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I recently received a life insurance death benefit check, and I'm looking for some advice. My first question is: is this money taxable at the federal or state (PA) level? The best answer I've found online so far is that only the interest it earned ($19) is taxable. However, the info I've found is quite dated.

Probably because the law hasn't changed since the Earth cooled. The death benefit is not taxable at the Federal level. See IRS Publication 525. I doubt that it's taxable in PA, but you'll have to check the state instructions. Check in the "Additions to Federal AGI" section.

Beyond that, I'm looking for advice on what kind of account to put it in. Although I'm aggressive with my 401k, I don't want to risk this money in the stock market. I know interest rates are terrible on savings accounts, money market accounts and CDs right now. Are there other options?

Here's my take, which is 100% personal opinion. This is found money with a sentimental twist, at least for me. When I've been in this situation I've done something with the money that I think the person whose death triggered it would approve of. My best friend and I had talked for years about a Transatlantic crossing on a ship. When he died and left me some money, that's what I did, raising more than one glass to his memory in the process.

That's me. From a strictly practical standpoint, this money is no different from any other. Invest it in accordance with your asset allocation.

Phil
Rule Your Retirement Home Fool
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