Widow's dilemma: Defer life-insurance payout or pay off mortgage?

DEAR HARRY: My husband just died at 54. We have two children, one on her own, the other a senior at a good college. I teach in one of our choice suburban districts where my salary is just under six figures. I have a good pension, a Roth IRA, a very good medical plan and savings of about $65,000. I'm thankful that college tuitions are behind me. My husband had a $250,000 life-insurance policy, which is my primary concern. The company is offering to hold the proceeds at interest for two years at their "most-favored rate" of 4 percent. I am wondering whether to do this or pay off my $160,000 mortgage. I had the good fortune of refinancing recently, so my rate is a nifty 3.6 percent. What now?

WHAT HARRY SAYS: It's a toss-up. Do you have the emotional need to be out of debt? If you were closer to retirement, I would recommend that you pay the mortgage, but now, I lean the other way. Get Fidelity, Rowe Price and Vanguard to suggest their best-performing index funds for you to consider. Select a total of five for investing. You also might choose to go a middle way: Use half the proceeds of the insurance to get the mortgage down by $100,000 and use the rest for the funds. Good luck!


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