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what to do with 900k

Started by chela1, December 06, 2018, 05:47:56 AM

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chela1

So, according to my financial advisor, I am financially secure - my future is set. But I just receive a windfall of $900,000 and I am not sure what to do with it. Yes, I know I can donate to charity, set up my children etc. but where should I invest or what should I do with the bulk of the money? Any advise will be appreciated.

Cheezus

Retire.

Really, you aren't giving us any information to go on other than you have $900k.  What did your financial advisor say?  Pay off mortgage?  Fund childrens college?  Put it in a Vanguard total stock market fund?  Take distributions because of your age?  Who the heck knows what you should do with it.

Sam

Quote from: chela1 on December 06, 2018, 05:47:56 AM
So, according to my financial advisor, I am financially secure - my future is set. But I just receive a windfall of $900,000 and I am not sure what to do with it. Yes, I know I can donate to charity, set up my children etc. but where should I invest or what should I do with the bulk of the money? Any advise will be appreciated.

More background please about overall net worth, goals, age, dependents, etc and better advice can be given.

With any windfall, I do recommend it's best to SIT ON IT for 3-6 months before doing a thing. Let the initial feeling of getting the windfall dissipate before deciding on anything.
Regards,

Sam

chela1

Ok - more background
Net worth 500k  goal retirement   age 69    4 dependents. My financial advisor would like to see me add the 900k to the current portfolio, but is that the best? Should I be looking at other investments? and if so what?

Cheezus

#4
How much is your financial advisor charging you?  I think you may want to start looking in to that, too.  You obviously don't trust your advisor enough to take their advice, so what's the point of having them take, probably, a substantial sum of your retirement away from you in return?  Financial advisors generally provide little to no value and if they are taking 1%... how much do you have invested with them?  That could be a very substantial sum that is diminishing your retirement. 

You are 69 years old.  You should be retiring.  Between your other investments, social security income, medicare, and now this...  This becomes a lot easier considering your age.  Would an extra $36,000/year make that easier for you or change your plans?  $3,000/mo is a lot of extra money to travel and do whatever you would like to do. If so, I would consider investing the money, maybe using a service like Betterment or just putting it almost all in to a Vanguard fund, either VOO or VTSAX.  Then pulling 4% yearly, split in to 12 disbursements so you get a monthly income off it.  At 4%, the money should not only outlast you, but could very possibly grow and you would be able to leave a substantial sum to your children.  You could take 4% of that money, without investing a penny, and it'll last you 25 years.  But I would invest it, not worrying about ups and downs in the market, don't even pay attention to it.  Just take 4% yearly whether the market is up or down... don't change the strategy, no matter what.  Don't even pay attention to the market fluctuations no matter how drastic.  It always goes up eventually, which is the long game you are playing.

Enjoy your retirement.

AdamJane

#5
If your state is financially strong then I would buy 900K of individual municipal bonds of min 4% coupon around PAR with different call and mature dates to create a bond ladder. This way, portions of your money is available at different dates when they are called/matures. 900K at 4% will generate 36K tax free.

We have over 2M of NY individual muni bonds and it generated 89K tax free this year, 2018. Don't buy any muni bond funds. We have no money in the stock market.

If you are interested in muni bonds then read my comments in the following post
https://www.financialsamurai.com/after-tax-investment-amounts-by-age-to-retire-early/

Adam

Cheezus

The returns of investing the funds in stocks instead of muni's could be substantial and also hedges against inflation.

AdamJane

Quote from: Cheezus on December 10, 2018, 05:48:15 PM
The returns of investing the funds in stocks instead of muni's could be substantial and also hedges against inflation.

This is true over time but it depends on chela1's risk level. At age 69, does he have enough time to recover if his stock portfolio takes a hit? He also has 4 dependents and does he want to take the risk with stocks?

Since we are ultra financially conservative, I would preserve principle at his age.

To my younger family members that are many decades from retirement, I recommended investing in the Vanguard S&P 500 fund and just let it grow.

I lost money during the dot.com days and I no longer invest in the stock market. Our munis, pensions and 401K interest generate passive income over 3x current expenses. We are age 54 and 53 and At this stage of our lives, we don't need to take any risks. My wife is already retired and I will retire at 55.

Adam

Cheezus

#8
Quote from: AdamJane on December 10, 2018, 08:54:30 PM
Quote from: Cheezus on December 10, 2018, 05:48:15 PM
The returns of investing the funds in stocks instead of muni's could be substantial and also hedges against inflation.

This is true over time but it depends on chela1's risk level. At age 69, does he have enough time to recover if his stock portfolio takes a hit? He also has 4 dependents and does he want to take the risk with stocks?

Since we are ultra financially conservative, I would preserve principle at his age.

To my younger family members that are many decades from retirement, I recommended investing in the Vanguard S&P 500 fund and just let it grow.

I lost money during the dot.com days and I no longer invest in the stock market. Our munis, pensions and 401K interest generate passive income over 3x current expenses. We are age 54 and 53 and At this stage of our lives, we don't need to take any risks. My wife is already retired and I will retire at 55.

Adam

You only lose money if you sell.  The idea is to put the money in the market in something like a Vanguard 500 account or a total stock market account.  Obviously not individual stocks or anything risky. This gives you broad coverage.  Then pull 3% - 4% per year whether it's up or down.  Unless the US economy crumbles completely, in which case we have other problems, then it's unlikely you would ever lose money.  This is basically Warren Buffetts suggestion as well.  Put 90% in a Vanguard 500 fund. Even in the worst downturns, the market always recovers and grows.  And you would still just pull your 3% - 4% no problem - but you are returning 7%+ which allows your distributions to grow and cover inflation.

Either suggestion is fine.  But you aren't really "taking risks" by investing in the stock market and taking a small distribution.  The math is clear.

25 - 40 years of munis is a LOT of inflation you need to think about.  You aren't hedging against inflation at all.