Congratulations, you inherited the money. Now what?

And that assumes the recipients are doing the right thing – not splurging, or even worse, getting ripped off. Unfortunately, half of all inherited money is spent or lost on investments, according to a study.

Although paying off all forms of debt might seem like the most sensible decision, you might want to think twice. First, simply paying off high-interest debt like credit card bills without understanding why you spent more than your income won’t really stop you from starting over. Studies of lottery winners and heirs show little change in their wealth over time because they don’t really get smarter about finances; they splurge or make reckless investments.

Also, the best thing for heirs to do when paying off a debt is to invest the money they’ve paid each month. Again, research shows that most people aren’t disciplined enough to do this.

What about student debt, or mortgage debt, which has surged in recent months? Both were probably investments that had to be paid off on current consumption and come with relatively low interest rates – unless there is an unforeseen situation, it is best to stick to the plan.

Some financial advisers say you shouldn’t pay off debt if the interest rate on the debt is lower than what you can get in a relatively safe, well-diversified, low-fee stock or bond index fund. Hanging on to debt is good advice, but I think the most compelling argument is that paying it off won’t help avoid getting into debt again and spending the inheritance.

It’s more important to focus on retirement because most are way behind in saving and there’s not much you can do once you’re there. Most savers have far less than the industry recommends – at age 55 it should be seven times annual income, four times at age 45 and twice at age 35. Another reason to spend inheritance money on retirement is that many employers offer employees a match, which amounts to free money, and there are significant tax breaks when you put money away. money in retirement accounts.

Remember to consider your vulnerability and the landmines that abound when receiving an inheritance. A retired schoolteacher I know recently inherited $750,000 after the sudden death of her father. As she deals with the emotional anguish of losing a parent, she must deal with the constant bombardment by brokers and others looking to “help” her. The best advice is to avoid making big investments, especially right away.

If the amount of money is large, consider hiring a paid financial advisor. A professional can help you plan for the future and avoid the habits that led to debt.

And finally, don’t spread the windfall – even telling friends about inheritance won’t help build long-term wealth. Research shows that when beneficiaries make bequests public, they spend more on themselves and others. So keep quiet, hang on to your debts, and save for the future.

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Teresa Ghilarducci is Schwartz Professor of Economics at the New School for Social Research. She is a co-author of “Rescuing Retirement” and a board member of the Economic Policy Institute.

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