How best to incorporate lump sum into asset allocation

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bonnie
Posts: 52
Joined: Wed Apr 25, 2007 5:53 am

How best to incorporate lump sum into asset allocation

Post by bonnie » Fri Oct 06, 2017 12:00 pm

62 year old female /part time/own business NY area- base income 35K
husband 64 year old full time in NYC - base income 193K
Total income expected 228k
Tax Status - Married and filing jointly
Tax rate Federal-25%;State-10%
Emergency Fund- six months- 78K
Debt- Mortgages (both 15 year fixed; 11 years remaining) - 254k- interest 2.87%- home value 500k; 190k-interest 3.12 -home value is 400k

Pension information- husband to retire in 2024
Valued at 75%of my husbands final three years- assume 200k(75%=149k) -this is the option for me to keep his pension in event of his death
plus social security (32Kfor husband-16k for me)

Assets
New lump sum-320k(excluding emergency fund and tax consequences of property sale)- not factored into percentages; pending your advice
I have factored in the percentages to best of my ability but especially with the 457 plan it was hard to get it exact due to all the funds.

Husband IRA -Traditional 90k VIPSX .20 expense ratio 15% of assets bond
Husband Inherited IRA 66k VAIPX .07 expense ratio 11% of assets small cap value
128k VWNAX .25 expense ratio 22% of assets large cap value
Husband 457 Plan (this year contributed only 50% of catch up amount of 50k)
Traditional IRA 26550 IEFIX N/A 5% international;
8850 Stable income Fund N/A 1.77% cash
79650 NY23c N/A 16% large cap
17700 VSEQX .18 3.5% mid blend
44250 NY27c .26 7.8% bond
Roth IRA 5500 IEFX N/A 1% international
1850 Stable Income Fund N/A .37% cash
16650 NY23c N/A 3.% large cap
3700 VSEQX .18 .7 % mid blend
9250 NY27c .26 1.56%
My Assets
Traditional IRA 61K VSEQX .18 10% mid blend
Roth IRA 7500 VAIPX .20 1.3% bond

With the 320K cash - we wonder if we should pay off our mortgage, max out our retirement contributions- I now understand I can open a SEP fund
What would be the best course of action in your opinion?
What would be the best investments to contribute to in our taxable account?
As it stands we do not anticipate having difficulty meeting our monthly expenses when my husband retires in 2024.
Thank you for your time.

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midareff
Posts: 5104
Joined: Mon Nov 29, 2010 10:43 am
Location: Biscayne Bay, South Florida

Re: How best to incorporate lump sum into asset allocation

Post by midareff » Fri Oct 06, 2017 12:13 pm

You are going to get lots of answers to this but here's mine. I would pay off the 3.12% mortgage so that leaves the question of what to do with what's left, which would be about $130K. Next... while I'm not a market timer this market is way overdue for a correction, or at l;east some seriously bad days, that could be caused by a number of things, economic, political, war, etc. I would buy a stack of Ally Bank 11 month, 1.5% breakable without penalty CDs @ $25K each (rounding to $30K for the last), and see what happens. The Shiller P/E has only been this high or higher twice before and the ending in both cases was not pleasant. http://www.multpl.com/shiller-pe/ I'll be 70 in December and have been in the market almost 59 years...... so to speak, it ain't different this time, it's just when. I'd lock in the 3.14% return of killing that mortgage and patiently wait for a friend called "opportunity" with the rest.

I'm not going to get into your AA at all... just the timing issue.

John Laurens
Posts: 297
Joined: Mon Nov 14, 2016 7:31 pm

Re: How best to incorporate lump sum into asset allocation

Post by John Laurens » Fri Oct 06, 2017 12:20 pm

I would take the 320k cash and 78k cash emergency fund and apply towards your mortgages. I would be completely debt free in a few months.

Regards,
John

bonnie
Posts: 52
Joined: Wed Apr 25, 2007 5:53 am

Re: How best to incorporate lump sum into asset allocation

Post by bonnie » Fri Oct 06, 2017 2:51 pm

Thank you for your responses it took some time for me to post in agreed format, which was very worthwhile
any other suggestions weighing in on how best to deal with new lump sum?

bonnie
Posts: 52
Joined: Wed Apr 25, 2007 5:53 am

hoping to hear from taylor latimer and friends regarding asset allocation

Post by bonnie » Fri Oct 06, 2017 6:45 pm

I tried to post according to posting guidelines -any ideas from folks that were so helpful to me many years ago
thanks

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