I Received $225,000 from the 9/11 Compensation Fund After Being Diagnosed with Lung Cancer. How Should I Save and Invest It?
Recently, a reader wrote to me, asking for advice on how to manage a windfall of $225,000 from the World Trade Center Health Program, which she is due to receive in July. As a freelancer writer and editor, collecting social security and a pension of $468 monthly, she has no debt and owns her apartment. However, she wants to use the money to top off her retirement fund. This raises the question: how can she save and invest the money wisely?
Build Your Emergency Fund and Invest in Your Overall Financial Health
Firstly, it is vital to build an emergency fund to cater for unforeseen expenses, including future medical bills. Bryson Roof, a financial adviser at Fort Pitt Capital Group, based in Harrisburg, Pennsylvania, said keeping at least six months of your expenses in a high-interest savings account is essential. The remaining half of your windfall could be split between investing in your overall financial health and indulging in a few life luxuries.
Diversify Your Investments and Know Your Risk Tolerance
While it is challenging to invest without knowing your risk tolerance, it is wise to diversify your investments further. That way, you are not overly exposed to the stock market, and your retirement savings are secured. When do you plan to draw from your retirement accounts? If you are going to save instead of investing, look for a high-yield saving account, which provides good interest rates.
Focus on the Most Critical Priorities
More importantly, it is essential to focus on the most critical priorities. For example, you do not need to buy up a lot of things at once, such as a new leather lounge chair, new kitchen cabinets, and new ceiling fans. Instead, prioritize spending on what you need the most. For instance, why not replace your bathroom flooring first before anything else?
According to research by Fidelity, by age 67, one should have accumulated 10 times their salary. If you earned $65,000 annually, you would need to have $600,000 to retire.
The limit on annual contributions to individual retirement accounts (IRAs) will increase to $6,500, while the catch-up contribution limit for individuals aged 50 and over remains $1,000.
The IRA 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.
In summary, the reader should pay attention to building an emergency fund, investing in her overall financial health, and diversifying her investment portfolio. She should also focus on her most critical priorities and avoid overspending on luxuries.
In conclusion, the reader should seek professional advice to ensure that she makes informed decisions about her finances. With her strong financial position and preferred semi-retirement work, the reader is in an excellent position to have an enjoyable retirement.