Young and rich

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
afoolwithmoney
Posts: 16
Joined: Sun Aug 30, 2015 10:31 pm

Young and rich

Post by afoolwithmoney » Sun Jun 17, 2018 8:45 pm

Wife and I are incredibly lucky, in our 30s with an inheritance that puts our net worth at $1 million. All the advice I see out there for people our age suggests being 90% or more invested in the stock market. But that calculation is, as I understand, designed around the face that future income will dwarf our current savings. But with this kind of money this young, is 90% a good idea?

Current allocation:
$380K in tax-protected index funds (IRAs, 401ks)
$380k in taxable equity accounts (mostly index funds, about $90k in individual stocks)
$350k in cash and bonds

That puts us about 67% invested. Eventually I hope to put about $250k into a house but that's probably 2-5 years away.

EDIT:
One kid on the way (in a few weeks)
We live in CA.
Total salary is $250k. 401k's maxed out.
Last edited by afoolwithmoney on Sun Jun 17, 2018 11:11 pm, edited 1 time in total.

User avatar
Cyclesafe
Posts: 658
Joined: Wed Dec 31, 2014 1:03 pm

Re: Young and rich

Post by Cyclesafe » Sun Jun 17, 2018 9:04 pm

Your asset allocation should be what allows you and your wife to sleep well at night. If you both have a large and stable earned income, then perhaps you'd be confident with a high equity allocation. If your income is more moderate and the $1M inheritance will likely to continue to be a big deal for you, then a more conservative allocation might be appropriate. Depends on you.

You have a house purchase in your future. You probably would be unhappy if a 30% drop in the market kept you from that.

pkcrafter
Posts: 13101
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Re: Young and rich

Post by pkcrafter » Sun Jun 17, 2018 9:14 pm

When considering risk, you need to think of need, ability and willingness. You don't have much need for high risk, but you do have ability. I think it's always worth remembering stocks are risky, so I would not recommend 90% of assets in equity, you don't need it.

The 250k marked for home purchase should not be in the market nor should it be counted in retirement asset allocation. When you don't count it, your asset allocation is higher than 67%. 67% equity seems pretty reasonable for your age and situation.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

Doctor Rhythm
Posts: 166
Joined: Mon Jan 22, 2018 3:55 am

Re: Young and rich

Post by Doctor Rhythm » Sun Jun 17, 2018 9:23 pm

The guidance that young people allocate heavily in stocks doesn't assume that future income (and future savings) will dwarf current savings.

Stocks tend to give higher returns than bonds, but they also make steep drops (think 2008). Those drops have always recovered historically, but it may take years for that to occur. If you're young, you have the luxury of time to weather out those drops and can therefore tolerate more risk by allocating heavily towards stocks. If you are older and have fewer working years left, you have less risk tolerance as you have fewer years working years left.

If you plan to buy a home in 2-5 years, I'd invest your planned down payment sum in something more conservative (maybe 40-60% stock). The remainder, if you don't plan to touch it for 20+ years, can be invested more aggressively. Doesn't have to be 90% stock - many would be more cautious - but 90% isn't unreasonable either.
Last edited by Doctor Rhythm on Sun Jun 17, 2018 9:48 pm, edited 1 time in total.

gotester2000
Posts: 589
Joined: Sun Nov 12, 2017 1:59 am

Re: Young and rich

Post by gotester2000 » Sun Jun 17, 2018 9:29 pm

Put 100% in the index after maxing retirement accounts if you can live comfortably on current income.

MotoTrojan
Posts: 2461
Joined: Wed Feb 01, 2017 8:39 pm

Re: Young and rich

Post by MotoTrojan » Sun Jun 17, 2018 9:35 pm

After tax this $1M will likely generate <$30K a year for life safely. You are not yet rich, but you have a great start, especially if your expenses are low and you don’t let this increase them.

As others have said there are many factors but somewhere in the 50/50-75/25 stock/bond would be appropriate depending on need, ability, and willingness to take risk.

