Please Help Me Invest $150k
Please Help Me Invest $150k
Cash/emergency savings: $40k money market savings earning 0.01% and $150k sitting in my Schwab account as cash.
Debt: $1,270/month mortgage at 3.125%. No other debt other than regular monthly bills
Home: $1.7 current valuation with $275,000 remaining mortgage
HELOC: $100k available at straight prime (currently 4.25%) and I have a zero balance.
Tax Filing Status: Single (I’m divorced and my ex claims our twin 18 year-old boys)
State of Residence: Washington state
Age: 54
Current retirement portfolio: $175k in Schwab IRA target date 2035 index funds SWYFX
Coming expenses: My boys are in their first year at university and are each taking the max $5,500/year federal student loan and receive scholarships and my ex and I have agreed to split the balance between us. We had GET units that will mostly get us through the first semester for both of them and each of us parents will begin contributing to their schools beginning in January of 2023. I anticipate that my contribution will be approximately $20k/year for each of the four years of 2023-2026 for a total contribution of $80k. Yes, I realize that I should be placing a high priority on my retirement account right now and that I’m behind on that, but in the general scheme of things $80k isn’t that much and I don’t want my boys graduating with six figures in debt out of my deep love for them. My ex is unstable and I want to lock her in on her equal $80k contributions as well. My parents have told me that they want to begin helping to fund their grandsons’ college expenses once I begin paying but I don’t know what that is going to look like and I think it is best for me to plan as if I won’t receive a single penny from them.
Employment status: I have had my own sole proprietor LLC for 18 months and have had a single client for that period with annual earnings at approximately $100k. Unfortunately that contract is coming to an end tomorrow and I am currently looking for other employment, either continuing as an LLC or going back to being company employed. I don’t anticipate that I will be out of work for more than a few months max and that my earnings will continue to be in the low-$100k range.
Lifestyle: I live in a luxurious house that is my happy place but otherwise am a man of very simple means. I drive a 2011 Chevy with low miles that I am completely happy with, buy my clothes on Amazon, shop at the discount aisle at the grocery store, haven’t been on a real vacation in many years, don’t eat out much and am perfectly content with my current lifestyle.
Retirement horizon: As is detailed above, most of my net equity is tied to my home and I don’t have a lot in other retirement assets. I feel like I’m a “young 54” and certainly don’t have any intentions of retiring before I am 65.
Question:
I recently received a $150k injury settlement that was far greater than I was expecting. This has been a great blessing to me and I have parked the entire amount in my Schwab brokerage account and the money will clear tomorrow. As previously mentioned I am perfectly content with my current lifestyle and there is zero temptation for me to use this money for anything extravagant. I’ve been deliberating over how best to invest it and roughly half of it will go toward my $80k university contribution that I will need to begin accessing in 2023. Here is what I am currently thinking for allocation of this $150k:
$20k into a 6 month CD earning 3.9% (I’ll need to tap into this money in 2023)
$20k into a 1 year CD or treasury bond earning 4.25%
$40k in 18 month treasury bond earning 4.30%
That allocation should take care of the university expenses I will have. That leaves a remaining $70k to invest. I’ve thought about putting at least some of that into more SWYFX index funds ($7k of which could be in the form of my 2022 IRA) but the climate of the current market terrifies me and I’m leaning towards just rolling this $70k into more bonds/CDs for peace of mind. I’m really thinking that I’m willing to sacrifice the long-term upside of more index funds for the stability of fixed assets.
My ex was an accountant/CPA and managed all of our finances up until our divorce four years ago and I’ve come a long way in understanding and positioning my investments, but deciding how to invest what is a large sum of money (for me) is intimidating. Any advice on my plan would be greatly appreciated.
Debt: $1,270/month mortgage at 3.125%. No other debt other than regular monthly bills
Home: $1.7 current valuation with $275,000 remaining mortgage
HELOC: $100k available at straight prime (currently 4.25%) and I have a zero balance.
