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 Earnings will be sheltered against taxes until withdrawn.: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.