Best tax-efficient strategy
John, a 45-year-old professional, recently inherited $100,000. He has no immediate need for the funds and wants to invest the money to help secure his retirement, which he plans for at age 65. John has moderate risk tolerance and currently contributes the maximum allowable amount to his 401(k) each year. He wants a diversified investment approach and is looking for a tax-efficient strategy.
Which of the following options is likely the best strategy for John?
- Invest the inheritance in a high-yield savings account for safety and liquidity.
- Allocate the funds to a mix of tax-efficient index funds in a taxable brokerage account.
- Use the entire inheritance to pay down his mortgage early.
- Invest in high-risk, high-return speculative stocks to maximize growth potential.
