesses you could start, but I tend to prefer businesses that don’t cost a fortune to start and have a proven business model.

For example, a pressure washing business is a straightforward business to start that can be profitable in any economy.

Best of all, you can start this type of business for less than $1,000.

Another option is to start an online business like a blog.

These cost very little to start and can make a significant amount of money as long as you have a computer and internet connection.

If you’re willing to put in the work, starting a business is a great option to grow your inheritance money and reach your financial goals.

Open a High Yield Savings Account

Opening a high yield savings account is a great way to keep your money safe and earn some interest on your balance.

High yield savings accounts typically have higher interest rates than traditional savings accounts, which means you can earn more money without having to do anything.

While you won’t earn a fortune with a high yield savings account, it’s a great option to save extra cash and earn a guaranteed return.

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Consider Annuities

Annuities, or fixed income, are a type of investment that can provide you with guaranteed income for life.

With an annuity, you essentially give a lump sum of money to an insurance company in exchange for guaranteed payments.

The payments from an annuity can start immediately or at some point in the future.

The amount you receive each month depends on the type of annuity, your age, and the current interest rates.

When it comes to retirement, this can be extremely helpful to avoid the ups and downs that might come with other investments.

Final Thoughts on How to Retire on $200000 Inheritance

If you want to retire after receiving an inheritance of $200k, you have options. While retirement planning can be stressful, it doesn’t have to be.

First, you’ll want to pay off high interest debts and get a budget together. Next, establish an emergency fund to keep some extra cash.

Then, you can think about how to invest your money.

You can either invest in the stock market, start a business, open a high yield savings account, or bonds.

Always consult a financial advisor before putting together a financial plan for your money.

Forrest is a personal finance, entrepreneurship, and investing expert dedicated to helping others obtain life long wealth. He has a Bachelor's degree in business and has been featured in many popular publications including Forbes, Business Insider, Bankrate, CNET Money, and many others. To learn more about Forrest, visit the About Me Page for more info.
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