Massive Windfall For 35 Year Old Guy

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FIREGuy88
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Massive Windfall For 35 Year Old Guy

Post by FIREGuy88 »

Hey all,

Long time lurker. I am in an extremely lucky situation where I've come into a large windfall the last few months via my startup being acquired, and I'm planning my investment strategy for the rest of my life. I've been a Vanguard / Bogleheads follower for many years now (first introduced via Ramit Sethi and I Will Teach You To Be Rich). I'm a 35 year old guy living in Boston.

I have all of my retirement accounts in a Vanguard target date fund, but am investing in an index via brokerage for the first time ever. My basic plan is to follow the three-fund lazy portfolio, minus the bonds.

Here's my current situation:

Cash: $100k
Roth IRA: $11k (VFIFX)
SEP IRA: $222k (VFIFX)
Vanguard Money Market: $7,000,000

It's kind of crazy to write out that number, but yeah, that's where I'm at (after tax).

My plan is a modified version of the three-fund lazy portfolio, minus the bonds, so $6,000,000 in just two funds:

70% VTSMX
30% VTIAX

And keep $1,000,000 in cash, for, I'm not sure what yet.

Is this crazy? What do you think?
jebmke
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Re: Massive Windfall For 35 Year Old Guy

Post by jebmke »

not a cash fan myself unless I have a known short term liability.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
Nicolas
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Re: Massive Windfall For 35 Year Old Guy

Post by Nicolas »

Do you owe tax on that windfall? You’d better plan for that.
OnTrack2020
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Re: Massive Windfall For 35 Year Old Guy

Post by OnTrack2020 »

Am assuming you will have to pay taxes on this windfall??
keanoz
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Re: Massive Windfall For 35 Year Old Guy

Post by keanoz »

I think the plan sounds good after making sure all of the taxes are cleared.
MightBeRight_MightBe
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Re: Massive Windfall For 35 Year Old Guy

Post by MightBeRight_MightBe »

Congrats!

The investment plan sounds good. Keep it simple and fewer moving parts to tempt you to "manage" it.

If you have any charitable intent/plans for the rest of your life, perhaps consider funding a DAF since you're most likely in the top tax bracket if this deal pays out in a single year.

Again, congrats. Enjoy being FI.
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MJS
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Re: Massive Windfall For 35 Year Old Guy

Post by MJS »

Consider putting 5-10 years of annual expenses in fixed funds: muni bonds, treasury bills, savings bonds, cash...

5-10 years of expenses in fixed will mean you don't have to sell equities during a crash. Muni bonds will reduce your income tax.

Enjoy exploring your future!
Ipsa scientia potestas est. Bacon F.
nix4me
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Re: Massive Windfall For 35 Year Old Guy

Post by nix4me »

I agree no bonds. Cash is fine. Dry powder. The $6mil is gonna multiply quick!
Topic Author
FIREGuy88
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Re: Massive Windfall For 35 Year Old Guy

Post by FIREGuy88 »

jebmke wrote: Mon Feb 08, 2021 7:48 pm not a cash fan myself unless I have a known short term liability.
Yes, I'm not planning on holding cash. The windfall just happened. Just confirming what I should do before I pull the trigger.
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FIREGuy88
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Re: Massive Windfall For 35 Year Old Guy

Post by FIREGuy88 »

Nicolas wrote: Mon Feb 08, 2021 7:50 pm Do you owe tax on that windfall? You’d better plan for that.
Yes, the amounts stated are after tax. It's crazy.
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FIREGuy88
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Re: Massive Windfall For 35 Year Old Guy

Post by FIREGuy88 »

OnTrack2020 wrote: Mon Feb 08, 2021 7:51 pm Am assuming you will have to pay taxes on this windfall??
As mentioned, tax is already paid here, yes.
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FIREGuy88
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Re: Massive Windfall For 35 Year Old Guy

Post by FIREGuy88 »

keanoz wrote: Mon Feb 08, 2021 7:55 pm I think the plan sounds good after making sure all of the taxes are cleared.
So this seems okay? I'm basically forgoing all bonds. Is that stupid?
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FIREGuy88
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Re: Massive Windfall For 35 Year Old Guy

Post by FIREGuy88 »

MJS wrote: Mon Feb 08, 2021 8:26 pm Consider putting 5-10 years of annual expenses in fixed funds: muni bonds, treasury bills, savings bonds, cash...

