What to do with $750k

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confused1
Posts: 56
Joined: Mon Jul 27, 2015 12:03 am

What to do with $750k

Post by confused1 »

Hi all

My wife and I moved to the US a few years ago from Europe and currently live in AK where the overall cost of living and housing is much much cheaper then we are used to. We have purchased a nice house and have $260k mortgage on it (15 yr)

In a few months time we will receive $750k from the sale of our house in Europe and have no idea how and where to invest it. We may want to move to the East or West coast in 5+ years, if we do that I am sure we will need to put some of the cash back into a house but that is not guaranteed.

Age : mid 30s
Joint Salary : $300k +
6 months living expenses in savings account : Yes
Max out 401k : Looking into now
IRA : Investigating
We have $100k in VFIAX that was some retirement cash we brought over from Europe.
$5k in a Lending Club account - Just testing the waters over there currently.

I guess I am looking for some general advice on what people would do with this $750k.

Thanks very much
mhalley
Posts: 8871
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Re: What to do with $750k

Post by mhalley »

The default response to how to invest money on bogleheads is always the three fund portfolio, consisting of total stock market, total bond matket, and total international stock market in the asset allocation that lets you sleep at night.
http://www.bogleheads.org/wiki/Three-fund_portfolio
The wrinkle that you have is that you might want to access some of this money in five years to move and buy a new house. 5 years is at the cutoff between saving and investing. Generally, if you have miney you will spend within five years, you want it in something safe like cds and saving accounts.
So the answer to the question depends on multiple factors. When you move, will it be to a high cost of living area? Will it be difficult to sell your current home? How much money will you want as a downpayment on the new home? Or will you want to buy outright?
Taking these things into consideration, i would put the downpayment you came up with (lets say 100k as a wild guess) and put it in a 5 yr cd ladder, and invest the rest in the three fund portfolio, substituting vanguard munincipal bond fund for total bond market.
Mike
Alex Frakt
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Re: What to do with $750k

Post by Alex Frakt »

Bumping. The moderators temporarily removed this thread to check out something. Everything is fine, please continue ...
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jose
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Re: What to do with $750k

Post by jose »

You should look at the wiki entry on managing a windfall:

https://www.bogleheads.org/wiki/Managing_a_windfall

That gives you some general ideas of the process and determine your goals and desired AA.

In this low interest rate environment, I suggest that you:

1. Maximize all tax-qualified contributions including back door Roth.
2. Pay your mortgage and all debt.
3. Invest the rest according to your AA.

There are two schools of thought: invest all at once, or dollar cost averaging. A third option is a little wait and see timing the market, going very conservative at the beginning and waiting for dips as entry points into equities.

Your international conditions are important, such us whether you are planning to return to Europe eventually or are US citizens. Lots of implications there.

Good luck and congratulations.
Louis Winthorpe III
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Re: What to do with $750k

Post by Louis Winthorpe III »

I agree with mhalley that 5 years is sort of a cut off point between saving and investing. I'd put part of the money in an online savings account or CDs. The low returns from that will sound unappealing, but if you will need the money in 5 years or less, I wouldn't accept market risk.

For money you won't use for 5 years or more, I would recommend something like a Life Strategy fund. Maybe Life Strategy Moderate Growth. It's an all-in-one fund that is a completely diversified, set-it-and-forget it portfolio. Alternatively, if you won't touch the money until you retire, I'd probably pick a Target Retirement fund.
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timboktoo
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Re: What to do with $750k

Post by timboktoo »

It sounds like this isn't retirement money, so I wouldn't invest it until you know for sure that you don't need it. In the meantime, I'd just buy a short-term treasury fund, individual 1 year treasury bonds with Treasury Direct, or buy CDs.

- Tim
Lafder
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Re: What to do with $750k

Post by Lafder »

From your description, I would pay off the current mortgage. If you end up moving you can use the equity from this house towards a future house, or pull cash out of taxable accounts.

I would be sure I was maximizing pretax retirement savings for both spouses.

I would invest the rest according to my investment plan.

What is your overall investment plan as far as stocks/bonds/International Stock? This may help if you are unsure and folks here can talk you through it. http://www.bogleheads.org/wiki/Asset_allocation There is a general rec of age in bonds, down to age - 15 in bonds.

Bonds are more often held in retirement accounts, but if your taxable savings are much greater than your retirement accounts, you may need tax advantaged bonds in your taxable accounts. http://www.bogleheads.org/wiki/Principl ... _placement

My overall favorite investments are a 3 fund portfolio viewtopic.php?f=10&t=88005

If you are sure you want a bigger chunk of this money for a down payment in the near future I would be more conservative with it than mostly stocks. But if it really is for the long term I would invest it according to my investment plan. If you invest in stocks and there is a market crash,it could be at a bad time if it is right when you wanted the money to buy a new house. But if that is a chance you can take, it would be my overall plan. I guess the point is that if you know you want x dollars for a down payment in 5 ears, be more careful with that. If it is only a possibility, invest as you would for the long term.

lafder
Topic Author
confused1
Posts: 56
Joined: Mon Jul 27, 2015 12:03 am

Re: What to do with $750k

Post by confused1 »

timboktoo wrote:It sounds like this isn't retirement money, so I wouldn't invest it until you know for sure that you don't need it. In the meantime, I'd just buy a short-term treasury fund, individual 1 year treasury bonds with Treasury Direct, or buy CDs.

- Tim
Tim

Think that's the crux of the issue. If we stay in a lower cost of living area then it is a very different plan than if we move to the East Coast in the future.
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