How to make today's inheritance pay for future retirement

Q: I recently came into $60,000. I am a single 32-year-old guy. I make about $50,000 a year. No debts, no real expenses ($800 for rent, utilities, and phone). I have about $20,000 for retirement so far. I need to know what to do with my money. My priority is future retirement.
- R.D.C., Via e-mail

A: How that money came into your life makes a difference on how you should deploy it. If you inherited it from an IRA, for instance, Charles Becker, a certified financial planner in White Hall, Ark., says there could be accompanying tax deferrals that you should try to maintain.

Otherwise, Mr. Becker says a lot of your strategy hinges on your personal goals. In your case, it's retirement, and here you have the advantage of getting a 20-plus year head start on funding those golden years.

How about a Roth IRA? Becker suggests. Contributions are not tax-deferred going into this investment, but they are tax-free coming out of it. You can dribble in the maximum amount every year (currently $3,000; and your $50,000 annual wage keeps you under the maximum income cutoff) until you allocate the entire $60,000. If you hurry, you can open a Roth for the 2003 tax year (the deadline is April 15). And you can immediately make your 2004 contribution.

With the new tax-law treatment of dividends, Becker thinks it could be prudent for some of your money to be invested in dividend-paying stocks as part of a taxable investment account. He has two other thoughts:

- Use some of the money ($10,000 to $15,000) as a down payment on a home. This avoids paying rent, builds equity, and could give you a tax break.

- Build an emergency fund - especially if your current savings are less than three months of your living expenses.