Have $100,000 burning a hole in your bank account? It may sound like an unlikely pipe dream, but windfalls happen: You sell a larger home to downsize; you find a buyer for your small business; a relative leaves you an inheritance. Or maybe you’ve simply squirreled away a lot of money over the years and are ready to put that savings to work.

Investing smaller windfalls, like a four-figure tax refund or five-figure check from selling a midlife-crisis car, deserve thoughtful consideration. But with a six-figure payday, the effects of the investing decisions you make are amplified — for better (investment growth, future financial freedom) and worse (taking a tax hit, giving up gains to financial fees).

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For the purposes of this article, we’ll assume you’re already standing on solid financial ground: You have no revolving high-interest (credit card) debt, you’ve got an adequate cash cushion to cover any emergency expenses, you’re able to easily cover your monthly expenses and have any money you need for nearer-term expenses (home improvements, tuition, family cruises) set aside and not invested in the stock market.

Now, let’s get to work on getting that $100,000 invested.

1. Avoid triggering an unnecessary tax bill

In most instances we’d say that you shouldn’t rush into a decision with the money. But there are a few situations that may require immediate action in order to avoid unwanted attention from the IRS:

  • Liquidating a 401(k) when leaving a job: You have just 60 days after an employer cuts you a check for money saved in a workplace retirement account to get that money into another retirement account, either a Roth IRA or a traditional IRA. Otherwise you’ll trigger a pretty hefty tax bill consisting of income taxes (the IRS treats the money as earned income for the year) and a 10% early withdrawal penalty if you’re not yet eligible to tap your retirement savings.
    » MORE: How to roll over a 401(k) to an IRA
  • Inheriting an IRA: You may also have to take action on a tight deadline if you’ve inherited an IRA. The rules about what beneficiaries can and cannot do and how much time they have to do it without incurring penalties or triggering extra taxes depends on your relationship to the deceased (surviving spouses have different options than other beneficiaries), whether or not the former owner had started taking distributions before they died, and what type of IRA it is (Roth or traditional).
    » MORE: IRS’ rules on inherited IRAs

2. Put as much money as possible where the IRS can’t get to it

Don’t even think about the Cayman Islands. There are legal ways to dodge the IRS, at least for a while, and one of the best is to stuff as much of that $100,000 as possible into tax-favored retirement savings accounts.

Employer-sponsored retirement plans, like a 401(k) or 403(b), and individual retirement accounts, like Roth or traditional IRAs, can help shield tens of thousands of your dollars from taxes. And with $100,000 at your disposal, you can afford to max out both a 401(k) and an IRA if you’re eligible. If you’re under age 50, that comes to $23,500 a year ($18,000 for the 401(k) and up to $5,500 for an IRA). It’s $30,500 for those age 50 and older when you add in the catch-up contributions (an extra $6,000 in a 401(k) and $1,000 for an IRA).

» MORE: Roth vs. traditional IRAs  |  Retirement plans for self-employed  |  IRAs vs. 401(k)s

3. Pay yourself even more

Even after maxing out your workplace plan and IRA, you’ve still got roughly $70,000 of that $100,000 to work with. Perhaps you’re thinking, “With this kind of money we can pay cash for the kids’ educations so they can graduate without any student loan debt!”

Before you go down that road, consider this: In the Maslow’s hierarchy of needs for finances, “pay yourself first” forms the foundation of the triangle. Therefore, in the “save for retirement versus save for my child’s college tuition” standoff, your needs come first.

The kids can get scholarships, loans or work their way through school. Retirees can’t get loans or scholarships to cover rising health care costs and any emergency expenses that arise. And Social Security — the closest thing to financial aid for retirement — may not cover all your expenses. Consider that in 2016 the average monthly benefit for a retired couple who both receive Social Security benefits was $2,212, according to the Social Security Administration.

Investing the remaining $70,000 windfall and earning a 6% average annual return would mean an extra $300,000 in 25 years — the kind of padding that makes it less likely you’ll run out of money and have to move in with the kids.