5-10 years of expenses in fixed will mean you don't have to sell equities during a crash. Muni bonds will reduce your income tax.

Enjoy exploring your future!
This is an interesting take, but I was thinking about just keeping it simple and doing $1 mil in cash.
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FIREGuy88
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Re: Massive Windfall For 35 Year Old Guy

Post by FIREGuy88 »

nix4me wrote: Mon Feb 08, 2021 8:29 pm I agree no bonds. Cash is fine. Dry powder. The $6mil is gonna multiply quick!
Cool, And 70/30 US/International seems ok?
Cycle
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Re: Massive Windfall For 35 Year Old Guy

Post by Cycle »

I'd probably do the etf version of those funds for portability, the er on the int fund is probably lower too.

You can open a 529 in your name and transfer it to someone in the future, like your child or anyone.

I'm glad we're back on a topic of what int/us allocation to have. IMO behaviorally it's easier to stick with market weight 55us,45int
Never look back unless you are planning to go that way
3funder
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Re: Massive Windfall For 35 Year Old Guy

Post by 3funder »

That's an enormous windfall.

I recommend the following:

$4,500,000 in VTSAX

$2,250,000 in VTIAX

$100,000 in intermediate-term US bonds

$100,000 in short-term US bonds

$50,000 in checking/savings
Last edited by 3funder on Mon Feb 08, 2021 8:46 pm, edited 2 times in total.
Global stocks, US bonds, and time.
Topic Author
FIREGuy88
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Re: Massive Windfall For 35 Year Old Guy

Post by FIREGuy88 »

Cycle wrote: Mon Feb 08, 2021 8:35 pm I'd probably do the etf version of those funds for portability, the er on the int fund is probably lower too.
No, the expense ratios on the ETF is higher (VGTSX at .17%) than this one (VTIAX at .11%). And I don't understand why portability matters.
Cycle wrote: Mon Feb 08, 2021 8:35 pm You can open a 529 in your name and transfer it to someone in the future, like your child or anyone.
I have a 529 setup for future children, yes, but thats a small piece of the puzzle.
Cycle wrote: Mon Feb 08, 2021 8:35 pm I'm glad we're back on a topic of what int/us allocation to have. IMO behaviorally it's easier to stick with market weight 55us,45int
Why is 55/45 easier than 70/30? Not sure I understand.
Topic Author
FIREGuy88
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Re: Massive Windfall For 35 Year Old Guy

Post by FIREGuy88 »

3funder wrote: Mon Feb 08, 2021 8:41 pm That's an enormous windfall.

Without knowing anything about your financial situation prior to receiving the windfall, I recommend the following:

$3,375,000 in VTSAX

$3,375,000 in VTIAX

$100,000 in intermediate-term US bonds

$100,000 short-term US bonds

$50,000 cash
Thanks. Any reason for the 50/50 split?
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Watty
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Re: Massive Windfall For 35 Year Old Guy

Post by Watty »

There is a wiki on managing a windfall and one of the main points is to park the money someplace that is very safe for six months or longer while you come up with a plan and get used to having the money. Right not making any avoidable mistakes is more important than being fast.

https://www.bogleheads.org/wiki/Managing_a_windfall
FIREGuy88 wrote: Mon Feb 08, 2021 7:46 pm I have all of my retirement accounts in a Vanguard target date fund, but am investing in an index via brokerage for the first time ever. My basic plan is to follow the three-fund lazy portfolio, minus the bonds.

Here's my current situation:

Cash: $100k
Roth IRA: $11k (VFIFX)
SEP IRA: $222k (VFIFX)
Vanguard Money Market: $7,000,000

It's kind of crazy to write out that number, but yeah, that's where I'm at (after tax).

My plan is a modified version of the three-fund lazy portfolio, minus the bonds, so $6,000,000 in just two funds:

70% VTSMX
30% VTIAX

And keep $1,000,000 in cash, for, I'm not sure what yet.

Is this crazy? What do you think?
One of the things to consider when deciding about having an aggressive asset allocation is if you have a need to be very aggressive. From what you have said you do not seem to have any need to take a lot of additional risk.

