I'm 58 and Unexpectedly Inherited $650K: Does This Change My Retirement Timeline?

Question: I’m 58 and unexpectedly inherited $650,000. Does this change my retirement timeline?

Answer: You’re not alone! In the coming years, $105 trillion in wealth is expected to change hands as older Americans pass on inheritances to their loved ones, according to projections from Cerulli. Happily, the timing and sum of an inheritance could give you more flexibility in the context of your retirement plans.

If you’re 58 years old and suddenly learn that you’re in line for a $650,000 inheritance, it could inspire you to rethink your retirement timeline (right after you’re done celebrating, that is). That could mean retiring right away or at an earlier age than you initially expected. But should a sum of that size alter your plans significantly? Let’s dive in.

A sudden inheritance means more options for retirement

When a surprise windfall lands in your lap, it can open up doors, says Patrick Doherty, SVP and financial adviser at Wealth Enhancement Group.

“A $650,000 inheritance is a tremendous gift and may allow you to alter your retirement timeline to some degree,” he says. “More importantly, it could increase your probability of retirement success and reduce the chance of depleting your assets.”

As Doherty explains, that lump sum of money might allow you to do things like delay Social Security for larger monthly checks. For each year you hold off on taking benefits past full retirement age, you get an 8% increase in your monthly checks. That puts less pressure on your savings while potentially boosting your monthly income.

Another thing a $650,000 inheritance could do for you, says Doherty, is allow you to pay off debt, whether it’s student loans, credit cards, or even a lingering mortgage.

“Reducing or eliminating debt can improve your ability to retire on time,” he says.

Plus, if you have a pension, a large inheritance can provide greater flexibility on when and how to take it.

“Pensions usually have a penalty if taken early, so you may be able to avoid those penalties by tapping into your pension benefits later than you may have without the inheritance,” Doherty explains.

Of course, if you’re behind on retirement savings, a $650,000 windfall could be your ticket to catching up and ending your career at a more optimal age. AARP says that 20% of Americans 50 and over have no money set aside for retirement whatsoever. Rather than struggle to make IRA or 401(k) catch-ups, a $650,000 inheritance could be the lump sum that closes the gap between where you are and where you want to be savings-wise.

An inheritance could be the key to preserving your nest egg

It’s unfortunate that many people approach retirement with little or no savings. However, even if you have a larger nest egg, you may be concerned about it running out. A recent Allianz survey, in fact, found that 64% of respondents worry more about running out of money than dying.

A $650,000 inheritance, says Doherty, could be your ticket to making your money last.

“You may be able to decrease your withdrawal rate from your investable assets,” he explains. “For example, before the inheritance, if you needed a 6% to 7% annual withdrawal rate to keep up with expenses, the additional assets could lower this to a more sustainable rate.”

For many years, the 4% rule was the standard when it came to managing portfolio assets in retirement. In recent years, experts have questioned it.

In 2021, Morningstar identified 3.3% as a safe withdrawal rate for retirement. In 2024, it adjusted that number to 3.7%.

You may need to continuously adjust your retirement savings withdrawal rate based on market conditions and your specific investment objectives. But having an extra $650,000 to work with makes it easier to maintain your lifestyle if you need to make changes to ensure that your nest egg isn’t depleted prematurely.

Don’t rush into early retirement

You may be inclined to use a $650,000 inheritance as an opportunity to retire early. At 58, you’re generally too young to take penalty-free withdrawals from an IRA or 401(k), but there’s nothing to stop you from using an inheritance to buy yourself an early workforce exit.

Doherty, however, says it’s important to think carefully before retiring earlier than planned.

“With retirement longevity increasing over the decades, it is not unusual for people to have a 30-plus year retirement,” he says. “Because of this, you need your assets to last longer.”

A large windfall can reduce your chances of running out of money, but an early retirement could erode that security, not to mention leave you with less annual income once you’re no longer employed. That’s why Doherty suggests thinking about what you want life to look like in retirement and considering how your inheritance might lend to that.

Even with a generous inheritance, “It is not always the best course of action to retire early,” Doherty says. “It’s better to plan your retirement and stick to a timeline that will support you and the lifestyle you deserve.”

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