I received $225,000 from the 9/11 Fund. How should I save and invest it?


I will receive a windfall of $225,000, tax-free, in July. The money comes from the World Trade Center Health Program. In the days and weeks following the 9/11 attacks I volunteered at St. Paul’s Chapel by giving out food and drink to the workers, and preparing kits of throat lozenges and socks and other things for them. 

In 2015, I was diagnosed with lung cancer. Fortunately, it was caught early. After having had a lobectomy and undergoing chemo over a three-month period, I moved into the scan phase. All the scans have been negative, including one just a few months ago. I monitor my health annually now with a chest scan. And I’m generally in good health.

‘My plan is to set aside 1/3 for savings, 1/3 for investments and 1/3 for spending. I want to top off my retirement fund to $500,000.’

How best should I use this money? I am 70, single with no dependents, still working part time as a freelance writer and editor, collecting Social Security and a pension of $468 per month. I have no debt and own my apartment, whose maintenance expenses, which includes electricity, are slightly under $1,000/month. 

My total expenses, including maintenance, are between $3,500 and $4,000 a month. I enjoy working, so don’t plan to quit. I also need the extra money. I put 15% of my income in a savings account. I have $477,000 in my retirement account. My plan is to set aside 1/3 for savings, 1/3 for investments and 1/3 for spending. I want to top off my retirement fund to $500,000. 

I plan to travel to Spain in October with friends, make improvements in my apartment, such as buying a leather lounge chair, new window treatments and kitchen cabinets, and perhaps buy new ceiling fans and replace my bathroom flooring. I also love clothes, so I will buy some new items too. How do you think I can best save and invest this money?

Happily Working into my Seventies

Dear Happily,

Enjoy your life. You certainly deserve it.

You have a lot figured out already. Congratulations on (a) regaining your health and (b) securing your financial health. Making your house comfortable is a good investment in itself, while leaving room for you to make adaptations if your mobility is limited in the future. Given that you have paid off your mortgage, and you have saved a considerable amount in your retirement account, while still saving money with your part-time job, you are in a relatively good place.

How much would you need to retire at your age? Fidelity recommends having 10 times your salary by the time you’re 67. So if you earned $65,000 a year, you would need $600,000. But you are buying time — in addition to the extra money to enjoy your semi-retirement — by working part-time as a freelance writer and editor. That said, allow me to state the obvious for you: maintain an emergency fund for any unforeseen expenses, including future medical bills. 

Bryson Roof, financial adviser at Fort Pitt Capital Group in Harrisburg, Pa., agrees that you should focus on building an emergency fund. “For a single household, I like to maintain at least six months of expenses in a high-interest savings account, or higher if anticipating a large transaction in the future, such as a medical procedure,” he says. 

‘Making your house comfortable is smart, while leaving room for you to make adaptations if your mobility is limited in the future.’

“While these funds may not earn a lot of interest, a high-interest savings account isn’t subject to market volatility and is easily accessible for contingencies such as replacing appliances, vehicle repairs, or housing maintenance costs,” he says. 

‘Windfalls provide a unique opportunity to immediately enhance your current financial standing and indulge in a few life luxuries; the challenge is finding the right balance,” Roof adds. “I typically recommend that 50% to 75% of your windfall goes to improving your overall financial health.

About your retirement contributions. “The limit on annual contributions to an IRA will increase to $6,500. The IRA catch‑up contribution limit for individuals age 50 and over is not subject to an annual cost‑of‑living adjustment and remains $1,000,” according to the IRS. “The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan will increase to $7,500.”

“It is hard to say what to invest in without knowing your current risk tolerance. When do you plan to draw from your retirement accounts?” says Cary Carbonaro, senior vice president and director of women and wealth at Advisors Capital Management. “You will have to start withdrawing from your IRA at age 73 if you are working or not. If you are going to save instead of investing, look for a high-yield saving account.”

The best annual percentage yield on a one-year CD for an online bank, meanwhile, is as high as 4.8%, and the highest APY for a high-yield savings account is hovering around 5.1%. The next 6-month rate for Series I bonds will be significantly lower than the previous 6.89% rate. The new rate, which went into effect on May 1, will be 4.3% annualized. I-bonds are U.S. savings bonds. People buy them to protect against inflation.

Michael J. Greenberg, an estate-planning and elder-law attorney based in New York, also has some thoughts. He advises purchasing long-term care insurance, if you qualify, so that you can help ensure that you receive quality care as you get older and have the ability to pay for care at a facility of your choice. (He’s not a financial planner, so as always this does not constitute financial advice, per se, but are merely suggestions as to what you can do with your money.) 

If you don’t have heirs to whom you would like to leave your estate, and you are charitably minded, Greenberg says you could invest in a charitable gift annuity with an institution/charity that you care about. “You would receive an immediate tax benefit, receive an income stream for the remainder of your life to help fund your lifestyle, and any money left in the annuity at your death would go to the institution/charity,” Greenberg says.

Investing in the stock market is a long-term bet. At 70, the general rule of thumb is that you should have no more than 30% of your portfolio in stocks. Have a great time in Spain, try not to pay the retail price on clothes. Wait for the sales — it’s so much more satisfying buying at a discount! And have fun making improvements to your home and your quality of life. Every day, as you know, is a gift. I wish you continued good health, and many adventures ahead.

Yocan email The Moneyist with any financial and ethical questions at [email protected], and follow Quentin Fottrell on Twitter.

Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Readers write to me with all sorts of dilemmas. 

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