Scott and Pat advise an attorney who has complex money issues but a surprising number of great options.

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Scott: Let's talk to Laura. Laura, you're with Hanson McClain.

Laura: Hi. How are you?

Scott: Hi, Laura.

Laura: I have a question. I have $100,000 sitting in a savings account, and I'm not quite sure what to do with it.

Scott: How did it end up there...where'd it come from?

Laura: I sold my business, and I pulled the cash out of the business.

Pat: Did you pay taxes...

Laura: I did.

Pat: Okay.

Laura: Tremendously.

Pat: Okay. Do you have any debt? The way she said that, oh don't remind me.

Laura: I do have a little bit of debt. It's just from selling my house to buy a new house.

Pat: Okay.

Laura: I should have that paid off by the end of this year.

Pat: Okay, so that's all done. And then after...

Scott: Are you...

Pat: ...it's paid off, you'll have no more debt.

Laura: Well, just the mortgage. We got married and then we bought a house.

Pat: How much do you owe on the home?

Laura: We owe...It's a V.A. loan. It's about $500,000.

Pat: Okay.

Laura: And this is my separate money. He has his own money, as well.

Scott: Got it, got it.

Pat: Yes, that was my next question.

Scott: How old are you, Laura?

Laura: I am 51.

Scott: And are you receiving any additional payments from the sale of the business? Will you have some in the future?

Laura: I am actually. I am using that to do the offset for the upside down house, but then after December that should be all taken care of. Then, I'll have a few more payments, probably about $42,000 or so of payments for the business.

Scott: And are you working...

Laura: But, I was going to use...Go ahead.

Scott: Are you working now?

Laura: Yeah. I came back to state government. This year I have 19 years in the CalPERS pension. He's got a CalPERS pension. He's going to retire in November.

Pat: Did you at any point in time cash out any of your pension in the previous years?

Laura: No.

Pat: Okay, thank you. I'm glad you did not.

Laura: No.

Scott: By the way, she could've bought some back.

Pat: You could've bought some back.

Scott: We're trying to look at...

Laura: Well, and I did take...I took a lot of money out of my 401(k) to do the Tier 2 to Tier 1 conversion.

Pat: Oh, beautiful.

Scott: Yeah, smart.

Laura: That was...

Pat: How much do you earn at your job, your new job?

Laura: I am at $11,000 a month.

Male: Okay. And, your family income is...you're making $132,000 a year, and your family income is approximately?

Scott: What are you contributing to your retirement plan through work?

Laura: I'm doing...Well, whatever the standard is, 7 percent or whatever, and then I put additional money into a 401(k).

Pat: Here's what I'd like you to do. Do you have both a 401(k) and a 457 available to you?

Laura: Yeah, I do both.

Pat: You do both?

Laura: Yeah.

Scott: How much on an annual basis do you think dollar wise is going in?

Laura: When I just started that, when I came back to the government. I have, what is it, $800 a month and I split them.

Pat: Okay.

Scott: Okay.

Pat: All right. We'd like you to put in $50,000 a year.

Scott: Yeah. This is where we want to see the $100,000 invested. When did you sell your business? What year?

Laura: Last year.

Scott: Okay, 2015.

Laura: Yes.

Pat: Okay. But...

Scott: And when are you receiving additional money from your sale of your business? This year?

Pat: Did you receive any in 2016?

Laura: It's quarterly.

Pat: Okay, perfect.

Laura: Yes, I did.

Pat: This works beautifully.

Scott: And that's taxable to you, at least some of it, right?

Laura: It is taxable, but I was hoping to play with some of it.

Pat: Well, you're going to play with it. You're going to play.

Scott: What do you mean play?

Laura: Okay.

Scott: Like spend it?

Laura: Like, you know, go travel and fun things.

Pat: That's fine. Yeah, you can do that as well.

Laura: Okay.

Pat: Whatever amount of money you want to save, what we want you to do is to...

Scott: Don't give it to some broker. Don't invest it in the bank. Don't buy some great mutual fund. Don't buy an ETF. Don't buy an annuity. Don't buy anything.

Pat: Don't buy a life insurance policy. Put it into your 401(k) and your 457.

Scott: Yeah.

Laura: Okay.

Pat: And you're going to put about $50,000 in. You're going to say “Hey, Hanson McClain, what do I live on?” What you're going to do is you're going to spend down that money in the bank.

Scott: The difference between your paycheck.

Pat: The difference between your paycheck.

Scott: I would maximize this year.

Pat: Yeah.

Scott: Get it down. Maximize those things this year.

Pat: So, you want to get to human resources first thing Monday morning.

Scott: You're in a high tax bracket right now.

Pat: First thing Monday morning, you want to put...

Laura: Yeah, we are. It's painful.

Pat: Yeah, of course, and this will help you. What we're going to do is first thing Monday morning you're going to put 100 percent or whatever's allowed into both the 401(k) and 457. It's going to reduce your paycheck by $2,000 or $3,000 a month.

Laura: Oh, okay.

Pat: I want you to take that $2,000 or $3,000 a month out of your savings account every month and put it in your checking account like it was a paycheck. It's a way for us to actually take this money sitting in the bank and make it tax deferred. You get a tax deduction...

Scott: You get the deduction.

Pat: ...and it grows tax deferred.

Scott: The one caveat I must say is the tax savings is a community asset, but this is...That's the one caveat with this. If you were my sister, this is exactly what I'd be telling you.

Pat: Yeah, and we'd say make sure the marriage is strong or get a prenuptial agreement. So, appreciate the call.

Scott: With a tax savings...

Laura: I'm a divorce attorney, so I'm good.

Pat: Perfect.