What to do with life insurance money?

My condolence for your loss. As you said, you are overwhelmed right now. My one advice to you is this, take a deep breath, put the money in a bank CD for 1 year. Don't make any major decision about money at this time. There's plenty of time to put it in a Roth account if you want to. Eventually, say in a couple of months, when you are ready, talk to 2 or 3 financial advisors before you make the decision as to what to do with your money. Financially you are in a stable place right now. You have a place to live. Don't worry too much about the job.

My condolences on your loss.

Assuming you meet the income limitations (almost certainly) you can put in $6000.

Yes. But the catch up takes the annual limit from 16,500 to 20,500 which is probably much higher than your employer's plan would allow on

It doesn't look like you will be in a very high tax bracket anyway, so the tax deferred compounding may not be worth that much to you. But the downside is similarly small. There is a penalty for withdrawing in the first five years, but it seems like the chances of you having to do that are remote.

I think the best advice I have heard for people in your situation is to do nothing for 60 days. Don't talk about or think about money for that time. Given the situation you have described you have the wherewithal to do that. At least the advice sounded good to me, but I have never been in that situation personally, so pardon me if I am talking through my hat.

The only thing you would need to do sooner than that would be if you wanted to make a contribution to an IRA for the 2008 tax year.

This would suggest that you put the money into a safe place like a money market account, and sit on it for a while. After 6 to

-john-

Doing this may cost you pennies over the next months, but a move made in haste can cost you dearly. John's advice is right on target. We'll all be here for you when you are in a better frame of mind. Joe

During that period of time where you are making no decisions, you might consider reading a couple of books on personal finance, maybe something like "Investing for Dummies." and also learning more from the internet in newsgroups like this one. That might give you a head start when it comes time to make decisions. The best decision could turn out to be: Just leave the money in the accounts where it is now. Good luck.

I think that you already have a superb allocation of capital for your needs and income. You or whoever did it, did a very good job. I would not alter it by too much, and the simplest route to take would be to put the windfall into those Vanguard balanced funds.

How's your health insurance?

The fund is doing OK and should do better when the economy recovers.

You can put in $6,000.

Yes.

Yes.

Don't quit your job. If you're healthy postpone taking SS in your account as long as possible, but check with SS to see what you can get from your husband's account.

When you get to be 65, sign up for Medicare.

-- Ron

I have excellent health insurance. Its' a retiree benefit from a previous employer. This year I pay less than $100/month which includes Rx coverage. When I'm eligible for Medicare they will become my secondary insurers.

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Thank you all so much for the advice.

Jane

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Don't make any major decision about money at

Normally and assuming a person meets the other requirements, a person has until April 15th 2009 to make a contribution for tax year 2008. I advise the OP to check her eligibility and make a $6k contribution to her Roth IRA by April 15th of this year, putting it in a money market fund. Worst case, she can always pull it out without penalty. At some later point, she can decide how she wants to invest the extra $6k in the Roth IRA.

I also wonder whether her husband had a Roth, too. Presumably it is now or will soon be in the OP's name. If her husband did have a Roth, may the OP arrange a contribution for tax year 2008 to her husband's IRA? This occurs to me because, for one thing, I expect she is filing MFJ for 2008.

I would ask this question at misc.taxes.moderated as well.

Suze Orman has a valid suggestion about "grief money". Let it sit in CDs or something something else safe for a year while emotions sort themselves out. Otherwise people have a tendency to invest it wrongly.

Also, if she's sure she will eligible for 2009 as well, she can go ahead and make that contribution at the same time.

Brian

Sorry for your loss... we are going thru the same transition with my wife's parents recently...

There is another thread above - $230k payout - asking the same type of questions.

BTW - Just wondering which specific John Hancock funds, along with which Vanguard funds ?

Also - just found out that the life insurance money transfers tax free, but the money from the parents investments and IRA's does not...

So - we received some checks last year, and then received the 1099-R for taxes.