Retired - What to do with “extra” $140K?

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ExcelJunkie
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Retired - What to do with “extra” $140K?

Post by ExcelJunkie »

Posting on behalf of my risk-averse MIL who recently retired at age 62. No retirement specific savings, but her pension and SS should cover expenses until around age 95. She has $140k sitting in a bank account from a recent home sale. There’s no plan or need to use the money anytime soon. Looking for advice on an easy, conservative way to invest.

Annual Expenses: $42,000

Annual Income: $48,000
- Pension: $20,000 (no COLA)
- SS: $28,000

Emergency funds: 3 months

Debt: None

Tax Filing Status: Single

Tax Rate: 12% Federal, 4.6% State

Age: 62

Desired Asset allocation: seeking advice; needs to be conservative

Current Portfolio: $140,000; all cash; none of it is tax advantaged

How do you recommend the $140,000 be used / invested? Simplicity is important. Thanks I’m advance!
DSInvestor
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Re: Retired - What to do with “extra” $140K?

Post by DSInvestor »

Here are some options that would be simple and conservative asset allocation:

Vanguard LifeStrategy Income fund VASIX er=0.11% Asset allocation is 20% stocks 80% bonds
https://investor.vanguard.com/mutual-fu ... file/VASIX

Vanguard Target Retirement Income VTINX er=0.12% Asset Allocation is 30% stocks 70% bonds:
https://investor.vanguard.com/mutual-fu ... file/VTINX

Wellesley Income Admiral VWIAX er=0.16% Asset allocation is 38% stocks 62% bonds
https://investor.vanguard.com/mutual-fu ... olio/vwiax

You can get lower expenses by selecting separate funds for US stocks and bonds but that increases complexity.

These funds are not typically recommended for taxable accounts but it may be appropriate for your MIL at her level of income.
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delamer
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Re: Retired - What to do with “extra” $140K?

Post by delamer »

If her entire liquid assets are only $150,000, keep most of it in cash (CD ladder), 20% in Treasuries/TIPS, and 20% in an S&P 500 fund.

Hopefully, the stocks & bonds will keep the overall portfolio from losing value to inflation. But she isn’t in a position to handle much volatility or risk.
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David Jay
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Re: Retired - What to do with “extra” $140K?

Post by David Jay »

DSInvestor wrote: Mon Jun 21, 2021 9:55 pm Here are some options that would be simple and conservative asset allocation:

Vanguard LifeStrategy Income fund VASIX er=0.11% Asset allocation is 20% stocks 80% bonds
https://investor.vanguard.com/mutual-fu ... file/VASIX

Vanguard Target Retirement Income VTINX er=0.12% Asset Allocation is 30% stocks 70% bonds:
https://investor.vanguard.com/mutual-fu ... file/VTINX

Wellesley Income Admiral VWIAX er=0.16% Asset allocation is 38% stocks 62% bonds
https://investor.vanguard.com/mutual-fu ... olio/vwiax
+1 for the whole list
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Brianmcg321
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Re: Retired - What to do with “extra” $140K?

Post by Brianmcg321 »

Vanguard Tax Managed Balanced Fund. VTMFX. Approximately 50/50 allocation.
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backpacker61
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Re: Retired - What to do with “extra” $140K?

Post by backpacker61 »

ExcelJunkie wrote: Mon Jun 21, 2021 9:44 pm Posting on behalf of my risk-averse MIL who recently retired at age 62. No retirement specific savings, but her pension and SS should cover expenses until around age 95.

Annual Expenses: $42,000

Annual Income: $48,000
- Pension: $20,000 (no COLA)
- SS: $28,000


How do you recommend the $140,000 be used / invested? Simplicity is important. Thanks I’m advance!
She will want some growth for the reason I bolded.

I wouldn't call it "extra". If she needs assisted living or skilled nursing care at some point, the extra funds will particularly be needed. @DSinvestor's suggestions are good ones, or really any of the Vanguard LifeStrategy Funds.

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

I would tip a little more to the growth side (Conservative Growth or Moderate Growth funds), as she's more likely to really need this money later in life after inflation has eroded the purchasing power of that $20K$ pension.
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lakpr
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Re: Retired - What to do with “extra” $140K?

Post by lakpr »

Brianmcg321 wrote: Tue Jun 22, 2021 1:06 am Vanguard Tax Managed Balanced Fund. VTMFX. Approximately 50/50 allocation.
Not appropriate for a person in 12% bracket. The VTMFX invests heavily in municipal bonds, and the yields from municipal bonds are geared towards folks in higher tax bracket, 24% and above. Folks in lower tax brackets are better off investing in Total bond market, or funds that in turn invest in total bond market.

You are right on the asset allocation of 50:50 for a 62 year old, and it is unfortunate that Vanguard does not offer a true 50:50 allocation fund.

I would suggest splitting into two parts, invest $70k in VSCGX (Vanguard Life Strategy Conservative Growth) and VSMGX (Vanguard Life Strategy Moderate Growth). The former follows 40:60 allocation, the latter follows 60:40, and together they provide a 50:50 asset allocation to the OP''s MIL. Both funds rebalance on a daily basis, so this split strategy is always guaranteed to be 50:50 for the rest of her life.
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galawdawg
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Re: Retired - What to do with “extra” $140K?

Post by galawdawg »

ExcelJunkie wrote: Mon Jun 21, 2021 9:44 pm Posting on behalf of my risk-averse MIL who recently retired at age 62. No retirement specific savings, but her pension and SS should cover expenses until around age 95. She has $140k sitting in a bank account from a recent home sale. There’s no plan or need to use the money anytime soon. Looking for advice on an easy, conservative way to invest.

Annual Expenses: $42,000

Annual Income: $48,000
- Pension: $20,000 (no COLA)
- SS: $28,000

Emergency funds: 3 months

Debt: None

Tax Filing Status: Single

Tax Rate: 12% Federal, 4.6% State

Age: 62

Desired Asset allocation: seeking advice; needs to be conservative

Current Portfolio: $140,000; all cash; none of it is tax advantaged

How do you recommend the $140,000 be used / invested? Simplicity is important. Thanks I’m advance!
I know that you mentioned her retirement expenses are met by her pension and social security. Does she still own a home or does she rent or live with family or friends? Does she own a vehicle? Those are two areas where she could have a potential need for significant sum of cash in the near future, such as for a replacement vehicle. Any cash that might be needed in the next three to five years should be held in a savings account, CD or similar. Otherwise, I'd recommend an allocation of somewhere between 20/80 and 40/60. DSInvestor's list are her best three options for investment.
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ExcelJunkie
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Re: Retired - What to do with “extra” $140K?

Post by ExcelJunkie »

Thank you all very much. I’ll look closer at the options outlined by DSInvester and lakpr.

My MIL no longer owns a home and will be living with family. She may choose to rent her own place in a few years. The expenses listed in the OP include the cost of rent (while living with family her expenses are closer to $20K annually). Annual expenses do not include the cost of a new vehicle.
deltaneutral83
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Re: Retired - What to do with “extra” $140K?

Post by deltaneutral83 »

Would living off the 140k to supplement pension to 67 or 70 for SS be on the table? Guaranteed return on SS at this point is strong.
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