Tax Filing Status: Single (I’m divorced and my ex claims our twin 18 year-old boys)
State of Residence: Washington state
Age: 54
Current retirement portfolio: $175k in Schwab IRA target date 2035 index funds SWYFX
Coming expenses: My boys are in their first year at university and are each taking the max $5,500/year federal student loan and receive scholarships and my ex and I have agreed to split the balance between us. We had GET units that will mostly get us through the first semester for both of them and each of us parents will begin contributing to their schools beginning in January of 2023. I anticipate that my contribution will be approximately $20k/year for each of the four years of 2023-2026 for a total contribution of $80k. Yes, I realize that I should be placing a high priority on my retirement account right now and that I’m behind on that, but in the general scheme of things $80k isn’t that much and I don’t want my boys graduating with six figures in debt out of my deep love for them. My ex is unstable and I want to lock her in on her equal $80k contributions as well. My parents have told me that they want to begin helping to fund their grandsons’ college expenses once I begin paying but I don’t know what that is going to look like and I think it is best for me to plan as if I won’t receive a single penny from them.
Employment status: I have had my own sole proprietor LLC for 18 months and have had a single client for that period with annual earnings at approximately $100k. Unfortunately that contract is coming to an end tomorrow and I am currently looking for other employment, either continuing as an LLC or going back to being company employed. I don’t anticipate that I will be out of work for more than a few months max and that my earnings will continue to be in the low-$100k range.
Lifestyle: I live in a luxurious house that is my happy place but otherwise am a man of very simple means. I drive a 2011 Chevy with low miles that I am completely happy with, buy my clothes on Amazon, shop at the discount aisle at the grocery store, haven’t been on a real vacation in many years, don’t eat out much and am perfectly content with my current lifestyle.
Retirement horizon: As is detailed above, most of my net equity is tied to my home and I don’t have a lot in other retirement assets. I feel like I’m a “young 54” and certainly don’t have any intentions of retiring before I am 65.
Question:
I recently received a $150k injury settlement that was far greater than I was expecting. This has been a great blessing to me and I have parked the entire amount in my Schwab brokerage account and the money will clear tomorrow. As previously mentioned I am perfectly content with my current lifestyle and there is zero temptation for me to use this money for anything extravagant. I’ve been deliberating over how best to invest it and roughly half of it will go toward my $80k university contribution that I will need to begin accessing in 2023. Here is what I am currently thinking for allocation of this $150k:
$20k into a 6 month CD earning 3.9% (I’ll need to tap into this money in 2023)
$20k into a 1 year CD or treasury bond earning 4.25%
$40k in 18 month treasury bond earning 4.30%
That allocation should take care of the university expenses I will have. That leaves a remaining $70k to invest. I’ve thought about putting at least some of that into more SWYFX index funds ($7k of which could be in the form of my 2022 IRA) but the climate of the current market terrifies me and I’m leaning towards just rolling this $70k into more bonds/CDs for peace of mind. I’m really thinking that I’m willing to sacrifice the long-term upside of more index funds for the stability of fixed assets.
My ex was an accountant/CPA and managed all of our finances up until our divorce four years ago and I’ve come a long way in understanding and positioning my investments, but deciding how to invest what is a large sum of money (for me) is intimidating. Any advice on my plan would be greatly appreciated.
Last edited by Troutmask on Thu Sep 29, 2022 9:56 pm, edited 1 time in total.
Re: Please Help Me Invest $150k
It sounds like you only need advice for the "extra" 70k. As you note, you have 11 years until retirement and no real need for it, at least yet. You could easily have a 30 to 35 year retirement on top of the 11 years. That is money that should be invested in equity's IMHO. If you want to make your life easy I would just pop it into a Target Retirement fund, say the 2040 Target fund. If you don't want to lump sum it invest 2,000 a week for the next 35 weeks.
