Bensman Risk Management, Inc.

Insurable Interests

Bensman Risk Management, Inc.
2333 Waukegan Road Suite 275
Bannockburn, IL 60015
847-572-0800 Phone
847-572-0502 Fax

Insurable Interests may offer general financial, insurance, tax and business ideas. However, due to the ever-changing tax laws as well as the complexity of the financial industry, you should seek professional advice before implementing any of the ideas contained in this newsletter. The Bensman Group, Bensman Associates Ltd., Bensman Risk Management, Inc. or Schemata, L.L.C. assumes no liability whatsoever in connection with the use of this newsletter.

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Securities offered through Kestra Investment Services, LLC (Kestra IS), Member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS). Kestra IS and Kestra AS are not affiliated with The Bensman Group, Bensman Associates Ltd., Bensman Risk Management, Inc. or Schemata, L.L.C.

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Insurable Interests

Vol. 3, Issue 3November 2007


Managing Windfalls

You sold your house for a large profit, or you inherited a bundle from your Aunt Maude, and now you have the enviable job of deciding what to do with your windfall. Do you buy a new car? Invest in gold futures? Or do you just keep on traveling the investment path you have already set?

The answer depends on many things, of course, including the amount and source of the windfall and your overall financial situation. But there are some basic guidelines.

Start by determining the tax consequences of your windfall. How much are you going to owe Uncle Sam, and is there any way to reduce that amount?

The next step is to look at your personal financial situation. If your windfall came from the sale of your home, do you need to buy another home? Do you have any significant debt, and what interest rate are you paying on that debt? If you are paying 15 percent interest on credit card debt, for example, paying off that debt is equivalent to getting a 15 percent return on an investment – and that is very good return.

Probably, though, you will want to invest a good part of your windfall. Your first concern should be ensuring that your retirement is fully funded. Assuming you have already developed a retirement funding plan, you can incorporate the new money into that plan. Talk with your financial adviser about whether you want to simply put more into your existing investments or whether you should consider some new investing approaches.

What are your other financial priorities? For example, do you want to set up or add to college funds for your children? Talk to your financial adviser about setting up a 529 plan or other tax-advantaged college savings plan.

Most tax-advantaged plans, such as retirement or college savings, have one major disadvantage: You usually cannot use that money for anything else without paying a significant penalty. So you might want to keep some of your money in investments that are more easily accessible.

If your windfall is very big and most of your immediate needs are already covered, you might want to consider ways to ensure that part of your windfall will be passed on to your children and grandchildren. You can fund a 529 college savings plan for a grandchild, for example, or set up trust funds for your heirs. Your adviser or attorney can help you decide how best to accomplish these goals.

Finally, treat yourself. While it makes bad financial sense to blow the whole thing on an expensive car or an emerald necklace, there is nothing wrong with treating yourself to nice dinner or a weekend getaway.

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