I would not have phrased it that way but yes that is pretty crazy.

You would not want to use them because they are not tax efficient but the Life Strategy funds lay out what they consider to be an appropriate asset allocation for several strategies. With no need to be real agressive what they call Moderate Growth could be a good fit for you and they use 60% stocks and 40% bonds.

https://investor.vanguard.com/mutual-fu ... trategy/#/

A couple of things that you did not include in your post which would be important are;
1) What is your housing situation and plans for the future? If you do not have a paid off house then it would be good to have a seperate house fund to either pay off your house or to buy a house someday. There is no hurry to buy a house but it would be good to have a separate fund so that you will be able to buy a house in five or ten years or whenever you decide to buy a house.

2) Are your going to retire or are you still working. If you are still working then when do you plan on retiring? This will impact how you will invest the money.
Patrick584
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Re: Massive Windfall For 35 Year Old Guy

Post by Patrick584 »

With financial independence, the biggest risks to your wellness are behavioral. This isn’t what you are asking about, but it’s probably something you have to figure out. By your screen name, it sounds like you are going from being focused on a business to unemployed? Being good at being unemployed requires you to be proactive. I don’t think many Bogleheads understand the fire experience, and the mmm forum has a more relevant fire community.
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arcticpineapplecorp.
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Re: Massive Windfall For 35 Year Old Guy

Post by arcticpineapplecorp. »

FIREGuy88 wrote: Mon Feb 08, 2021 8:43 pm
3funder wrote: Mon Feb 08, 2021 8:41 pm That's an enormous windfall.

Without knowing anything about your financial situation prior to receiving the windfall, I recommend the following:

$3,375,000 in VTSAX

$3,375,000 in VTIAX

$100,000 in intermediate-term US bonds

$100,000 short-term US bonds

$50,000 cash
Thanks. Any reason for the 50/50 split?
closest to market cap weighting.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
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FIREGuy88
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Re: Massive Windfall For 35 Year Old Guy

Post by FIREGuy88 »

Watty wrote: Mon Feb 08, 2021 8:48 pm There is a wiki on managing a windfall and one of the main points is to park the money someplace that is very safe for six months or longer while you come up with a plan and get used to having the money. Right not making any avoidable mistakes is more important than being fast.

https://www.bogleheads.org/wiki/Managing_a_windfall
Super helpful, thank you.
Watty wrote: Mon Feb 08, 2021 8:48 pm
I would not have phrased it that way but yes that is pretty crazy.

You would not want to use them because they are not tax efficient but the Life Strategy funds lay out what they consider to be an appropriate asset allocation for several strategies. With no need to be real agressive what they call Moderate Growth could be a good fit for you and they use 60% stocks and 40% bonds.

https://investor.vanguard.com/mutual-fu ... trategy/#/

A couple of things that you did not include in your post which would be important are;
1) What is your housing situation and plans for the future? If you do not have a paid off house then it would be good to have a seperate house fund to either pay off your house or to buy a house someday. There is no hurry to buy a house but it would be good to have a separate fund so that you will be able to buy a house in five or ten years or whenever you decide to buy a house.

2) Are your going to retire or are you still working. If you are still working then when do you plan on retiring? This will impact how you will invest the money.
This all makes sense. Perhaps I don't need to be this aggressive. I'm not going to stop working, I make about $250k a year, and my expenses are less than $100k per year. I don't own a home or a car.
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FIREGuy88
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Re: Massive Windfall For 35 Year Old Guy

Post by FIREGuy88 »

Patrick584 wrote: Mon Feb 08, 2021 8:53 pm With financial independence, the biggest risks to your wellness are behavioral. This isn’t what you are asking about, but it’s probably something you have to figure out. By your screen name, it sounds like you are going from being focused on a business to unemployed? Being good at being unemployed requires you to be proactive. I don’t think many Bogleheads understand the fire experience, and the mmm forum has a more relevant fire community.
Ah sorry, I shouldn't have made that my username. I don't know much about FIRE. I made that my username because I thought all of you guys were FIRE guys :)

I'm not going to stop working, no. So far very little about my life has changed. I'm going to pay off my dad's mortgage, but that's it.
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FIREGuy88
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Re: Massive Windfall For 35 Year Old Guy