» MORE: Use a retirement calculator to see how extra dollars affect when you can retire and how much monthly income you’ll have in the future.

4. Don’t let fees drain your fortune

Remember back before you were a one-hundred-thousandaire and you were vigilant about every little extra investing cost? Keep it up. Now there’s even more of your money at stake.

Investing fees are like a distant relative you helped out that one time who now hounds you for bigger and bigger handouts. Not only is every dollar you hand over money you’ll never recoup, but it’s also one less dollar you have to invest for your future. And a dollar that’s not invested has no chance to compound and grow with all your other dollars.

Even the smallest extra fee can take a huge bite out of your investment returns. We calculated that a millennial investor paying just 1% more in investment fees than her peer sacrifices nearly $600,000 in returns over time. The fix? Investing in low-cost mutual funds and exchange-traded funds as opposed to paying the higher price for actively managed funds.

» MORE: Understanding investment fees: What you should pay and how to ferret them out

5. Resist the urge to make a major strategy shift

Don’t scrap your existing asset allocation plan (that carefully crafted pie chart indicating how much of your money is in cash, bonds, stocks, real estate, etc.) in order to accommodate new money. Unless you’re in the midst of a major life change, such as retirement or liquidating assets for an upcoming expense, changes to the current makeup of your portfolio and your risk tolerance profile are probably unnecessary.

But with this new money in hand, now’s a good time to review where you are:

  • Take an asset allocation snapshot. Look at the overall mix of investments you have in all of your accounts, including current and old 401(k)s, IRAs, taxable brokerage accounts, bank accounts, the sock drawer, and so on.
  • Identify areas where your portfolio may have become unbalanced. Position sizes morph over time as investments grow and contract. Rebalancing your portfolio by using some of the windfall money to restore the underrepresented assets will reduce your exposure to risk from lack of diversification.
  • Consider asset location, too. Like asset allocation, asset location is about tax diversification. With your 401(k) and in IRAs, you’ve got the tax-deferred angle covered. Because you’re not taxed on investment growth, it makes sense to hold investments that generate taxable income (such as corporate bond funds, high-growth stocks or mutual funds that buy and sell a lot) in these accounts. Even better if you can hold them in Roth versions of these accounts, where withdrawals in retirement are tax-free. In a taxable account, such as a regular brokerage account, growth and interest are subject to yearly income taxes, so investments that are slow, steady growers (large-cap stocks or index funds and index ETFs) belong here.

» MORE: Four ways to rebalance your portfolio

6. Find the right kind of help

Finding the right help depends on the type of advice you want, how much guidance you want, and how hands-on or hands-off you want to be:

  • Full-service help: Hiring a financial advisor (we recommend fee-only) is going to be the costliest option. But you get someone to make investment recommendations and manage your windfall as well as review and address other financial planning tasks on your list.
    » MORE: How to find and evaluate a financial advisor
  • Do-it-yourself: If you’re the hands-on type (or want to learn how to buy stocks), it’s cheaper — and easier — than ever to create, research and manage your own portfolio.
    » MORE: Best online brokers  |  Best brokers for beginners  |  Best IRA account providers
  • Automated or hybrid help: Robo-advisors offer automated portfolio management for less than you’d pay a human to do the same thing. The price you pay is composed of investment fees (each fund or ETF’s expense ratio) and whatever management fees the robo-advisor charges. If the low-cost/low-hassle setup of a robo-managed investment account sounds good but you crave the human touch, too, Vanguard and Personal Capital offer both in one package. What you get for your money is access to financial advisors for your investing questions as well as the ability to customize the investment mix in your portfolio.
    » MORE: Compare the best robo-advisors and see whether a hybrid service or fully automated one is right for you.

Dayana Yochim is a staff writer at NerdWallet, a personal finance website: Email: dyochim@nerdwallet.com. Twitter: @DayanaYochim.

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