what to do with a windfall

[Anonymous]

My family just received a wonderful and unexpected windfall of just over $120k, after taxes. Our 401ks are fully funded and we've taken a bit of the money to max out the tax deduction on the kids' 529s. We have a pre-existing emergency fund of 12 months' expenses. No other big plans or purchases on the horizon. So what do we do with the money!?

[Anonymous]

Put it into an indexed fund, CD, or money market and leave it. I'd personally be inclined toward a CD or MM myself - I think the market is overheating somewhat and having diversified investments is good.

[Anonymous]

Backdoor Roths for both of you for 2017 & 2018 -- put the rest in a safe spot (brokerage account or CD like PP said if you have reservations about market timing) for 6 months - a year while you think about your options.

Maybe you'll decide on a great vacation, maybe you'll want to do some home renovations, maybe you'll get used to the balance in that account trending upward and hang on to it. Just don't do anything rash.

[Anonymous]

If the windfall comes from someone, I would take a nice trip (not super splurgy, but nice) and make sure everyone knows... "Grandma sent us to Italy."

The rest would go into savings.

[Anonymous]

Anonymous wrote:My family just received a wonderful and unexpected windfall of just over $120k, after taxes. Our 401ks are fully funded and we've taken a bit of the money to max out the tax deduction on the kids' 529s. We have a pre-existing emergency fund of 12 months' expenses. No other big plans or purchases on the horizon. So what do we do with the money!?

Hold old are the kids and how much have you saved?

[Anonymous]

Following on pp’s questions. What is your intent toward funding college?

[Anonymous]

The money was an unexpected (and much appreciated) bonus after a particularly well publicized success at work. We spent about $200 of it on a nice dinner to celebrate!

Not sure whether to put it in an account that's restricted to education. We have 3 kids --- 2 in kindergarten, 1 in first grade. We have about $60k in 529s, across the 3 kids. We are planning to pay the equivalent of tuition and room & board at our state school, plus half of the difference between that amount and whatever school they ultimately decide to go to.

[Anonymous]

Rebalance your portfolio with the new money.

[Anonymous]

Anonymous wrote:The money was an unexpected (and much appreciated) bonus after a particularly well publicized success at work. We spent about $200 of it on a nice dinner to celebrate!

Not sure whether to put it in an account that's restricted to education. We have 3 kids --- 2 in kindergarten, 1 in first grade. We have about $60k in 529s, across the 3 kids. We are planning to pay the equivalent of tuition and room & board at our state school, plus half of the difference between that amount and whatever school they ultimately decide to go to.

I would probably take the funds and daily cost average it into the three 529 accounts. My kids are older than yours, but we put bonuses in the 529 for a number of years and college is pretty much paid for. It’s nice to have that monkey off our backs.

An alternative is to take 1/2 the money and put it in a post tax investment account and the other half in the 529 accounts.

One last thing. Double check they withheld the right amount of tax money or you will get a nasty surprise next April. You are likely to go up in your tax bracket as a result. And it is not uncommon for companies to tax bonuses at 25% which may not be adequate.

[Anonymous]

With 3 kids you want to fully fund, I’d put it all in 529’s.

[Anonymous]

Anonymous wrote:With 3 kids you want to fully fund, I’d put it all in 529’s.

+1

[Anonymous]

Anonymous wrote:

Anonymous wrote:With 3 kids you want to fully fund, I’d put it all in 529’s.

+1

"You may have read that you can contribute as much as $75,000 to a 529 plan without incurring gift taxes. This is absolutely true, as long as your contribution is at least $15,000 and you spread it over a five-year period. The amount will be pro-rated over the next five years, so if you deposit $50,000 it will be applied as $10,000 each year, leaving you with $5,000 in unused annual exclusion."

https://www.savingforcollege.com/article/how-much-can-you-contribute-to-a-529-plan

I'd divide the money up into thirds and put a third in each 529.

Otherwise, do you have a mortgage? It might not be popular on DCUM, but I would pay off my mortgage, or at least put a lump sum towards the principle and then have the mortgage recast to lower my monthly payments. We want to be mortgage-free before our first DC enters college so that we can cash flow some of the tuition.

[Anonymous]

Anonymous wrote:The money was an unexpected (and much appreciated) bonus after a particularly well publicized success at work. We spent about $200 of it on a nice dinner to celebrate!

Not sure whether to put it in an account that's restricted to education. We have 3 kids --- 2 in kindergarten, 1 in first grade. We have about $60k in 529s, across the 3 kids. We are planning to pay the equivalent of tuition and room & board at our state school, plus half of the difference between that amount and whatever school they ultimately decide to go to.

Then I would put it into an investment account but label it education in your quicken(or whatever you use). I might put $20k into each child’s 529 first that will go a long way towards your goal.

[Anonymous]

Congratulations! What a wonderful reward for your hard work. I'd go on a really nice vacation, and maybe do a small home renovation project or redecorating. The rest in the 529s.

[Anonymous]

Lol, if you put it in the right places, then you can vacation later. I wouldn’t waste any of this on vacations. Do you need to renovate? Great. If not, then that’s just wasted money. I seriously agree with spending it on known expenses (529) or a new investment that makes money. We put our only windfall into a land purchase for a future home. Sold at a significant increase and then reinvested in commercial real estate.