Post by FIREGuy88 »

arcticpineapplecorp. wrote: Mon Feb 08, 2021 8:54 pm closest to market cap weighting.
It's interesting to me that Bogle himself seemed fairly anti-international. Wasn't his recommended weighting like 10%?
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arcticpineapplecorp.
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Re: Massive Windfall For 35 Year Old Guy

Post by arcticpineapplecorp. »

FIREGuy88 wrote: Mon Feb 08, 2021 8:31 pm
keanoz wrote: Mon Feb 08, 2021 7:55 pm I think the plan sounds good after making sure all of the taxes are cleared.
So this seems okay? I'm basically forgoing all bonds. Is that stupid?
two ways to think about it:
1. you've won the game stop playing (no need to take risk)
2. because you can afford to take risk, you can take risk (i.e., if you lost half your money, if you'd still be ok, that risk wouldn't matter)

either of these are valid.

how much risk you take is based on your need, ability and willingness to take risk.

You might not have a need to take risk even though you have the willingness and ability.
You might have the ability to take risk, but not the willingness or need.

so on. it's an individual decision. read more here:

https://www.cbsnews.com/news/asset-allo ... -you-take/

https://www.cbsnews.com/news/asset-allo ... tolerance/

https://www.cbsnews.com/news/asset-allo ... -you-need/

https://www.cbsnews.com/news/asset-allo ... ing-goals/
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cowbman
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Re: Massive Windfall For 35 Year Old Guy

Post by cowbman »

FIREGuy88 wrote: Mon Feb 08, 2021 8:55 pm
Watty wrote: Mon Feb 08, 2021 8:48 pm There is a wiki on managing a windfall and one of the main points is to park the money someplace that is very safe for six months or longer while you come up with a plan and get used to having the money. Right not making any avoidable mistakes is more important than being fast.

https://www.bogleheads.org/wiki/Managing_a_windfall
Super helpful, thank you.
Watty wrote: Mon Feb 08, 2021 8:48 pm
I would not have phrased it that way but yes that is pretty crazy.

You would not want to use them because they are not tax efficient but the Life Strategy funds lay out what they consider to be an appropriate asset allocation for several strategies. With no need to be real agressive what they call Moderate Growth could be a good fit for you and they use 60% stocks and 40% bonds.

https://investor.vanguard.com/mutual-fu ... trategy/#/

A couple of things that you did not include in your post which would be important are;
1) What is your housing situation and plans for the future? If you do not have a paid off house then it would be good to have a seperate house fund to either pay off your house or to buy a house someday. There is no hurry to buy a house but it would be good to have a separate fund so that you will be able to buy a house in five or ten years or whenever you decide to buy a house.

2) Are your going to retire or are you still working. If you are still working then when do you plan on retiring? This will impact how you will invest the money.
This all makes sense. Perhaps I don't need to be this aggressive. I'm not going to stop working, I make about $250k a year, and my expenses are less than $100k per year. I don't own a home or a car.
Maybe now you want a home/car though...
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arcticpineapplecorp.
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Re: Massive Windfall For 35 Year Old Guy

Post by arcticpineapplecorp. »

FIREGuy88 wrote: Mon Feb 08, 2021 8:57 pm
arcticpineapplecorp. wrote: Mon Feb 08, 2021 8:54 pm closest to market cap weighting.
It's interesting to me that Bogle himself seemed fairly anti-international. Wasn't his recommended weighting like 10%?
i believe he said it wasn't necessary but if you felt so inclined, no more than 20%.

I do more than 20% because my target date retirement fund forces me too.

but i also do 30% in my Roth IRA because a vanguard white paper suggested that years ago.

now that same whitepaper (though updated) recommends 40%:

https://www.vanguard.com/pdf/ISGGEB.pdf

see page 5.

seems 40% gives the most volatility reduction.

in Jack's day international wasn't easy to come by and it was more expensive. Still is relative to US but not as bad as it once was. I like the additional diversification especially considering we don't just buy American.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
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Re: Massive Windfall For 35 Year Old Guy

Post by GreendaleCC »

