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Message
re: What to do w/ $500,000
Posted on 2/7/24 at 9:32 am to GentleJackJones
Posted on 2/7/24 at 9:32 am to GentleJackJones
quote:
-Currently inherited approximately $535,000 from an estate.
-It’s sitting in a money market account making approximately $2,400 a month.
-I plan on investing / dollar cost averaging in small increments ($10,000 $15,000), BUT:
-Wife and I have student loans around $88,000 (monthly payment is approximately $890.00)
-$300,000 mortgage, but with a 3.1% rate
-No other real debts…we will likely “look” to move in the next 3-5 years…depending on job, stability, prices, rates, inflation, etc…
-We’ll be looking to get another car in say 3 years. My GMC Silverado currently has 170,000 miles.
I'm a bit risk-averse so take all of this with that in mind.
If I'm getting $2,400/month from the money, then I'm leaving the inheritance there. Tinkering around with a calculator it looks like your student loan interest rate is ~4%.
I would take $1,000 per month from the returns and throw it at the loans to pay the loan(s) off in about half the time (so 4-5 years instead of 9-10).
I would leave the other half to just continue rolling over in the money market. In 3 years (if the return remains at least the same), that extra $1,400/month is $50k without even taking compounding interest into account. In other words, depending on what I bought, I could just buy the new vehicle outright instead of adding a car note to my monthly bills. A year or two later, the student loans are paid off and the money which had been set aside for student loans then goes into investments.
In that 5 year period I've paid off more on my home while (ideally) it's increased in value. I can sell the home and use the proceeds for putting down on a new place plus I have somewhere over $600k extra (in the money market) to dip into to either buy the new place outright, just add to how much I am putting down to keep mortgage payments the same or lower, or just leave it to continue growing.
1
Posted on 2/7/24 at 9:37 am to GentleJackJones
id be buying property, several of them.
Posted on 2/7/24 at 9:47 am to GentleJackJones
I would put it all in VOO. Make minimum payments on my debt. In 10 years you will have 2MM. This is a simple math problem.
Posted on 2/7/24 at 10:16 am to GentleJackJones
quote:Seems like we would need to know more about your overall financial picture away from this windfall.
What to do w/ $500,000
-Currently inherited approximately $535,000 from an estate.
quote:Why? Just invest it all now.
-I plan on investing / dollar cost averaging in small increments ($10,000 $15,000), BUT:
quote:Student loan debt is the one debt I like being aggressive with paying down in these situations - it's non-dischargeable. 'd consider just getting rid of it.
-Wife and I have student loans around $88,000 (monthly payment is approximately $890.00)
quote:Make it your business to NEVER pay this back.
-$300,000 mortgage, but with a 3.1% rate
quote:How old are you? You only live once. If you want a new car, get a new car.
-We’ll be looking to get another car in say 3 years. My GMC Silverado currently has 170,000 miles.
Posted on 2/7/24 at 10:19 am to GentleJackJones
Don't mingle it with your community assets
Posted on 2/7/24 at 10:37 am to Jason9782003
somewhat altruistic approach that may not match your situation:
my wife inherited 6 figures last year, though nowhere near 500k. the person never had married and left that amt. to at least 6 people, maybe 10.
Our only debt is 108k mortgage at 2.125% and we don't really "need" the money to get by.
so my wife's approach was "what would be appropriate way to use the money left by someone who obviously was not frivolous (although had 2 houses) and was generous enough to leave it all to nieces, nephews, caretakers, church etc."
no, we didn't buy jetskis and a 75 thou truck to pull them which is what 95% of the hilljacks around here would do.
we put it in a separate account of VOO and VTEB and has done quite well in the last 4-5 months.
my wife inherited 6 figures last year, though nowhere near 500k. the person never had married and left that amt. to at least 6 people, maybe 10.
Our only debt is 108k mortgage at 2.125% and we don't really "need" the money to get by.
so my wife's approach was "what would be appropriate way to use the money left by someone who obviously was not frivolous (although had 2 houses) and was generous enough to leave it all to nieces, nephews, caretakers, church etc."
no, we didn't buy jetskis and a 75 thou truck to pull them which is what 95% of the hilljacks around here would do.
we put it in a separate account of VOO and VTEB and has done quite well in the last 4-5 months.
This post was edited on 2/7/24 at 10:38 am
Posted on 2/7/24 at 10:41 am to GentleJackJones
Put 500k on red. You win, you can pay off all debt and still keep the 500k in money market
Posted on 2/7/24 at 10:58 am to Jmcc64
How was any of that altruistic? So, you just kept the money and invested it for yourself? I'm not sure you know what that word means.
This post was edited on 2/7/24 at 11:01 am
Posted on 2/7/24 at 11:11 am to Jmcc64
quote:
somewhat altruistic approach
what? Posted on 2/7/24 at 11:12 am to Fe_Mike
Great advice. Only thing I'd add is 1800-2k a month on no effort funds is 100 times better then buying property and adding landlord hassles to your daily / weekly/ monthly stress. Sure you'd potentially add long wealth, but what's its worth to your time, effort, stress. That's a mortgage each month just from the interest your getting.
Posted on 2/7/24 at 11:13 am to SwampCollie
quote:
I'd lump sum 50% of what's left and keep the rest liquid
Why would he not just park 90% of it in MMMF with the yield he's getting and use the other 10% on either SPY short puts or long calls?
Seems like way too much money to risk when yields are frothy. Albeit they are going keep going down. But that's not exactly a risk on signal for equities it's quite the opposite.
Posted on 2/7/24 at 11:41 am to GentleJackJones
Buy Solana and retire in spring of 2025.
Posted on 2/7/24 at 12:06 pm to Mohican
quote:
Is a FA recommended for pretty much any time you receive a lump sum like this? What if you have some basic knowledge?
