Proper Place For A Severance Package

Kevin is about to come into a huge chunk of change as a severance package. He's not sure how to use it or where to put it.

QUESTION: Kevin is about to retire tomorrow and will get a $70,000 severance package. He has $23,000 in debt. Should he roll the money into an IRA and pay it off over time? Also, he knows he’ll have to roll over his 401k. Is the IRA the best option there?

ANSWER: I’m almost positive you can’t. I’m pretty sure severance pay counts as income, not retirement. You’ll have to take the check, and then when it comes to paying off debt and you are making a living doing something else and don’t need this money to eat, then start your total money makeover. You’ve got some good rollover options in the open market. You’ve got about 8,000 to choose from as opposed to the 12 or so that your employer offers you. Sit down with a broker who has the heart of a teacher. The trick is not to have someone tell you what to do. The trick is them telling you what they would do and why. You’re not looking for a babysitter, you’re loking for a coach .