Advertiser disclosure

Terms and Restrictions Apply
Physician on FIRE has partnered with CardRatings for our coverage of credit card products. Physician on FIRE and CardRatings may receive a commission from card issuers. Some or all of the card offers that appear on the website are from advertisers. Compensation may impact on how and where card products appear on the site. POF does not include all card companies or all available card offers. Credit Card Providers determine the underwriting criteria necessary for approval, you should review each Provider’s terms and conditions to determine which card works for you and your personal financial situation.
Editorial Disclosure: Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed, or approved by any of these entities.

What To Do With A Windfall

tahquamenon falls

Our Saturday Selection for today is another Q & A from nearly five years ago, but the answer hasn’t changed. Dr. Jim Dahle fields a question from a reader anticipating a large windfall.

It’s a common question, and the answer often depends on your current financial situation. Obviously, you will have different needs if you are in intern with $300,000 in debt versus a financially independent physician with $3,000,000 to your name.

Questions like this are often posted on the WCI forum. For example,

Read on for The White Coat Investor’s quick take, then read the posts above for crowdsourced answers to similar questions. This post originally appeared on The White Coat Investor.

What To Do With A Windfall



What should I do with a windfall, such as a $500K inheritance from a long lost Uncle or a larger sign-on bonus than expected?




Two of my favorite investing/finance books, The Bogleheads Guide To Investing, and The Only Investment Guide You’ll Ever Need, each have an entire chapter on this subject that are well worth reading.

The Bogleheads Wiki also has a nice page on it.  I prefer to divide windfalls into three categories:



Category 1: Spare Cash


This is money, perhaps $10,000 to $200,000, that you weren’t expecting.  I would just fold this money into my existing financial plan.  For example, I might be paying off student loans, paying down a mortgage, trying to max out retirement accounts, putting money toward the kid’s college, and trying to save up for a new car.

I’d just take this money and divide it among my goals in whatever manner I see fit, trying to minimize interest, decrease taxes, and maximize returns.  Right out of residency, it might all go toward my student loans.

If I were 50, it might go all toward the mortgage.  But more likely, it would be split between the various options.  If you’re not maxing your current retirement accounts, perhaps live off the windfall for a few months to allow you to max them out, essentially converting a taxable account to a tax-protected account.


Category 2: Enough Money To Make You Financially Independent


Consider this an inheritance of $1 Million to $2 Million.  This is enough money to really change your life in a significant way.  The best thing to do upon getting this money is nothing, at least for a period of a few months or a year.  Give it some time and really think about what you want to do with your life.

Ready to retire?  Do so.  Want to get out of medicine and write books?  Now’s your chance.  Still love what you’re doing?  Perhaps put a chunk toward retirement, give some away, and spend some.


Category 3: Ridiculous Money


This is when you get a windfall, such as lottery winnings, which if invested wisely, is more money than you would ever spend given your current lifestyle.  While somewhat similar to category 2, it is different in some important ways.  You now need to engage in some serious estate planning for instance.

You also have the opportunity to make real change in your community and the world, a responsibility not to be taken lightly.  You’ll also have to fend off the hordes who want you to share the money with them!

I really like Andrew Tobias’s recommendations for what to do if you win a million dollars.  Here’s what he says:

1) Go out for a very nice dinner.

2) Put about one year of normal living expenses someplace liquid, like a bank or money market fund.

3) Put roughly equal sums into US Treasury securities maturing in one, two, three, and four years.

4) Put the bulk of the remaining money into stock-index funds, split between domestic and foreign investments.

5) Buy a country place or a bigger house, if you want one — but not so big that the cost of carrying it will in any way strain you.  5a) If you have the inclination and can find a good value, buy a small rental property, too.  It will provide an inflation hedge and a little tax shelter.  5b) Do not buy a boat.

6) Be sure your will is in order.

7) Now, relax and forget the whole thing.  Review it once a year, mainly to roll over your treasury securities as they come due.  Don’t spend any of the investment principal, but enjoy the extra income it throws off.

I find it interesting that these recommendations aren’t really very different from what he recommends you do if you DON’T win a million dollars.  Now, here’s what I recommend you do with any significantly sized windfall.


tahquamenon falls
i couldn’t find a picture of a windfall. close enough.


