Received an inheritance now how to plan for future retirement?

1)what is your mortgage interest rate? if it is low (sub 4%), then don't necessarily use your cash to pay it off now. You can potentially earn more w/the liquid cash than the loan is costing you...as mortgage interest is deductible. If the loan IS higher interest, consider using a little of the cash to get into a lower interest loan. Rates are still very low. Use someone else's cheap money and keep your cash for investing. Go to bankrate.com and look at the mortgage calculators: put in all of your current variables (loan balance, rate, etc) and look at the detailed amortization schedule. It will show you exactly how much interest you are paying over time. Re-run the calculator using today's mortgage rates and compare the two. You can see how much you'd save in interest with a re-fi and how much the loan is costing you. It might not be as much as you think.

2)ditto for the car loan. Look at the interest rate...if it is .9% or other ridiculously low rate, then keep your cash and pay the loan off over time. Is the vehicle worth more than the loan balance? This might be a good time to sell it and get another vehicle financed at a super-low rate. I bought a new car on a .9% rate; it will cost me a couple hundred bucks in interest to pay it off over 36 months. I'd much rather have that chunk of cash in my pocket, working for me, and spend the lousy few hundy in interest rather than paying off the car.

3)start an individual retirement account. Since you have NO retirement funds, I'd start with a traditional IRA. The traditional IRA is deductible on your income taxes (up to $5,500 depending on your adjusted gross income). The IRA contribution deduction can be claimed whether or not you itemize. Right now, you can still make an IRA contribution for 2014 (up until April 15). So right now, you can open an IRA and fund it with up to $5,500 for 2014 and $5,500 for '15. In one fell swoop, you can dump $11,000 into retirement. You may be able to put more away, depending on your employment status (since you're not covered by an employer plan) and income.

Pick a low-cost provider, put everything into a life-cycle portfolio (this is a mix of funds selected for your age). Or, if that's still too much risk, go for an index fund. You've got years to let it ride, so don't be too conservative. CD rates are worse than awful right now...given that you're not going to need the retirement money any time soon, I'd accept a little risk.

4)start an emergency cash reserve of 6-12 months living expenses. stick it in an online only bank account so you aren't tempted to chip away at it. you won't make much money on it, but that's not the point. it is your ready cash cushion.

If you still have a pile of cash left over, go back to #1. It MIGHT be a good idea to pay off the car or house after you've fully funded retirement for this year & last and piled up a cash reserve.

I would recommend finding a good financial planner and meeting with them. The person you received this inheritance from, I'm guessing they were pretty wealthy, were they working with an advisor?

Am I correct in assuming that the $2K/month is your current debt service?

I would feel uncomfortable giving you any more advice without sitting down with you and doing an analysis of your goals and risk tolerance. This is a once in a lifetime event so you want to get it right.

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Am I correct in assuming that the $2K/month is your current debt service?

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Correct that is roughly what the current home and auto note run. At the moment our company does not offer any type of retirement. The way i was looking at it the money isn't making 4% sitting there so paying off the house and paying myself back is attractive.

i was in a similar situation to you a few years ago. at the end of 2011, i received a pretty decent inheritance. first thing i did was meet with a financial advisor. all the advice here is very sound, don't pay off low interest debt. the money can work for you, especially since retirement is so far off, you can withstand and outlast any dips in the market.

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be sure to get it right and talk to at least 2 professionals and decide whats best for you.

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Such good advice. One is not enough....you are admittedly a novice, and you won't have enough experience to differentiate the slick salesman from the legit advisor. So so so many slick salesmen who are willing to sell you things you don't need, or complicated things that are wasting your money.

Also, get a few books on personal finance from the public library and start learning. With money comes a responsibility to understand it.

I know a lot of people who have set themselves up very well by investing all their inheritance money and pretending they didn't have it until retirement.

It is natural to dip into the increased disposable income and expand your budget when you pay off mortgages/auto loans and free up income.

You need to do some reading first-I recommend:
Common sense of investing
Become your own banker

Quit peddling the Dave Ramsey BS. This guy is 34 and has NO retirement investments, he needs to speak with a professional and get on course here first and foremost. His interest rates are low enough that he shouldn't be paying them early in the first place. He'd be crippling his retirement income if he used all the cash to off his house.

do a ton of reading on the forums

bogleheads.org

financial advisors are out... DIY is in.