

Q: Should I live off the dividends of my inheritance?

A: Sounds like you have a problem many investors wish they had. But just because you're in a good spot financially now, doesn't mean you can afford to make mistakes.


The answer to your question lies in the details. Without knowing your income and expense picture, it's difficult to tell if you need the dividends from your inheritance to make ends meet. If that's the case, then you probably already know the answer to your question. You'll need to live off your dividends lacking any other source of cash.

But if you're working and gathering a decent income, then the dividends thrown off by your inheritance present a good opportunity for you. One strategy would be to use the income from the inheritance to help you fund your retirement. With the boost of the dividends, you should have more than enough to make ends meet. You should have money left over from your earned income from your job that you can use to max out any retirement accounts you can.

Dividends can also be effective tools in keeping a portfolio in balance. If bonds start to fall in your portfolio relative to stocks, you can use the income generated by your inheritance to buy bonds. By using dividends to strategically keep your portfolio in balance, you may be able to avoid having to sell certain high-performing assets in your portfolio if they start becoming too large in your portfolio.