Opinionated and Honest Advice on How to Best Use a Windfall of $225,000
Receiving a windfall of $225,000, tax-free, can be a game-changer for anyone, but especially if you are a 70-year-old, single, freelance writer and editor, still working part-time, collecting Social Security, and a pension. This reader shared that they volunteered after the 9/11 attacks and later were diagnosed with lung cancer, underwent treatment, and recently had negative scans. They have no debt, own their apartment, and their expenses are between $3,500 and $4,000 a month. They plan to spend a third of the windfall, save a third, and invest a third. They want to top off their retirement account to $500,000, travel to Spain, make some home improvements, and buy some new clothes.
Here’s my opinionated and honest advice on how to best use this windfall:
1. Enjoy your life: This reader deserves to enjoy their life. Working part-time, which allows them to enjoy their work and earn some extra money, is a great option. Making home improvements to make their home comfortable and adapting to their future mobility needs is a good investment.
2. Emergency fund: Having an emergency fund to cover any unforeseen expenses, including future medical bills, should be a priority.
3. Build a financial health fund: Bryson Roof, a financial adviser, recommends building a fund of at least six months of expenses in a high-interest savings account to cover large transactions such as medical procedures and replacing appliances, vehicle repairs or housing maintenance costs.
4. Invest in your better financial health: While windfalls allow you to indulge in luxuries, invest in your overall financial health. Consider investing between 50% to 75% of your windfall to boost your financial standing, create a retirement fund, and cover future expenses.
5. Retirement contributions: make sure you’re keeping up with the IRS’ annual contribution limits to retirement accounts. Consider your current risk tolerance and withdrawal timeline when deciding how to invest your funds.
Related Facts:
– Fidelity recommends having ten times your salary by the time you’re 67.
– The limit on annual contributions to an IRA will increase to $6,500, and the catch-up contribution limit for individuals age 50 and over remains $1,000.
– The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan will increase to $7,500.
– The best annual percentage yield on a one-year CD for an online bank is as high as 4.8%, and the highest APY for a high-yield savings account is hovering around 5.1%.
– The next six-month rate for Series I bonds will be lower than the previous period, at 3.54%.
Key Takeaway:
Receiving a windfall of $225,000 brings many opportunities to improve your financial health and enjoy your life. Prioritize an emergency fund, create a financial buffer to cover large expenses, and invest in your financial health and retirement planning. It’s always wise to consult with a financial adviser before making any major financial decisions.
In conclusion,
This reader is an inspiration for all of us. They volunteered at St. Paul’s Chapel after the 9/11 attacks and bravely faced lung cancer. They are now enjoying their life, working part-time and planning a comfortable and well-deserved future. Invest in your financial health, make smart decisions, and enjoy your life.
