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Started By
Message
What to do w/ $500,000
Posted on 2/7/24 at 7:03 am
Posted on 2/7/24 at 7:03 am
-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 was going to tackle the student loan first, but I’m currently covering it and more just with the monthly interest. We can also cover our debts and monthly living expenses without going to savings or touching this money. That said, it inhibits how much we can invest monthly AND 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?
What do you think?
-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 was going to tackle the student loan first, but I’m currently covering it and more just with the monthly interest. We can also cover our debts and monthly living expenses without going to savings or touching this money. That said, it inhibits how much we can invest monthly AND 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?
What do you think?
This post was edited on 2/7/24 at 7:29 am
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Posted on 2/7/24 at 7:11 am to GentleJackJones
quote:
What do you think?
You should get a financial advisor. Random internet people aren't going to give you the advice you really need.
Posted on 2/7/24 at 7:15 am to GentleJackJones
Lowest priority mortage
Possibly mid priority - Student Loans. But that could be wiped within the decade. Maybe hold off to see who wins the election on that ine but what is the interest rate on this?
Invest in the market SP500 ETFs are a good start.
Individual stocks that you believe in.
And of course my reckless side recommendations
$35K into BABA DCA over the next few months
1BTC
$10K into Chainlink
Not financial advice.
Possibly mid priority - Student Loans. But that could be wiped within the decade. Maybe hold off to see who wins the election on that ine but what is the interest rate on this?
Invest in the market SP500 ETFs are a good start.
Individual stocks that you believe in.
And of course my reckless side recommendations
$35K into BABA DCA over the next few months
1BTC
$10K into Chainlink
Not financial advice.
This post was edited on 2/7/24 at 7:19 am
Posted on 2/7/24 at 7:22 am to GentleJackJones
What’s the rate on the student loan debt?
Posted on 2/7/24 at 7:24 am to ApisMellifera
quote:
You should get a financial advisor. Random internet people aren't going to give you the advice you really need.
Then why even post? It’s a message board for exactly this kind of question. And…there are numerous FAs that frequent. MTB is full of tremendous resources and it’s been proven for years on basically any financial topic.
Posted on 2/7/24 at 7:25 am to lynxcat
I’d have to check, because I have a couple and my wife has a few, each, but around 5.5% - 6.25% I believe. I’m positive none are are more than 6.5. They just combine to $88,000.00. We previously paid off the highest interest student loans.
This post was edited on 2/7/24 at 7:28 am
Posted on 2/7/24 at 7:34 am to GentleJackJones
Pay off your student loans.
1) Peace of mind and closer to debt free. Can't place a value on that.
2) Yes, your interest covers the loan payment. But you still make interest after paying off the loan.
Interest on 500k @ ~6% is making you $2400. Less $890 for student loans you are netting $1510.
Pay off $89k in student loans and that $890 monthly goes away. $500k less $89k for loans means 6% interest on $411k, or almost $2k monthly.
Paying off the student loans nets you $400+ a month more, right now.
For the other stuff, definitely don't pay down house. It's free money. Don't worry about a potential car in three years, cross that bridge when you get there, your situation will be fluid and you'll have plenty of new options to consider then. Not worth worrying over right now.
1) Peace of mind and closer to debt free. Can't place a value on that.
2) Yes, your interest covers the loan payment. But you still make interest after paying off the loan.
Interest on 500k @ ~6% is making you $2400. Less $890 for student loans you are netting $1510.
Pay off $89k in student loans and that $890 monthly goes away. $500k less $89k for loans means 6% interest on $411k, or almost $2k monthly.
Paying off the student loans nets you $400+ a month more, right now.
For the other stuff, definitely don't pay down house. It's free money. Don't worry about a potential car in three years, cross that bridge when you get there, your situation will be fluid and you'll have plenty of new options to consider then. Not worth worrying over right now.
Posted on 2/7/24 at 7:35 am to lynxcat
quote:
Then why even post? It’s a message board for exactly this kind of question. And…there are numerous FAs that frequent. MTB is full of tremendous resources and it’s been proven for years on basically any financial topic.
Might be a dumb question, but I’ll be in a similar position as the OP soon.
Is a FA recommended for pretty much any time you receive a lump sum like this? What if you have some basic knowledge?
Posted on 2/7/24 at 7:39 am to GentleJackJones
I would leave the Mortgage alone. You are making money with a 3.1. The student loans would bother me, I would get them and anything with interest higher than 5% gone. 100K in high return cash, invest the rest.
Posted on 2/7/24 at 7:42 am to GentleJackJones
Go on a nice vacation.
Posted on 2/7/24 at 7:42 am to GentleJackJones
-If rate on student loans is >7% I'd pay them down some
-Leave 6 months E Fund + any confirmed CAPEX (new house, major expenses, truck etc.) for the next 3 yrs parked in the MM fund (VUSXX yield is 5.44%)
-Max out all tax deductible avenues (401k's, 529's, HSA, TIRA if eligible etc)
-Data says lump sum beats DCA more often than not but being an election year, market ATH, global sh*t show and relatively large balance I'd lump sum 50% of what's left and keep the rest liquid. If/when things get rough cash creates lots of opportunities - people liquidating toys, real estate etc.
