A lump-sum payment, and long-range plans

Q: I had stock in a company that didn't want to stay public, so it sent me a lump-sum payment of $50,000. I am 26, and I think I would like to buy property in three to five years. I feel that I need a growth fund. How should I do the investing? By myself, through a broker, or by investing online? Any thoughts?

R.S., Lowell, Mass.

A: "Determine how much you will need to buy your property in the next three years, and set that money aside in a conservative bond mutual fund," says David Bendix, who heads up Bendix Financial Group, Garden City, N.Y. Major fund companies offer short-term and all-purpose general bond funds.

For the remainder of your $50,000, set aside an emergency fund, perhaps in a money-market account, as well as education funds, if you have children (or plan to), says Mr. Bendix. Long-range monies could go into growth mutual-fund products, either through a broker or a fund company. If you go through a broker, you will typically pay a management fee ranging from 1 to 3 percent of assets. If you go through a no-load fund company, you will pay management expenses of 1 to 2 percent.

Q: I stand to inherit money that will put me in a high tax bracket in the future. I am curious about whether I should invest the full allotment into a 403(b) plan, or invest in after-tax investments to avoid future tax burdens.

Rob, via e-mail

A: "You can't put an inheritance into your company's tax-deferred 403(b) retirement plan. You can only put current earnings into the plan," Bendix says. His suggestion: If you meet earnings guidelines, put $3,000 into a Roth IRA, set aside some money in an emergency fund, and put the remainder of the inheritance into a variable annuity. Earnings will be sheltered against taxes until withdrawn.:

Q: My son is getting married, and his fiancée has many financial obligations, including IRS debts. Will her obligations become my son's, too?

Name withheld, via e-mail

A: Not if your son avoids entangling his financial accounts with hers, says Gary Schatsky, an attorney and fee-only financial planner in New York. "If they file a joint tax return, any refund could be siphoned off by the IRS to satisfy her tax debts," Mr. Schatsky says. His solution: File taxes separately. Keep all financial accounts separate until her debts are retired.

About these ads
Sponsored Content by LockerDome

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...

Save for later

Save
Cancel

Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items

OK

Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items

OK

Failed to save

You have already saved this item.

View Saved Items

OK