What to do with an unexpected sum of money

The Ticker

July 19, 2000|By JULIUS WESTHEIMER

If you receive a windfall - inheritance, divorce settlement, severance package, insurance payout - what should you do with the money?

Fortune, July 24, says, in an article titled "A Lesson in Lump Sums": "Go slowly. This is an emotional time, the worst time to make major decisions. Park the money temporarily in a safe, liquid place such as a money fund or a bank account.

"Pay down debt, particularly high-interest, nondeductible debt. Then make a budget so you don't rack up big bills again.

"Treat yourself. Consider trading up to a bigger house, buying a new car, enrolling the kids in better schools, taking a vacation.

"Invest prudently and preserve your new capital. Build a portfolio of diversified stocks and bonds. Why take unnecessary risks? You've already won the lottery."

NO PENALTY: "If you leave your money in your employer's 401(k) plan, you can begin to draw on the money as early as age 55 without the 10 percent early-withdrawal penalty - even if you are working somewhere else. If you roll the money into an IRA, the penalty does not disappear until you're 59 1/2 years old." (Kiplinger's Personal Finance, August)

WALL STREET WATCH: "We are staying the course with our `all-purpose guideline' of selling all or part of fully valued positions and buying undervalued stocks." (The Prudent Speculator in this week's Barron's)

"Volatility will likely persist. The 1990-2000 bull market is still alive, but its move to new highs could be its final top." (Prudent Market Decisions)

"Know what you own and know why you own it." (Peter Lynch, investment guru)

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