Grt2bOutdoors
Posts: 19310
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Young and rich

Post by Grt2bOutdoors » Sun Jun 17, 2018 9:41 pm

I would not say you are lucky - you incurred a loss to receive that inheritance: my condolences on your loss. A down payment to be used in the next 2-5 years belongs in safe, stable assets like a high yield savings account, money market fund, cds or Treasury bills. A balanced fund is inappropriate to use as risk of loss is quite real, in 2008, balanced funds declined as much as 20%+.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Momus
Posts: 538
Joined: Tue Feb 21, 2012 9:23 pm

Re: Young and rich

Post by Momus » Sun Jun 17, 2018 9:49 pm

$1M is definitely not rich. But, it's a good amount to have especially when you haven't lift a finger to deserve this money. It's just handed to you. Now, if you say you get 5M inheritance, that's a different story. Move to metro CA, $1M gives you a tiny 2-3 bedroom house.

$1M at 4% withdrawal rate, guarantee you, 40k/yr income.

123
Posts: 3819
Joined: Fri Oct 12, 2012 3:55 pm

Re: Young and rich

Post by 123 » Sun Jun 17, 2018 9:56 pm

The most important advice we can give you about receiving a significant sum, such as $1M, is to tell no one.
The closest helping hand is at the end of your own arm.

LarryAllen
Posts: 1122
Joined: Fri Apr 22, 2016 9:41 am
Location: State of Confusion

Re: Young and rich

Post by LarryAllen » Sun Jun 17, 2018 10:03 pm

The key thing here is if you think you are rich you are likely to blow this dough. Don't do that! Don't spend a dime. You got a nice nest egg. Don't mess it up. I wouldn't get too aggressive with your asset allocation. Again, key is not spending.

Doctor Rhythm
Posts: 166
Joined: Mon Jan 22, 2018 3:55 am

Re: Young and rich

Post by Doctor Rhythm » Sun Jun 17, 2018 10:05 pm

A balanced fund is inappropriate to use as risk of loss is quite real, in 2008, balanced funds declined as much as 20%+.
I was the one who offered up 'balanced fund' allocation ranges for the $250K anticipated to be used for a future home purchase. I can certainly see your point of being more conservative, especially since they can be with the head start from the inheritance. That being said, stock allocations in excess of 40% are often recommended for people on the cusp of retirement (e.g., Target 2020 funds) who have a much lower risk tolerance than the OP in that they may be dependent on their savings for basic expenses and have no future earning potential.

H-Town
Posts: 1273
Joined: Sun Feb 26, 2017 2:08 pm

Re: Young and rich

Post by H-Town » Sun Jun 17, 2018 10:24 pm

afoolwithmoney wrote:
Sun Jun 17, 2018 8:45 pm
Wife and I are incredibly lucky, in our 30s with an inheritance that puts our net worth at $1 million. All the advice I see out there for people our age suggests being 90% or more invested in the stock market. But that calculation is, as I understand, designed around the face that future income will dwarf our current savings. But with this kind of money this young, is 90% a good idea?

Current allocation:
$380K in tax-protected index funds (IRAs, 401ks)
$380k in taxable equity accounts (mostly index funds, about $90k in individual stocks)
$350k in cash and bonds

That puts us about 67% invested. Eventually I hope to put about $250k into a house but that's probably 2-5 years away.
You came to the right place and asked the right question. Anyone can burn through $1M inheritance quickly. Just treat it as a number on the screen. If 90/10 is your AA, there so be it. If you're nervous about 90/10 then it's not the right AA for you. Let's say 60/40?

Let's pick a AA, then we can talk about tax planning. You have all opportunities to take a year off work, travel the world, and do back-door Roth. Assuming that you spend about $50k or less to travel the world.