FIREGuy88 wrote: Mon Feb 08, 2021 8:43 pm
Cycle wrote: Mon Feb 08, 2021 8:35 pm I'd probably do the etf version of those funds for portability, the er on the int fund is probably lower too.
No, the expense ratios on the ETF is higher (VGTSX at .17%) than this one (VTIAX at .11%). And I don't understand why portability matters.
The ETF for this fund is VXUS (0.08% ER).
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calmaniac
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Re: Massive Windfall For 35 Year Old Guy

Post by calmaniac »

FIREGuy88 wrote: Mon Feb 08, 2021 8:31 pm So this seems okay? I'm basically forgoing all bonds. Is that stupid?
I did not see you mention whether you will continue to work (and have income) or whether you will RE. If the latter, it will serve you well to have at a minimum ≈5-10% in bonds.

As important as these financial decisions is planning how to live your future life. In our society there are countless ways to urinate away your windfall and your life. This is a good time to take stock of what is of importance to you and how to want to live your life.

Congrats!
"Pretired", working 20 h/wk. AA 75/25: 30% TSM, 19% value (VFVA/AVUV), 18% Int'l LC, 8% emerging, 25% GFund/VBTLX. Military pension ≈60% of expenses. Pension+SS@age 70 ≈100% of expenses.
Cycle
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Re: Massive Windfall For 35 Year Old Guy

Post by Cycle »

FIREGuy88 wrote: Mon Feb 08, 2021 8:43 pm
Cycle wrote: Mon Feb 08, 2021 8:35 pm I'd probably do the etf version of those funds for portability, the er on the int fund is probably lower too.
No, the expense ratios on the ETF is higher (VGTSX at .17%) than this one (VTIAX at .11%). And I don't understand why portability matters.
Cycle wrote: Mon Feb 08, 2021 8:35 pm You can open a 529 in your name and transfer it to someone in the future, like your child or anyone.
I have a 529 setup for future children, yes, but thats a small piece of the puzzle.
Cycle wrote: Mon Feb 08, 2021 8:35 pm I'm glad we're back on a topic of what int/us allocation to have. IMO behaviorally it's easier to stick with market weight 55us,45int
Why is 55/45 easier than 70/30? Not sure I understand.
The two I was thinking of were:
VTI is .03 er
VXUS is .08 er

One could pay for your grandkids private gradeschool, highschool, college as well in that 529, it's not a small piece if you put a lot in it. I've seen this mentioned elsewhere, I personally just have enough in mine for my kids, but I fully funded it when they were newborns or even before they were born so the tax free gains will be substantial.

Why is market weight behaviorally easier? For me, I view tilts as a bet. I'd be betting the us market is going to outperform int and the market hasn't priced that in. Since my tilt is performance chasing, I could see myself switching my tilt if the performance shifted to another market (like vxus). I just stick to the market weight and don't make a tilt one way or the other. I've managed to stick with this non-tilt for six years now, even with vxus being quite terrible. That's my logic and it has so far resulted in lower performance than the 70/30 you are planning. You'd be fine with whatever you choose.
Never look back unless you are planning to go that way
dboeger1
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Re: Massive Windfall For 35 Year Old Guy

Post by dboeger1 »

it sounds like you have enough money and the basics of investing down to the point that you'll be set for life. Where I would differ is the $1m in cash. That seems like a fairly large and arbitrary amount. It sounds like you didn't have anywhere near that in net worth before let alone an emergency fund, and now you want to hold so much cash? Cash tends to be a pretty poor long term holding, so unless you have plans to spend the money any time soon or have some other reason to raise your emergency fund that high such as upcoming medical costs or charitable giving, I think it makes more sense to reevaluate your emergency fund given your windfall and potentially increased living expenses going forward (assuming you want to increase them now, which is certainly not mandatory), and maybe take a small chunk of money just to splurge on a reward for yourself. There's a decent chance you could buy yourself a nice new car or something, invest the remainder, and still come out ahead in the long term over holding so much cash.
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Re: Massive Windfall For 35 Year Old Guy

Post by KyleAAA »

Buy bonds instead of cash. Otherwise, the allocation is fine albeit very aggressive.
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Re: Massive Windfall For 35 Year Old Guy

Post by aj76er »

I would probably do global cap weight (or close to it) in VXUS and VTI (or mutual fund equivalents) and you never really need to rebalance (other than small drift due to dividends). $1m in cash sounds fine.