It's a really tough question because no one knows your financial literacy, and I think outcome wildly varies based on your advisor. There was the guy about two weeks ago that had an advisor recommending him some insane insurance products in his youth or something.
If I got half a million I think I'd know most of what I wanted to do with it and would probably go to a forum to bounce ideas and sanity check myself. I don't think I'd rely on an advisor at my age with my knowledge level. Maybe a consult with someone who could potentially minimize tax burden.
If I were 55+ I'd probably want a professional's take on how to maximize that for the next few years in line with whatever strategy was already laid out.
Posted on 2/7/24 at 1:46 pm to GentleJackJones
I used to be someone that wanted to be debt free and conservative, but now I personally wouldn't pay off debt that you can afford. Which it seems like you can.
I'd invest all of the money yourself and try it out, if you don't feel comfortable after a couple months then look into a FA. Its really not hard at all.
I'd take a percentage of the money you earn and take a vacation or whatever in honor of your family member every year, and then take a percentage to pay off your debts. But there's a lot of great suggestions here.
I'd invest all of the money yourself and try it out, if you don't feel comfortable after a couple months then look into a FA. Its really not hard at all.
I'd take a percentage of the money you earn and take a vacation or whatever in honor of your family member every year, and then take a percentage to pay off your debts. But there's a lot of great suggestions here.
Posted on 2/7/24 at 2:12 pm to GentleJackJones
not ask td what to do with that kind of money, but id have already bought some nvidia.
I also wouldnt necessarily pay off all loans either. Being completely debt free was nice, but if you can afford it then make that money work somewhere else where the pay off is bigger than your monthly loan payment.
I also wouldnt necessarily pay off all loans either. Being completely debt free was nice, but if you can afford it then make that money work somewhere else where the pay off is bigger than your monthly loan payment.
This post was edited on 2/7/24 at 2:15 pm
Posted on 2/7/24 at 2:39 pm to GentleJackJones
Here’s what I would do.
Step 1: Pay off your student loans.
Step 2: Put that $900 student loan payment you no longer owe into an emergency fund until it is fully funded with 6 months of expenses or your highest insurance deductible, which ever is higher.
Step 3: Invest the remaining $450k today.
Step 4: Once Step 3 is complete, build up your truck/house fund with that $900 student loan payment.
Basically don’t change your life/spending habits. $450k is a lot, but not enough to rest on your laurels.
Step 1: Pay off your student loans.
Step 2: Put that $900 student loan payment you no longer owe into an emergency fund until it is fully funded with 6 months of expenses or your highest insurance deductible, which ever is higher.
Step 3: Invest the remaining $450k today.
Step 4: Once Step 3 is complete, build up your truck/house fund with that $900 student loan payment.
Basically don’t change your life/spending habits. $450k is a lot, but not enough to rest on your laurels.
Posted on 2/7/24 at 2:56 pm to Bard
quote:
I'm a bit risk-averse so take all of this with that in mind. If I'm getting $2,400/month from the money, then I'm leaving the inheritance there.
Same same .
Some of the advice in this thread seems designed to grow the money exponentially , but there’s risk with being a landlord (pandemic rent moratoriums anyone ?) and even with VOO.. you just never know …. When it comes to money, i am conservative, and i am lazy.. if you are making $2400 per month by doing absolutely nothing- personally id keep it there and move to an LCOL country where you can literally live like a king on that kind of money, but I realize not everyone has that option… Also, i recently (unexpectedly) had the remaining $25k of my student loan debt wiped since id been paying on it for over 20 years.. so you might not want to pay that off as others mentioned, just wait and see.. but it’s hard to justify , IMO, doing anyhting other than keeping the money where it is, since you are already earning around 6% with no effort .
Posted on 2/7/24 at 4:24 pm to GentleJackJones
quote:Good. A 5.4% ROI leaves you in no hurry.
It’s sitting in a money market account making approximately $2,400 a month
quote:Consider loans in terms of leverage risk and money flow.
-Wife and I have student loans around $88,000 (monthly payment is approximately $890.00)
-$300,000 mortgage, but with a 3.1% rate
Both home and student loans allow tax write offs. Calculate those.
Then run the end of year estimated difference between paying off the loan vs continuing to pay interest while keeping the principal invested.
Meanwhile, ROI (money in the markets) entails risk and tax exposure as well.
Estimate those.
If the difference between keeping the loan and paying it off is close or keeping the loan is more expensive, pay the loan off.
I'd guess that would have you paying off the $88K student loans while keeping the $300K home loan.
quote:Given anything >12mo time horizon, your options there are wide open.
I’d rather invest than have it in a money market. Also, what would you do knowing you’d need a car and potentially a new home / down payment in the foreseeable future?
quote:That's prudent, assuming you are patient with a sound approach or get good advise.
I’d rather invest than have it in a money market.
So in contrast to someone's earlier post, this is a good informational forum. Granted "you get what you pay for" and this is a free board, but there are folks here giving free advice that would cost you a big buck or two elsewhere.
There are also folks here who'll tell you on Tuesday afternoon about all their great Monday morning supposed investments. E.g., everyone in the coffee break lounge is happy to discuss wins, losses don't seem to come up.
Sort thru that. You'll do well if you channel the good advice here though.
Posted on 2/7/24 at 5:27 pm to Jason9782003
Could you expound on this?
Posted on 2/7/24 at 6:20 pm to GentleJackJones
Put it into a high dividend mutual fund, SCHD or similar and use the dividends to pay off the house.
Most dividends are yielding 3.5-3.8%, higher than your 3.1% mortgage.
Most dividends are yielding 3.5-3.8%, higher than your 3.1% mortgage.
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