Grt2bOutdoors
Posts: 19310
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Young and rich

Post by Grt2bOutdoors » Sun Jun 17, 2018 10:25 pm

Doctor Rhythm wrote:
Sun Jun 17, 2018 10:05 pm
A balanced fund is inappropriate to use as risk of loss is quite real, in 2008, balanced funds declined as much as 20%+.
I was the one who offered up 'balanced fund' allocation ranges for the $250K anticipated to be used for a future home purchase. I can certainly see your point of being more conservative, especially since they can be with the head start from the inheritance. That being said, stock allocations in excess of 40% are often recommended for people on the cusp of retirement (e.g., Target 2020 funds) who have a much lower risk tolerance than the OP in that they may be dependent on their savings for basic expenses and have no future earning potential.
The difference between someone retiring in 2020 is they will be usually withdrawing their funds over a period of 10-25 years thus giving them sufficient time to recover from a market hiccup and protection from the corrosive effects of inflation, the prescription would be different if they needed to withdraw ALL assets in 2-5 years as the OP would be doing with a house down payment fund that needs to be $250k on the day of withdrawal.
Last edited by Grt2bOutdoors on Sun Jun 17, 2018 10:27 pm, edited 1 time in total.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

MotoTrojan
Posts: 2461
Joined: Wed Feb 01, 2017 8:39 pm

Re: Young and rich

Post by MotoTrojan » Sun Jun 17, 2018 10:27 pm

Momus wrote:
Sun Jun 17, 2018 9:49 pm

$1M at 4% withdrawal rate, guarantee you, 40k/yr income.
Pre-tax.

TheNightsToCome
Posts: 349
Joined: Fri Jun 30, 2017 11:48 pm

Re: Young and rich

Post by TheNightsToCome » Sun Jun 17, 2018 10:49 pm

Grt2bOutdoors wrote:
Sun Jun 17, 2018 10:25 pm
Doctor Rhythm wrote:
Sun Jun 17, 2018 10:05 pm
A balanced fund is inappropriate to use as risk of loss is quite real, in 2008, balanced funds declined as much as 20%+.
I was the one who offered up 'balanced fund' allocation ranges for the $250K anticipated to be used for a future home purchase. I can certainly see your point of being more conservative, especially since they can be with the head start from the inheritance. That being said, stock allocations in excess of 40% are often recommended for people on the cusp of retirement (e.g., Target 2020 funds) who have a much lower risk tolerance than the OP in that they may be dependent on their savings for basic expenses and have no future earning potential.
The difference between someone retiring in 2020 is they will be usually withdrawing their funds over a period of 10-25 years thus giving them sufficient time to recover from a market hiccup and protection from the corrosive effects of inflation, the prescription would be different if they needed to withdraw ALL assets in 2-5 years as the OP would be doing with a house down payment fund that needs to be $250k on the day of withdrawal.
+1

TIAX
Posts: 1160
Joined: Sat Jan 11, 2014 12:19 pm

Re: Young and rich

Post by TIAX » Sun Jun 17, 2018 10:54 pm

It would be helpful if you could provide us more information including your current incomes, city and state of residence, tax rates, plans for kids, etc.

User avatar
eye.surgeon
Posts: 382
Joined: Wed Apr 05, 2017 1:19 pm
Location: California

Re: Young and rich

Post by eye.surgeon » Sun Jun 17, 2018 10:55 pm

Chose a sensible asset allocation based on your age. Plenty of information on that in the wiki here.

You would do well to never again refer to yourself as rich, or you risk believing it and acting like it. Although you are fortunate, and ahead of the game, you are neither rich nor have you won the game yet. In some parts of the country, your net worth is the median price of a home, which you do not yet own.
"I would rather be certain of a good return than hopeful of a great one" | Warren Buffett

User avatar
welderwannabe
Posts: 809
Joined: Fri Jun 16, 2017 8:32 am

Re: Young and rich

Post by welderwannabe » Sun Jun 17, 2018 10:59 pm

eye.surgeon wrote:
Sun Jun 17, 2018 10:55 pm
You would do well to never again refer to yourself as rich, or you risk believing it and acting like it. Although you are fortunate, and ahead of the game, you are neither rich nor have you won the game yet. In some parts of the country, your net worth is the median price of a home, which you do not yet own.
+1
I am not an investment professional, but I did stay at a Holiday Inn Express last night.