With $6m that is close to $120k in annual dividends today, and will rise over time. Just direct those into your checking account and you’ll be set for life.
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle
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Nestegg_User
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Re: Massive Windfall For 35 Year Old Guy

Post by Nestegg_User »

Didn't see it mentioned yet:

Umbrella Insurance!

your biggest risk is being a target; get the largest umbrella policy that you can to mitigate that risk

AFA the cash: I personally went with five years of CD ladder when I retired... nowadays CD's make as much sense as bonds for 3-5 year duration, without the risk. If inflation does pick up, the bond side might take a hit (unless kept to maturity) while the CD wouldn't and could be drawn (sans any EWP)
mikejuss
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Re: Massive Windfall For 35 Year Old Guy

Post by mikejuss »

FIREGuy88 wrote: Mon Feb 08, 2021 7:46 pm Hey all,

Long time lurker. I am in an extremely lucky situation where I've come into a large windfall the last few months via my startup being acquired, and I'm planning my investment strategy for the rest of my life. I've been a Vanguard / Bogleheads follower for many years now (first introduced via Ramit Sethi and I Will Teach You To Be Rich). I'm a 35 year old guy living in Boston.

I have all of my retirement accounts in a Vanguard target date fund, but am investing in an index via brokerage for the first time ever. My basic plan is to follow the three-fund lazy portfolio, minus the bonds.

Here's my current situation:

Cash: $100k
Roth IRA: $11k (VFIFX)
SEP IRA: $222k (VFIFX)
Vanguard Money Market: $7,000,000

It's kind of crazy to write out that number, but yeah, that's where I'm at (after tax).

My plan is a modified version of the three-fund lazy portfolio, minus the bonds, so $6,000,000 in just two funds:

70% VTSMX
30% VTIAX

And keep $1,000,000 in cash, for, I'm not sure what yet.

Is this crazy? What do you think?
Good on you for planning to invest everything in index funds--but why no bonds? I'd recommend 20%–30% VBTLX as an "anchor to wind," as John C. Bogle used to say.

And as for the $1 million in cash you propose holding, do you plan on making any major life choices in the next 5 years (buy a house, get married, have kids)? If not, hold only a year or two of your expected expenses in cash. You're also welcome to distribute some of your windfall to those of us in this thread. :sharebeer
Last edited by mikejuss on Mon Feb 08, 2021 10:16 pm, edited 2 times in total.
50% VTSAX | 25% VTIAX | 25% VBTLX (retirement), 25% VTEAX (taxable)
radiowave
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Re: Massive Windfall For 35 Year Old Guy

Post by radiowave »

OP, congrats

Do you have a working budget yet, e.g. baseline expenses (usual food, housing, transportation, medical, insurance, etc.), discretionary (trips, hobbies, etc), and capital (new vehicle, house, etc). Once you have that sketched out, it will inform how best to set up your investments to meet your current and future budget, manage cash flow, and model what lifestyle you want to live and probability of success.
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page
J295
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Re: Massive Windfall For 35 Year Old Guy

Post by J295 »

I’ll suggest you read about investment policy statement on the wiki; then put one in place after giving it some serious thought and commit to following it. Maybe you’ve done that and landed on your suggested allocation, I don’t know.

For a long time it’s been like shooting fish in a barrel in the equity markets. It’s not always this way and you just want to be sure that wherever allocation you choose will be a good fit for you financially and emotionally when the speed bumps hit. For example, in the Great Recession (2008-09) the equity markets were down about 50% over a 16 month period, and my recollection is it took about four years to go from late 2007 top through the trough back up to that breakeven point. Point being you need to be prepared to weather this sort of storm. I’m not suggesting you can or cannot weather it, just pointing out that between now and the end of your projected investing career there will likely be storms of various varieties.

Just so you have a point of reference, I’m an “old guy” at age 61, and have been investing since my college days in the late 70s. Transitioned out full-time work eight years ago. Up until that time I was 100% equities.

