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).
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.