-Leave 6 months E Fund + any confirmed CAPEX (new house, major expenses, truck etc.) for the next 3 yrs parked in the MM fund (VUSXX yield is 5.44%)
-Max out all tax deductible avenues (401k's, 529's, HSA, TIRA if eligible etc)
-Data says lump sum beats DCA more often than not but being an election year, market ATH, global sh*t show and relatively large balance I'd lump sum 50% of what's left and keep the rest liquid. If/when things get rough cash creates lots of opportunities - people liquidating toys, real estate etc.
This post was edited on 2/7/24 at 7:44 am
Posted on 2/7/24 at 7:46 am to Fe_Mike
Good post. Nice work baw.
Posted on 2/7/24 at 7:51 am to lynxcat
quote:
Then why even post?
Because people frequent this website so often that some get trapped into a mindset thinking that a quick question on the MTB is a good substitute for advice from a good FA.
quote:
It’s a message board for exactly this kind of question.
He asked the question and I gave an answer.
quote:
And…there are numerous FAs that frequent.
That is great and all but everyone has a unique situation and you can only gather so much information about somebody on a message board. As a CPA, I usually shy away from the posts asking tax questions because there are very few questions that have clear cut answers that apply to everyone.
Posted on 2/7/24 at 8:12 am to Fe_Mike
Good solid advice here.
Definitely pay off student loan 100%!
Take the remaining $400k or so and get you a fully funded emergency fund as well.
You didn’t say what your income level is but $30-50k you can keep in the money market fund
Take remaining $350k and park it an S&P index fund and don’t look at for 15 years.
Almost 100% chance you are gonna like the results …should be worth well over $1m in 15 years
Definitely pay off student loan 100%!
Take the remaining $400k or so and get you a fully funded emergency fund as well.
You didn’t say what your income level is but $30-50k you can keep in the money market fund
Take remaining $350k and park it an S&P index fund and don’t look at for 15 years.
Almost 100% chance you are gonna like the results …should be worth well over $1m in 15 years
This post was edited on 2/7/24 at 8:15 am
Posted on 2/7/24 at 8:14 am to GentleJackJones
I would pay off the student loans
Id purchase or put a heavy down payment on some sort of rental property
Keep the rest of the money in that money market and use the interest to cover expenses that pop up for your rental
you may even want to get another rental if you like it
Id purchase or put a heavy down payment on some sort of rental property
Keep the rest of the money in that money market and use the interest to cover expenses that pop up for your rental
you may even want to get another rental if you like it
Posted on 2/7/24 at 8:17 am to GentleJackJones
Knock out the loan.
Don't pay off the house.
Place the vehicle funds in something to get a return for a couple years.
Take a vacation you wouldn't otherwise do.
Don't pay off the house.
Place the vehicle funds in something to get a return for a couple years.
Take a vacation you wouldn't otherwise do.
Posted on 2/7/24 at 8:46 am to GentleJackJones
NVM
This post was edited on 2/7/24 at 8:48 am
Posted on 2/7/24 at 9:02 am to GentleJackJones
What’s the probability that grandpa Joe wipes out your student loans??
Posted on 2/7/24 at 9:16 am to GentleJackJones
If interest rate on student loans is above 6-7% I'd pay it off.
After that, I'd fund retirement tax advantaged accounts next. Max IRAs and 401ks etc. You may need to use some of the inheritance to live on while bumping up contributions.
Careful if you go the advisor route. Many are salesmen and will try to persuade you to buy high fee products that arent best for you like whole life insurance, annuities or loaded mutual funds. They will also most often charge a % of assets under management which even at 1% will often cost you something like 25% of final balance after 20-30 years. I prefer self managing and buying low expense ratio index funds.
Finally, how are these funds being inherited? Is it an inherited retirement account or just funds from estate?
After that, I'd fund retirement tax advantaged accounts next. Max IRAs and 401ks etc. You may need to use some of the inheritance to live on while bumping up contributions.
Careful if you go the advisor route. Many are salesmen and will try to persuade you to buy high fee products that arent best for you like whole life insurance, annuities or loaded mutual funds. They will also most often charge a % of assets under management which even at 1% will often cost you something like 25% of final balance after 20-30 years. I prefer self managing and buying low expense ratio index funds.
Finally, how are these funds being inherited? Is it an inherited retirement account or just funds from estate?
This post was edited on 2/7/24 at 11:58 am
Posted on 2/7/24 at 9:18 am to GentleJackJones
quote:
t’s sitting in a money market account making approximately $2,400 a month.
I'd take that a buy a rental property. If you don't have renters you already have the mortgage payment. If you get renters you can start stacking more money towards another rental.
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