Inherited mothers Profit Sharing / 401K, now what?

[BrianTheMute]

I am completely new to this, I know nothing about banking or finance or anything.

In January of this year, my mother passed away. She had breast cancer. Shortly after, I found out she had a "Profit Sharing" account with her former employer. So I took a ride down to corporate and talked to them about it, and they put it in my name and now it's at "Fidelity". After that, it sort of went to the back of my mind, I had a lot going on and was very depressed. Recently, I called Fidelity and set up my account on their website. I saw that I have $14,600.

My question is; what should I do now? I have been planning a trip for my fiance and I, Disney World, first week of February next year. I want to take out $5,000. What is the best way to do that, take out the entire lump sum or just what I need? How do I go about this?

Also, I noticed that in a matter of 2 days since I gained access to the account, it went down by $119. Is this normal? Kind of worries me.

[jpg7n16]

I am completely new to this, I know nothing about banking or finance or anything.

In January of this year, my mother passed away. She had breast cancer. Shortly after, I found out she had a "Profit Sharing" account with her former employer. So I took a ride down to corporate and talked to them about it, and they put it in my name and now it's at "Fidelity". After that, it sort of went to the back of my mind, I had a lot going on and was very depressed. Recently, I called Fidelity and set up my account on their website. I saw that I have $14,600.

.... Also, I noticed that in a matter of 2 days since I gained access to the account, it went down by $119. Is this normal? Kind of worries me

That's all your account went down? You're actually pretty lucky then! Market has been going down lately. Does that mean you're invested poorly? No. Just means that over this very short timeframe, the market has gone down.

The main thing is to make sure that you have a reasonable asset allocation going forward. Plan for the long term, not based on a few days.

My question is; what should I do now? I have been planning a trip for my fiance and I, Disney World, first week of February next year. I want to take out $5,000. What is the best way to do that, take out the entire lump sum or just what I need? How do I go about this?

Well, you say you've been planning the trip - so you've been saving up for it, correct? Why then do you need to take the funds out from this account?

If it comes down to you planning the trip with funds from the account, then you should consider that it will be considered extra income for the year in which you receive it out of the account. Will you be in a higher or lower tax bracket next year? If the same, then it doesn't really matter when you take the withdrawal.

But if your trip only costs $5k, why would you take out all $14k?

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My general feel is that you're treating this account like "found" money - meaning you're not planning it carefully, and won't be spending it carefully either. I see you taking the $5k (plus extra for taxes), some for bonus Christmas gifts (that you wouldn't normally purchase), and then cashing out the rest for wedding expenses that weren't necessary (or in the original budget). And next thing you know, you've just blown through all $14,600.

I've only got one post to base that off of, but in general I feel it's an accurate prediction that when someone goes "oh I gotta withdraw $5k, oh... well why not just take it all?" that there's an underlying, "this money doesn't really matter to me" thought behind it all.

If this were money YOU saved up, would you spend it the same way? If yes, then good for you. If not, then why do you think that is?

[jteezie]

Hi Brian. Welcome.

Firstly, a lot of people would just cash out and spend the money immediately, but you're here and you're seeking help on the best thing to do. Congrats, you're saving yourself from making a big mistake.

The short answer is, don't take the money out!

If you take the money out now, you will not see 14k. You will probably see something like 8-10k if you withdraw. So now you just blew HALF of your mother's hard earned profit/sharing/retirement savings on a trip to Disney World. How does that make you feel?

On the other hand, if you leave it alone, that money will grow to a lot more. Depending on your age and a lot of other factors (most of which are good), at your retirement, you could be looking at (somewhat random but educated guess), $250K.

I'll let somebody else respond with a longer more in depth response about tax implications, retirement savings, personal finance, good money management, ethics, etc, but I wanted to write something before you make a big mistake.

[BrianTheMute]

I was asking if I should take it all out at once because I thought there was a risk of the value decreasing if it just sits in the account. I saw the market value go down by over a hundred dollars, what if it goes down even more?

Also, I'm firm on taking out 5K. I know it's a lot of money, but I've had really hard year, and so has my fiance and I want to treat us just once before I start living smart. I already put a deposit on the trip.

I just wanted more info on how withdraws are handled and what I should know about these things.

[jpg7n16]

I was asking if I should take it all out at once because I thought there was a risk of the value decreasing if it just sits in the account. I saw the market value go down by over a hundred dollars, what if it goes down even more?

Also, I'm firm on taking out 5K. I know it's a lot of money, but I've had really hard year, and so has my fiance and I want to treat us just once before I start living smart. I already put a deposit on the trip.

I just wanted more info on how withdraws are handled and what I should know about these things.

Am I the only one who finds it odd that you seem perfectly fine with spending $5000 on what should easily be a $2-3k trip (excess of $2-3k is lost), but are losing sleep over losing $100 on an investment in your future? The excess on your Disney trip is 20-30x greater than your loss in the market.


$100 loss on a $14k investment in the stock market is nothing. You could easily lose/gain 2-3x that amount on any given day. The point is not to focus on the daily swings, but to focus on a long term picture. Are you too aggressively invested for your risk tolerance?


If you want a withdrawal, just call Fidelity and make a withdrawal. You can even do it online.

It's taxable income to you when you take it out. So if you're in the 25% bracket, you'll owe $1,250 taxes on your withdrawal of $5k. (plus state tax if applicable) No penalty on distributions from an inherited account.