Ten Rules For Managing A Large Windfall


1) Don’t do anything quickly.  There is no rush.  Especially if the windfall is life insurance proceeds from the death of a loved one.

2) If we’re talking about ridiculous money such as lottery winnings, try to keep anyone you know from finding out you have this money or how much it is.  It is far more likely to ruin your life than to help it.

3) Consider annuitizing the money.  Most lottery winners are broke within just a few years.  If you annuitize it, at least over 20 years or more, you’ve got to screw up 20 separate times to go broke.  That’s a lot harder than screwing up once.

4) Seek out some solid, unbiased advice.  Talk to a CPA for some tax advice and an attorney for some estate planning and asset protection advice.  Pay them a fair, hourly rate.  You may need to update insurance, especially liability insurance.  Investing advice is far less important early on.

5) Pay off your debts.  Don’t take on any more.  Life is no longer about increasing returns, but about minimizing risks.  Having debt generally increases your risks.

6) Put a big chunk of the money into very safe investments — CDs, treasuries, bank accounts, money market funds, etc…  You now have a much lower need to take investment risk than you had prior to this windfall.  Take advantage of that by taking less risk.

7) Spend some money.  But don’t spend it on something that requires significant ongoing expenses.  Take a luxurious trip around the world or buy a new truck or something.  Don’t buy a 10,000 square foot house or a $2 Million yacht.

8) Give some money away….to some real charities, not your brother-in-law and Ray across the street.

9) Write down a plan for how you’re going to deal financially with family and friends.  Tell them what it is, and stick to it.

10) Remember that one of the benefits of having enough money is that you don’t have to maximize it.  You only need a plan that is good enough.  You don’t need to get every last dollar out of your inheritance.  As Tobias says, not having to try [to maximize the money] is one of the luxuries that being a millionaire should bring.



[PoF: For the most part, I agree with the advice Dr. Dahle shares, but I will admit to having a different philosophy than him and Mr. Tobias in regards to the asset allocation of an oversized sum of money.

In the event of a large windfall, i.e. ridiculous money, I think it’s reasonable (but not necessary) to have the amount you need to be FI in a safe portfolio (≥ 50% bonds), but with the remainder, I would be comfortable letting it ride in an aggressive all stock portfolio.

I understand the “if you’ve won the game, why keep playing?” mentality, but if we’re talking about money we don’t need, why not give it the best chance to grow? If we’re going to be charitable, we might as well give our chosen charities (or our kids, or Ray across the street) the opportunity to get the maximum benefit from our dollars someday.]


Annual fee
Intro APR
Regular APR
Recommended credit
Bonus Intro Rewards
bonus_miles_full read more


What do you think?  Have you had a windfall?  What did you do with it?  What advice do you have to someone who comes into $50K, $2 Million, or $100 Million?  Comment below!

Share this post:

14 thoughts on “What To Do With A Windfall”

  1. “I understand the “if you’ve won the game, why keep playing?” mentality, but if we’re talking about money we don’t need, why not give it the best chance to grow? ”


    Having enough and then some, puts you in the perfect position to play for the highest returns. It is no time to pull back.

    You’ve only ever “won the game” if you are thinking only in terms of your own short life. But our wealth has the opportunity to live and grow far beyond that, potentially benefiting descendants and causes for decades, even centuries, beyond. As Ben Franklin showed.

  2. Subscribe to get more great content like this, an awesome spreadsheet, and more!
  3. Timely, I just posted on WCI forum about this. Although not exactly a windfall because I already earned the money and will need it, I received a $500,000 check from selling my house which was paid for. I’m going to buy another house in 2–3 years, and needed a place to put the money until then. I received a lot of answers including CDs, treasuries of ultra short duration, online savings accounts and others. I’ll probably end up putting most of it in vanguard money market and putting some into stock mutual funds in brokerage, and replacing the difference between now and the cost of the future house (700K expected) with future pay checks over the next 2-3 years so that I have some in the market and some in safe money market. I’ve basically won the game and don’t need to play as risky like Bernie says.

  4. Great list of suggestions. I like the suggestion to just add it to your current financial plan. If you have any outstanding debts, pay them off. Go out for a nice meal or take a trip that you otherwise might not have taken. Take the rest of it and distribute it into your asset allocation. After that, conduct business as usual like you never received it.