Good luck.
raiderjkwong
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Re: Massive Windfall For 35 Year Old Guy

Post by raiderjkwong »

Having 7M at 35 is awesome. Unless you have a serious gambling problem, you have enough money to live a great life. That said, I like your proposed AA but it is a bit aggressive. No one says you have to invest all your money in the stock market. You don't need to take the risk. Once you have reached financial freedom which you have, the goal isn't aggressive investing, its aggressive preservation. JPMorgan (NYSE:JPM) expects flat to slightly negative returns over the next five years for the S&P 500.

In fact, I would only invest 3M, 4M the most and put the rest in savings. That's just me. I am 54 and I am getting to retire in 2 years. I have a 2.8M portfolio and own our home (1.3 M) and cars. We have 0 debt. My wife and I will have two pensions when we retire. We are quite frugal so we can probably live off our pensions and never touch our portfolio. Our AA is 30/70 stocks to bonds. We want to retire with peace of mind with minimal stress or risk. Since we have the financial freedom to do whatever we want and don't need anymore monies, we are quite conservatively invested. Good like to you and enjoy your windfall!
Last edited by raiderjkwong on Mon Feb 08, 2021 10:56 pm, edited 1 time in total.
Marseille07
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Re: Massive Windfall For 35 Year Old Guy

Post by Marseille07 »

Really interesting discussion forming here in which one camp says go aggressive (0~10% in bonds) vs another camp saying the OP has won the game, why take risk, stop playing the game.
MotoTrojan
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Re: Massive Windfall For 35 Year Old Guy

Post by MotoTrojan »

Looks like a great plan to me if you understand the possibility of a 50% drawdown. On that note, research tax-loss harvesting and have a plan for it. Mutual funds like you've chosen make that very easy via the exchange function, so you'll just need to pick partner-funds and a threshold for when to TLH.

VLCAX is a great partner for VTSAX. VTIAX is trickier in mutual-fund form as the alternatives exclude small-caps, or even emerging markets. I personally use ETFs to give more options here (can swap VXUS for IXUS, etc...).
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Watty
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Re: Massive Windfall For 35 Year Old Guy

Post by Watty »

FIREGuy88 wrote: Mon Feb 08, 2021 8:55 pm I don't own a home or a car.
One of the first things I would do would be to figure out what sort of budget you would want for a house if you ever decide to buy one(There is no hurry!) and put that amount into a seperate house fund account. If you are likely to stay in Boston that will likely be a significant amount.

That will help simplify the rest of your investing since your remaining portfolio would be smaller.
young-ish
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Re: Massive Windfall For 35 Year Old Guy

Post by young-ish »

Congratulations on the financial success!

Not much we can suggest unless we know your goals. Perhaps make a back of the envelope budgeting plan for the next few decades. Amounts & dates of big purchases, lifestyle changes & charitable giving.

Also, what is your risk tolerance? Since you are 35 you probably didn't have tons of money in stocks during the tech crash of Y2K or the '08 financial crisis.

What is your favorite book written in the BH style?
muffins14
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Re: Massive Windfall For 35 Year Old Guy

Post by muffins14 »

raiderjkwong wrote: Mon Feb 08, 2021 10:49 pm Having 7M at 35 is awesome. Unless you have a serious gambling problem, you have enough money to live a great life. That said, I like your proposed AA but it is a bit aggressive. No one says you have to invest all your money in the stock market. You don't need to take the risk. Once you have reached financial freedom which you have, the goal isn't aggressive investing, its aggressive preservation. JPMorgan (NYSE:JPM) expects flat to slightly negative returns over the next five years for the S&P 500.

In fact, I would only invest 3M, 4M the most and put the rest in savings. That's just me. I am 54 and I am getting to retire in 2 years. I have a 2.8M portfolio and own our home (1.3 M) and cars. We have 0 debt. My wife and I will have two pensions when we retire. We are quite frugal so we can probably live off our pensions and never touch our portfolio. Our AA is 30/70 stocks to bonds. We want to retire with peace of mind with minimal stress or risk. Since we have the financial freedom to do whatever we want and don't need anymore monies, we are quite conservatively invested. Good like to you and enjoy your windfall!
At 35, I couldn’t imagine being 50/50 regardless of portfolio size. There’s simply too much opportunity. I’d probably go for a 75/25, with much less cash, mainly munis for bonds instead. That 25% of the portfolio today could be more than 10 years of expenses in fixed income. Why hold more than that at 35 except for a house purchase?
Crom laughs at your Four Winds
alexL
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Re: Massive Windfall For 35 Year Old Guy

