22 Oct A widow and a windfall: how to invest

Q. I’m recently widowed and I received a $500,000 life insurance payout. I don’t need the money for bills and I’m not sure what to do with it. How can I decide?
— On my own

A. We’re sorry to hear about your husband.

You say you don’t need the life insurance payout now, but will you ever need it? Are you simply wealthy beyond your desires or could this possibly make a difference in your life in some way? asks certified financial planner Laura Mattia.

“Assuming that you do not have unlimited resources, the best way to determine how much you need is by prioritizing your goals, both short- and long-term,” Mattia said.

You need to determine how much money you will need to satisfy the goals. Next, determine how much you have — or will have through various income sources — to see if you have enough, Mattia said.

“If you don’t have enough money, there are strategies that you can employ to make certain that you do,” Mattia said. “This is what financial planning is all about.”

Mattia said once you understand the amounts you will need, you can make decisions such as how long you should work, how you should invest, how much risk you should take, whether or not you need a spending plan and possible tax reduction strategies.

“The key here is to understand that a windfall today can help both your short-term and long-term consumption, which can improve your overall financial well-being in your life,” she said. “It makes sense to keep all of this in mind and consider the things that are most important to you before you go out and buy your dream car or spend it on something that may not have long-lasting effects.”

It’s a tall order to fill on your own.

Whenever you have a major life change, you should consider meeting with an objective professional. Even if you’re a do-it-yourselfer, meeting with a third party — someone who doesn’t work on commission but is only paid on a fee basis for his time or advice — can give you insight you may not have on your own.

Jody D’Agostini, a certified financial planner with AXA Advisors/The Falcon Financial Group in Morristown, says your question goes to the heart of financial planning.

She recommends you meet with a certified financial planner to discuss your financial goals and objectives.

“They can help assess what resources you currently have to meet these goals and your ability to save for these,” D’Agostini said. “I would look to invest the money to meet these future goals, based on your ability to withstand risk, which a risk tolerance questionnaire can help with.”

You may have more than one goal with different time horizons for each, she said, and therefore, you many have more than one investment account to accomplish these.

“If you keep the money in cash, in a savings or checking account, you will receive very little in return, generally way less than average inflation, which averages approximately 3 percent annually,” D’Agostini said. “If you want to be able to afford the same goods and services in the future, you need to outpace this 3 percent target.”

If you want some one-on-one help, consider a money makeover with NJMoneyHelp.com.
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This story was first posted in October 2015.