MW 'Frankly, I'm terrified': I'm 63 with $2.2 million saved for retirement. How should I invest an $80,000 inheritance?

By Quentin Fottrell

'It's hard to look at what's happened to my retirement savings in recent weeks'

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Dear Quentin,

I'm 63 with a $2.2 million retirement portfolio, mostly held in a traditional IRA and 401(k). I max out my contribution to a Roth 401(k), have a $1,100-per-month mortgage at 3.1%, $100,000 in a money-market account and $25,000 in a CD ladder. My father passed away and I inherited $80,000. What are my options for investing this money inside or outside a retirement account? It's hard to look at what's happened to my retirement savings in recent weeks. Frankly, I'm terrified.

Sixtysomething

Related: I've made money buying solid companies in terrible markets. Is this stock that soared during the pandemic a good buy?

Dear Sixtysomething,

You could learn a lot about investing from this $80,000 inheritance.

Given that you have $2.2 million, a large share of which I assume is invested in the stock market, this $80,000 is "mad money" - that is, money you can play with, stow away for a rainy day or use to lighten your financial responsibilities, especially as market volatility increases. There are few people who can treat $80,000 as "play money." You have that luxury.

Use this $80,000 to invest in your peace of mind - pay some to reduce your mortgage payments, assuming your payments are small enough to make a significant dent, put $10,000 in an emergency fund for any house repairs or medical issues that crop up, and a generous sum in a high-yield savings account where it's easily accessible.

With the S&P 500 having recently entered correction territory - a 10% decline from a recent peak - you could also invest a portion of your inheritance ($10,000 to $20,000) in an exchange-traded fund that tracks the total market, the S&P 500 SPX or some other diversified index, perhaps a Vanguard Total Stock Market ETF VTI VTI. Don't buy individual stocks.

Use this $80,000 to invest in your peace of mind.

Enjoy investing this inheritance. You could also invest a portion in gold, which passed the $3,000-per-ounce mark for the first time last month. Gold doesn't always rise when there's geopolitical uncertainty or instability, but it's generally regarded as a safe haven in uncertain times. (But, you might ask, what times have not been uncertain?)

For a safer haven, look at shorter-duration bonds, mutual funds and exchange-traded funds, with a maturity of less than five years; Treasury inflation-protected securities $(TIPS.UK)$ - inflation-protected bonds issued by the U.S. Treasury; and the D-word - diversification. Morgan Stanley $(MS)$ also cites possible upside in "value-oriented and defensive sectors."

Some questions to mull over: Do you have long-term care insurance? (Premiums will obviously be higher in your 60s than your 50s.) How do you fare with the 4% rule? That involves taking 4% of your retirement savings in your first year, and the inflation-adjusted amount every year for 30 years. (For what it's worth, the 4% rule is not perfect.)

Related: Trump's trade war has rattled investors - uncertainty is a call to action

Expect more stock-market peaks and valleys ahead. "Heightened uncertainty has also caused the U.S. dollar to weaken after posting strong post-election gains," according to Deloitte. "In our baseline scenario, we think the Fed will only manage to cut rates twice this year. Stubborn inflation will slow the speed at which interest rates can be brought back to neutral."

Health Savings Accounts (HSA) allow you to save money in a tax-advantaged account and withdraw it tax-free for qualified medical expenses. You can also use that cash to reduce your out-of-pocket medical expenses in retirement. HSAs are, essentially, one way to build a "medical nest egg" over your lifetime, depending on how much you use during your working life.

You could also seek out a broker who works on commission or even a fee-based financial adviser to figure out your retirement goals. AARP's retirement calculator allows you to include many lifestyle factors and is based around three questions: "Am I saving enough? When can I afford to stop working? How long will my money last?" But you are ahead of the game.

Expect more stock-market peaks and valleys ahead.

Signs point to slower economic growth in the year ahead. "Business confidence is weakening in the face of uncertainty," Deloitte adds. "The National Federation of Independent Business' small business optimism index dropped in January and February. In addition, several regional Federal Reserve Bank surveys reported a sharp drop in the outlook for business conditions."

The average 65-year-old in the U.S. today will live until approximately 85 years. About one-third of 65-year-olds will live until at least age 90, and 1 out of 7 could live until at least age 95, the Social Security Administration says. "Depending on your retirement age, your retirement savings may have to last three decades or longer," says U.S. Bank.

Millions of Americans face cost-of-living pressures, and you belong to a wealthy cohort. "A person who withdraws $50,000 from savings and investments to fund retirement's first year," the bank adds. "If inflation averages 3% per year, after 30 years, close to $118,000 would need to be withdrawn to maintain the same living standard."

The good news: You have a comfortable retirement ahead of you.

Related: 'I'm not trying to be overly doomsdayish': My grandmother is in her 70s and has $400K in stocks. Is it time to sell?

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.

The Moneyist regrets he cannot reply to questions individually.

More columns from Quentin Fottrell:

My portfolio lost 20%. With Trump's trade war, do I sell my stocks and buy gold?

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-Quentin Fottrell

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April 07, 2025 05:25 ET (09:25 GMT)

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