Congrats! Terrific investment plan! KISS! Are there any estate taxes, either already accounted for or to be paid? Inheritance taxes? State taxes?scienceguy wrote:Wife very recently inherited about $1.4 mil. We are in mid 40s with plenty of income ($250K) and no debts except $400K low rate fixed mortgage. Tenured prof with 100% secure job for next 25 years. No need for this money for any reason we can reasonably foresee (have other savings for kids college, weddings, etc).
I was thinking to stick it all in Vanguard funds with:
60% Total Stock Index
20% International Index
20% Total Bond Index
Rebalance every two years or so to keep these %s.
Is this reasonable? Is this too simple? Am I missing something?
They certainly could afford it! Or easily choose not to frivolously spend any of it.pteam wrote:Really big shopping spree?
I'm assuming they were already doing this before the windfall, and doing quite well. For all we know, they have terrific pension and millions in retirement in 50/50 allocation. There's an argument that 80/20 isn't aggressive enough and they can afford to take on even more risk!goodenyou wrote:That is an aggressive approach. 80/20 allocation is aggressive. It's not how I would allocate money with little need to take risk. For me, a dollar-cost average approach into a 3-fund portfolio over 1-2 years at 60/40 would be my choice. I would use Tax-Exempt Intermediate for Bonds as well. I would, of course, maximize all tax-advantage spaces and 529, including looking into a DHCP with an HSA and maximally funding that as well. I would buy $20k of I-Bonds per year (for you and spouse) and forget about them. I would probably consider paying off my mortgage if it were over 3.5%. It's a good position to be in.
Great idea, but it's better to do it later, not now, unless taxes are going to be lower than now in the future, or they will donate more than they can ever deduct. Gains from the investments lead to higher deductions in the future. There reaches a point where the deductions going to be income limited, so some estimates and calculation for the future might be helpful on how soon to begin.Minot wrote:Donate some to charity?
http://www.legalzoom.com/taxes/personal ... w-much-can
Paying off the low interest mortgage would generate less future expected value, so the opposite is better financially. Take out maximum cashout from mortgage and invest it! Most people wouldn't do this or even consider doing this, so the next best strategy is to just pay it off on schedule. Advance payments are just giving away a positive expected value statistical arbitrage play.Jim127 wrote:I would pay off the mortgage and then take the remaining $1 million and invest it in the three funds you have listed. Like others have said, you probably don't need to have 80% in stock, but given your financial position, the added risk probably doesn't cause any real burden to your overall financial picture.
http://www.extramoneyblog.com/arbitrage ... tion-tool/
Long Term Care Insurance is a strange animal, and only beneficial up to a certain net worth. At some point, if you have enough wealth, you just self insure. The max payout is often lifetime capped at a very modest sum. Finding unlimited policies with long exclusionary periods might be worthwhile, but they're hard to find and harder at decent premiums.scienceguy wrote:Interesting to me that Laura mentions Long Term Care Insurance, I have thought that the major risk to our children's ultimate inheritance is that my wife or I could get a chronic illness such as Alzheimers that would eat up all the $$$. Given that risk, I plan to look in to long term care insurance ASAP.