[BrianTheMute]

Am I the only one who finds it odd that you seem perfectly fine with spending $5000 on what should easily be a $2-3k trip (excess of $2-3k is lost), but are losing sleep over losing $100 on an investment in your future? The excess on your Disney trip is 20-30x greater than your loss in the market.

Like I said, I had a hard year and I'm splurging. This is going to be my fiance's first vacation ever, and our one big trip, I wanted to go all out. The most expensive part is the hotel, but I have my heart set on us staying where I stayed as a child.

[bjl584]

I am completely new to this, I know nothing about banking or finance or anything.

In January of this year, my mother passed away. She had breast cancer. Shortly after, I found out she had a "Profit Sharing" account with her former employer. So I took a ride down to corporate and talked to them about it, and they put it in my name and now it's at "Fidelity". After that, it sort of went to the back of my mind, I had a lot going on and was very depressed. Recently, I called Fidelity and set up my account on their website. I saw that I have $14,600.

My question is; what should I do now? I have been planning a trip for my fiance and I, Disney World, first week of February next year. I want to take out $5,000. What is the best way to do that, take out the entire lump sum or just what I need? How do I go about this?

Also, I noticed that in a matter of 2 days since I gained access to the account, it went down by $119. Is this normal? Kind of worries me.

Don't worry about the $119 loss. That is perfectly normal. My accounts have gone down several thousand in the past week.

What does the rest of your financial picture look like? Do you have debt? If so, how much? Do you have other investments? Would the best use of your Mom's inheritence be a vacation, or would that money be better used elsewhere?

[kv968]

If this is a 401k, you should look into rolling it over directly into an "inherited IRA". Regardless of if you do this or not, you may have to start taking the minimum required distributions (MRD) by Dec. 31 of next year. I'm not totally clear on the withdrawl requirements, but you'd have to pay regular income tax on them but not the 10% early withdrawl penalty.

Maybe MonkeyMama or someone more familiar with the MRD can chime in.

[Slug]

What does the rest of your financial picture look like? Do you have debt? If so, how much? Do you have other investments? Would the best use of your Mom's inheritence be a vacation, or would that money be better used elsewhere?

^ Yes, we can't help you if we don't know the whole fiscal picture. Based on what I've read so far, this seems like a very bad idea that could be leveraging your future for short-term self-indulgence. Such habits are generally looked on with scorn in this forum.

[disneysteve]

I'm firm on taking out 5K. I know it's a lot of money, but I've had really hard year

How would you have paid for this trip had you not received this inheritance?

As my user name indicates, I'm a big Disney fan. We go to Disney World every year. This past August, as we've done for the past few years, we went for 2 weeks. For 3 of us (me, my wife and our 15-year-old daughter) spent 2 full weeks in Florida and spent a grand total of about $4,500 for everything including travel, accommodations, food, park admission, souvenirs and more.

Maybe you can afford a luxury 5K vacation, maybe not. We don't know anything about your finances so it is hard to say. Basing it just on the fact that you feel you need this inheritance money to pay for it, we are assuming that you can't really afford it, just so you understand where these comments are coming from.

[riverwed070707]

While I don't necessarily support what the OP is suggesting, if there is one thing that has always been a strong belief around here it's that inheritances are different than regular investments/money earned. The advice is always take some time to think about what you really want to do with that money (which the OP has done) and if he wants to go to have a nostalgic Disney trip, it's his choice to do so. He didn't say he was going to put it on a CC and worry about it later -- he has cash.

OP, it sounds like you're brand new to investing. I highly suggest you do some reading before you start withdrawing your money. As others have mentioned, you will pay income taxes on any disbursements you take, and that money has the potential for some serious growth over the long term. You might consider talking to a financial advisor for the best way to handle it. It won't be free, but it will be worth it if it savesyou money in the long term. GL

[BrianTheMute]

I appreciate all the advise, but I have no intentions on blowing through all the money. I want to take out 5K and save the rest. The remaining 8K will still continue to grow, won't it?

[riverwed070707]

I appreciate all the advise, but I have no intentions on blowing through all the money. I want to take out 5K and save the rest. The remaining 8K will still continue to grow, won't it?

Well yes, but it won't quite be $8k if you need the full $5k for your trip. Expect to pay $1,000-2,000 in income taxes just to take the dispursement. If you don't have that in savings it will need to be accounted for in the amount you withdraw. As I said, its a good idea to speak to a financial advisor, especially if $14k is a lot more money than you currently have.

[bjl584]

I appreciate all the advise, but I have no intentions on blowing through all the money. I want to take out 5K and save the rest. The remaining 8K will still continue to grow, won't it?

It depends on what it is invested in as to whether or not it will continue to grow.

You have received what I would call "found money" or "free money", so if you wish to take $5000 of it for an extravagant vacation, then it will not have any impact on the rest of your finances. Where you are receiving friction from the board is the fact that there may be a better use for that $5000, and that you may be able to go on that vacation for less money.

Would you be willing to post the rest of your financial picture? List your debts and your assets. Then you will get a much clearer answer as to what to do with your Mom's inheritence.

[disneysteve]

I want to take out 5K and save the rest. The remaining 8K will still continue to grow, won't it?

Yes. Just keep in mind, as noted, that this money is taxable. If you take out 5K, you will only net about $3,500. If you actually need 5K, you need to take out about 7K.