  5. Okay, I first off I want to start off by saying I agree wholeheartedly with your conclusions in this post, but…I do have to point out some inconsistencies with what you’ve communicated before.

    In a previous conversation you stated that you are not a believer in “taking some money off the table” and you won’t dramatically change your investment strategy as your net worth continues to grow. So what you have said here is “you no longer need to maximize the return on every dollar”, and put big chunks in safe in investments like CD’s and treasuries. This is just contrary to what you’ve said before. So if your net worth went from $3M to $9M, you’d not invest the same way? You would take some chips off the table since you’ve beyond won the game?

    Don’t get me wrong, I’m not disagreeing with that is a very prudent thing to do, its just that I get chastised when I suggest such things on this blog and others. Interested on your take.

    • The bulk of the content, with the exception of the introduction and final comments, were written by the White Coat Investor, including the part on CDs and treasuries.

      WCI & I do think similarly, though. My plan is to have about 5 years worth of expenses in bonds, and the rest in stocks, which is very similar to what was described in the 7 step plan. I also think it would not be unreasonable to be 100% invested in stocks, but it is comforting to know I’ll have a pile of money to draw from without touching stocks that have dropped in the event of a prolonged bear market.


      • Thanks for the reply! So maybe this would be a good topic for you to expand upon in a blog post in the “After I’ve won the game and then some”. So deciphering from what you’ve communicated in the past if your annual burn is roughly $80k you’d keep $400k in bonds and the rest in stocks even once your net worth is 100x your burn? That’s not exactly in line with what item 6) states above or maybe we just have different definitions on what deleveraging and taking risk is…all good problems to have!

  6. We’ve never really had a windfall but may have a moderate size one some day. That being said I’ll likely just fold it in to my existing plans regardless of size. Even if it we’re millions (never happen), I think I’d probably still stick to our chosen asset allocation. Like you pointed out if you don’t need it it doesn’t matter if it’s at risk so it might as well be.

  7. This happened in my husband’s family. (Over $600K inheritance mostly from highly appreciated real estate). The four siblings lost almost all of it in a Ponzi scheme (gas station oil and supplies…ridiculous) convinced into it by the eldest. Horrible. Fueled by greed, ignorance and the lack of due diligence. One background check of the smooth-talking swindler would have prevented it.

  8. Good points/tips on what to do with the windfall. People selling personal businesses are often faced with these decisions… and commonly make poor choices. :-/

    I agree on the asset allocation. I’d build a portfolio just like my current FIRE one and fill is so a Monte Carlo shows 99% success (I’m at about 90% now). I’d then put the rest in stocks.

    Sure, I shouldn’t ever need the money, but the best thing is to let the money make more money. Then use that to bless a ton of other people. Give away a large portion (or all) of the proceeds. Set up some scholarships. Support community outreach center. Etc.

  9. Great post. Even though I don’t have any windfalls coming down the pipe (fingers crossed that I don’t) it is a great exercise to plan ahead for these events.

  10. Incrowd_surveys

    Physicians and pharmacists, Register with Incrowd for the opportunity to earn easy money with quick "microsurveys" tailored to your specialty.

  11. Great answer and great question! I have never really thought about this question before since I don’t have any relatives that are super wealthy and close to the point where they will give me a fortune.

    However, if it happens, I think I’ll max out all of my retirement accounts (i.e. 401k, Roth IRA), pay off our house, give my close family members a small portion of the fortune, and buy another house as a rental. We might change our minds if it ever happens, but I think I’d invest most of the money. 😀

  12. Not that I will have a windfall like this, but I do have some decisions to make regarding insurance monies that may be coming in…so this is a timely article and I appreciate it.

    • That will be sizable windfall. Houses in California are not exactly cheap. I’ll be interested to see how the replacement house compares to the one you lost in the fire.



Leave a Comment


Doctor Loan up to 100% Financing

Related Articles

Subscribe to Physician on FIRE

If you do not see a subscription box above, please navigate here to subscribe.

Join Thousands of Doctors on the Path to FIRE

Get exclusive tips on how to reclaim control of your time and finances.