Post by alexL »

Marseille07 wrote: Mon Feb 08, 2021 10:54 pm Really interesting discussion forming here in which one camp says go aggressive (0~10% in bonds) vs another camp saying the OP has won the game, why take risk, stop playing the game.
We are genetically programmed to be diverse, to ensure that some of us will be correct and surve, no matter what happens.
finite_difference
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Re: Massive Windfall For 35 Year Old Guy

Post by finite_difference »

Congrats!! I’d go 60/40 or 70/30. I like bonds more than cash. Could also do a CD ladder or high yield savings.

Following Bogle/Larimore, I’d go 80% US Stock and 20% Intl. You could bump up Intl to 30-50% if you desire.

Enjoy!
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh
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FIREGuy88
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Re: Massive Windfall For 35 Year Old Guy

Post by FIREGuy88 »

GreendaleCC wrote: Mon Feb 08, 2021 9:04 pm The ETF for this fund is VXUS (0.08% ER).
Oh, interesting. You're correct, I was wrong. I'm very confused by this. VTIAX, VXUS and VGTSX are all the Vanguard Total International Stock Index Fund, but one is Admiral shares, one is ETF shares and one is Investor shares. I'm having a hard time understanding the difference.
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FIREGuy88
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Re: Massive Windfall For 35 Year Old Guy

Post by FIREGuy88 »

dboeger1 wrote: Mon Feb 08, 2021 9:26 pm it sounds like you have enough money and the basics of investing down to the point that you'll be set for life. Where I would differ is the $1m in cash. That seems like a fairly large and arbitrary amount. It sounds like you didn't have anywhere near that in net worth before let alone an emergency fund, and now you want to hold so much cash? Cash tends to be a pretty poor long term holding, so unless you have plans to spend the money any time soon or have some other reason to raise your emergency fund that high such as upcoming medical costs or charitable giving, I think it makes more sense to reevaluate your emergency fund given your windfall and potentially increased living expenses going forward (assuming you want to increase them now, which is certainly not mandatory), and maybe take a small chunk of money just to splurge on a reward for yourself. There's a decent chance you could buy yourself a nice new car or something, invest the remainder, and still come out ahead in the long term over holding so much cash.
This is great, thank you.
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FIREGuy88
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Re: Massive Windfall For 35 Year Old Guy

Post by FIREGuy88 »

KyleAAA wrote: Mon Feb 08, 2021 9:29 pm Buy bonds instead of cash. Otherwise, the allocation is fine albeit very aggressive.
What's aggressive about it?
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FIREGuy88
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Re: Massive Windfall For 35 Year Old Guy

Post by FIREGuy88 »

mikejuss wrote: Mon Feb 08, 2021 10:13 pm
Good on you for planning to invest everything in index funds--but why no bonds? I'd recommend 20%–30% VBTLX as an "anchor to wind," as John C. Bogle used to say.

And as for the $1 million in cash you propose holding, do you plan on making any major life choices in the next 5 years (buy a house, get married, have kids)? If not, hold only a year or two of your expected expenses in cash. You're also welcome to distribute some of your windfall to those of us in this thread. :sharebeer
Hey thanks for this advice. I guess I'm questioning bonds these days with all the money printing the fed is doing and my investing timeline (I'm 35), it doesn't make a ton of sense to me to be in bonds unless I'm doing something intentional soon with the cash like buying a house.

I could be convinced otherwise though, so if you have a compelling argument, please let me know. I feel like bond weightings in portfolios, especially in this climate of unlimited stimulus, seem like a losing game. Open to having my mind changed though.
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FIREGuy88
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Re: Massive Windfall For 35 Year Old Guy

Post by FIREGuy88 »

Marseille07 wrote: Mon Feb 08, 2021 10:54 pm Really interesting discussion forming here in which one camp says go aggressive (0~10% in bonds) vs another camp saying the OP has won the game, why take risk, stop playing the game.
I'm super interested in this too. Not even entirely sure what I am going to do with my life. Do I stop playing or go for $100M?
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