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[quote=Anonymous]You don't want to invest in bonds in taxable if you can possibly help it. You've got a few options, once you decide on a bond allocation.

1) Use your lump sum to augment living expenses while temporarily hiking up your 401k contributions. This is a good choice if you're not already maxing to employer match. Invest according to allocation- 50/50 split between a total bond index and TIPS is usually a good bet. Replace TIPS with stable value if you have a fund returning 2.5% or greater.

1a) If you already have a good amount in your 401k, allocated according to your risk tolerance, you can swap stocks within the plan for bonds and then use your lump sum to replace those stocks in a taxable account. Your overall allocation percentages won't change.

2) If you do not already have a roth IRA you can hold your bond allocation in that. Yearly contribution limits may not give you enough room right away, depending on the size of the lump sum. If you already have a healthy IRA you can apply the principles of 1a.

3) If you must hold the whole shebang in taxable,  I would split your bond allocation between I Bonds, a well rated tax free muni fund, and long term CDs (in that order of preference). If that's too much fuss for you, a Vanguard tax balanced fund will accomplish much the same thing, only with slightly more bond risk and the inability to harvest tax losses.[/quote]

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