Determining goal for windfall will aid in deciding how to invest it

If the windfall will be needed for a short-term goal, keep the money in a savings account or CD. For longer-term goals such as retirement, invest most of the money in stocks.

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Dear Liz: Recently my mother passed away. My brother and I were fortunate enough to inherit a substantial amount of money from her life insurance. My brother and I do not want to spend this money and have placed the funds in brokerage accounts. My question is this: Because of the often-volatile market, is there a better way to invest this money? Should we take this money out of the market and save some of it in a bank?

Answer: Your first task with a windfall is to determine your goal (or goals) for the money. Goals usually come with a time frame, and that time frame helps dictate how you should invest.

Let's say you want to use this money as a down payment on a house in the next few years. That relatively short horizon means you don't have time to recover from market downturns. So you should keep the money in an accessible, low-risk account such as an FDIC-insured savings account or certificate of deposit. These accounts are also a good bet for emergency funds, since you could need access to the money at any time.

If you're saving for a longer-term goal, such as retirement, you probably have decades ahead of you to ride out the stock market's ups and downs and to benefit from the long-term growth only equities can provide. When saving for retirement, you'll want the majority of your accounts to be invested in stocks. Even in retirement, many financial planners recommend their clients keep 40% to 50% of their portfolio in stocks to provide growth and offset the eroding power of inflation.

You can't put inheritance money directly into a workplace retirement plan such as a 401(k), but you can step up your contributions and use cash from the inheritance to replace the missing income. In this instance, you would invest the retirement plan contributions mostly into stocks, but keep the inheritance itself in a savings account. The employee contribution limit for 401(k), 403(b), most 457 plans and the federal government's Thrift Savings Plan is $17,500 in 2013, plus you can contribute an additional $5,500 if you're 50 or older.

You can put an additional $5,500 into an IRA or Roth IRA this year, plus a "catch up" contribution of an extra $1,000 if you're 50 or over.

If you need help deciding what to do with this money, invest a few hundred dollars in a consultation with a fee-only financial planner. You can get referrals to such planners who charge by the hour from the Garrett Planning Network at Another resource is the National Assn. of Personal Financial Advisors at, which represents planners who charge retainer fees or fees for the assets they invest and manage for you.

Social Security benefits for a divorced spouse after remarriage

Dear Liz: You've been writing about Social Security and how people can qualify for benefits based on a spouse's or ex-spouse's earnings record. Please add that given the parameters you already cite, a divorced spouse may remarry after the age of 60 and collect Social Security from the ex. However, if a person is collecting a public pension, any Social Security, whether one's own or that of the former spouse, will be offset, possibly to the extent that one cannot collect anything from that former spouse. It is important to have all of the information.

Answer: It is indeed — but you're incorrect about the availability of divorced spouse benefits after remarriage.

Only spouses or ex-spouses who are receiving survivors' benefits may remarry after 60 without worrying about losing their checks. If the primary earner is still alive, the rules are different. Here's what Social Security has to say on its website: "Generally, we cannot pay benefits if the divorced spouse remarries someone other than the former spouse, unless the latter marriage ends (whether by death, divorce or annulment), or the marriage is to a person entitled to certain types of Social Security auxiliary or survivor's benefits."

People who are eligible for pensions from the government or from a job not covered by Social Security should learn about the offsets that affect their benefit. The Social Security website has information about these offsets at Information also is available by calling 1-800-772-1213.


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