Dear Dr. Don,
I was the beneficiary of two life insurance policies totaling about $500,000 after the recent death of my wife. My home is paid off. As expenses, I have only property taxes, utilities and homeowners insurance, which can easily be covered by the money from her pension and income from my work.

I’m wondering what I should do with the $500,000 so it can draw the most in interest, with low maintenance costs. Is it possible to manage the money with no annual fees or maintenance costs? The return on certificates of deposit is too low, so I’m not interested in them. Do you have any suggestions?

— Johnny Juncture

Dear Johnny,
First, I’m sorry for your loss. You planned well as a couple if you own your house free and clear. Having life insurance for your wife was part of that sound financial plan.

If you haven’t received the insurance benefits yet, one option is to keep them invested with the insurance company. You’ll owe income taxes on investment income, but the money will be professionally managed and should handily beat the current market yields on CDs.

Total return is determined by investment income and price appreciation, or capital gains. For stocks, investment income is realized by dividend payments. For bonds, investment income is realized through interest payments. Trying to maximize interest payments in fixed-income investments other than CDs could force you to go after a higher yield in the bond market. When interest rates are rising, as we expect, chasing higher yield exposes you to price risk. With rising rates, bond prices go down, reducing total return on your fixed-income investments.

It’s easy enough to minimize fees and expenses on an investment account. But that shouldn’t be your only concern.

Aside from annual account fees and expenses, consider how the investment manager is paid. If investing in mutual funds or exchange-traded funds, you can keep fees low by investing in index funds based on stocks or bonds.

If I were in your shoes, I’d pay for a few hours with a fee-based financial planning professional to review your income, assets and life goals. When working with $500,000, this isn’t a do-it-yourself investing job.

Making sure your late wife’s financial legacy is positive means making sound decisions. Investing should be based on your broader financial situation. That includes considering more than the life insurance payments, as large as they are.

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