"Confusion has its cost" - Crosby, Stills and Nash
Re: Please Help Me Invest $150k
Thank you very much for your reply. I'm coming around to putting at least some of the remaining $70k into a target date index fund, even with my concern about the volatility of the market. If I'm not going to be tapping into it for over ten years it will almost certainly yield more than bonds/CDs.goblue100 wrote: ↑Thu Sep 29, 2022 9:30 pm It sounds like you only need advice for the "extra" 70k. As you note, you have 11 years until retirement and no real need for it, at least yet. You could easily have a 30 to 35 year retirement on top of the 11 years. That is money that should be invested in equity's IMHO. If you want to make your life easy I would just pop it into a Target Retirement fund, say the 2040 Target fund. If you don't want to lump sum it invest 2,000 a week for the next 35 weeks.
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Re: Please Help Me Invest $150k
I don't know if I have any thoughtful advice for the remaining $80k of the settlement money, but I do have a quick comment about the above.
You could get about 200x the interest on that $40k if you moved it to a high yield savings account at somewhere like Ally (Vanguard's mutual fund is also yield >2% right now; I don't know about Fidelity's). Check out depositaccounts.com or Doctor of Credit for current rates on other options. I would make that simple change.
It's good you have the emergency fund to carry you until you can find other employment!! I hope you can find something ASAP.Employment status: I have had my own sole proprietor LLC for 18 months and have had a single client for that period with annual earnings at approximately $100k. Unfortunately that contract is coming to an end tomorrow and I am currently looking for other employment, either continuing as an LLC or going back to being company employed. I don’t anticipate that I will be out of work for more than a few months max and that my earnings will continue to be in the low-$100k range.
Will your future Social Security benefit cover your expenses in retirement? If you can, it'll probably be advantageous to work until your FRA (67?).Retirement horizon: As is detailed above, most of my net equity is tied to my home and I don’t have a lot in other retirement assets. I feel like I’m a “young 54” and certainly don’t have any intentions of retiring before I am 65.
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Re: Please Help Me Invest $150k
I would leave it all in cash until there is more clarity regarding your employment situation.
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Re: Please Help Me Invest $150k
Undoubtedly, folks smarter than I about such things will chime in, but it sounds like this money will be in a taxable account, and I'm not sure target date funds are necessarily tax-efficient. Wasn't there some chatter about a huge distribution last year? I could certainly be wrong about that.Troutmask wrote: ↑Thu Sep 29, 2022 9:47 pmThank you very much for your reply. I'm coming around to putting at least some of the remaining $70k into a target date index fund, even with my concern about the volatility of the market. If I'm not going to be tapping into it for over ten years it will almost certainly yield more than bonds/CDs.goblue100 wrote: ↑Thu Sep 29, 2022 9:30 pm It sounds like you only need advice for the "extra" 70k. As you note, you have 11 years until retirement and no real need for it, at least yet. You could easily have a 30 to 35 year retirement on top of the 11 years. That is money that should be invested in equity's IMHO. If you want to make your life easy I would just pop it into a Target Retirement fund, say the 2040 Target fund. If you don't want to lump sum it invest 2,000 a week for the next 35 weeks.
I'd consider putting an appropriate amount, likely less than the full $70K (I'm basing this on your comments seemingly about risk aversion) into VTSAX or VTI (total market) and the balance into a CD ladder that you hinted at in your first post.
Cheers
Re: Please Help Me Invest $150k
Yeah, at least a very good chunk of it. I like the HYSA idea.I would leave it all in cash until there is more clarity regarding your employment situation.
Re: Please Help Me Invest $150k
I like this idea, at least until my employment is stabilized. I see some APY's close to 3% but they're from institutions that I've never heard of, anything to be wary of here?You could get about 200x the interest on that $40k if you moved it to a high yield savings account at somewhere like Ally (Vanguard's mutual fund is also yield >2% right now
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Re: Please Help Me Invest $150k
I probably wouldn't have many concerns if the account was FDIC insured. But I also wouldn't set up an account at a seemingly random place just for an extra 0.25% interest. I would probably stick with a familiar name. Check online for reviews from other customers.Troutmask wrote: ↑Fri Sep 30, 2022 11:10 amI like this idea, at least until my employment is stabilized. I see some APY's close to 3% but they're from institutions that I've never heard of, anything to be wary of here?You could get about 200x the interest on that $40k if you moved it to a high yield savings account at somewhere like Ally (Vanguard's mutual fund is also yield >2% right now