User avatar
BL
Posts: 8366
Joined: Sun Mar 01, 2009 2:28 pm

Re: Young and rich

Post by BL » Sun Jun 17, 2018 11:01 pm

https://www.bogleheads.org/wiki/Managing_a_windfall
Read about windfalls first of all.

mpsz
Posts: 302
Joined: Sat Jan 09, 2016 7:11 pm

Re: Young and rich

Post by mpsz » Sun Jun 17, 2018 11:05 pm

eye.surgeon wrote:
Sun Jun 17, 2018 10:55 pm
You would do well to never again refer to yourself as rich, or you risk believing it and acting like it. Although you are fortunate, and ahead of the game, you are neither rich nor have you won the game yet. In some parts of the country, your net worth is the median price of a home, which you do not yet own.
Another +1 to this, and a +1 to the previous advice to tell no one.

This advice isn't intended to discourage you, and you likely just chose "young and rich" because it's an attention-grabbing title. But many people who start thinking they're "rich" will overspend. Telling people about your wealth or buying flashy things will make you a target in ways that you may not want.

I would decide on an asset allocation that works for you -- I like 110 minus age in bonds (so ~20-30% in bonds for you depending on where you are in your 30's). Invest the $1 MM and your existing savings according to this asset allocation and work on building the second million.

User avatar
Sandtrap
Posts: 5363
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii😀 Northern AZ.😳 Retired.

Re: Young and rich

Post by Sandtrap » Sun Jun 17, 2018 11:10 pm

Welcome.
1 Condolences
2 Congratulations
3 For short term savings for your home, value security of principal and liquidity. This means CD's, Short Term Treasuries, MM, etc.
4 Maximize your (non taxable space) contributions.
5 Do and read the following.

GETTING STARTED
https://www.bogleheads.org/wiki/Getting_started
Define General Investment Goals and Objectives (what is your plan?)
https://www.bogleheads.org/wiki/Invest ... statement
Funding Priority (what do I do first?)
https://www.bogleheads.org/wiki/Priori ... vestments
Tax Efficient Fund Placement
https://www.bogleheads.org/wiki/Tax-ef ... _placement
Asset allocation in multiple accounts
https://www.bogleheads.org/wiki/Asset ... accounts
Risk Tolerance (what is your "sleep factor"?)
https://www.bogleheads.org/wiki/Risk_tolerance

Regarding your "asset allocation" question:

Asset Allocation (what is right for you?)
https://www.bogleheads.org/wiki/Asset_allocation

*Notice here that it does not have to be that exact.

VANGUARD PORTFOLIO ALLOCATION MODELS
https://personal.vanguard.com/us/insig ... locations

My O3: Someone 30 years old with 1 million (more to lose than to gain) will have a different allocation than someone of equal age but different financial circumstance. Adjust accordingly.

Emergency Fund
https://www.bogleheads.org/wiki/Emergency_fund
Bogle 3 Fund Portfolio Basics and Beyond
https://www.bogleheads.org/wiki/Three- ... _portfolio

Read:
Suggested Reading List
https://www.bogleheads.org/RecommendedReading.php
Forum Library of Investing Advice with links
https://www.bogleheads.org/wiki/Main_Page

Outstanding write up on the 64/40 allocation by Bernstein.
http://web.archive.org/web/20061214061 ... in6040.pdf
R. Ferri on Bernstein's 60/40
http://www.etf.com/sections/index-inve ... nopaging=1

Free Reading: "If You Can" by Bernstein
https://www.google.com/url?sa=t&rct=j& ... -SB3S580I5

Read and memorize and do ASAP:
MANAGING A WINDFALL
https://www.bogleheads.org/wiki/Managing_a_windfall

**Note: 1 million is not as much as it might seem, even at your age. Be careful with it. Use it to establish a solid financial foundation for you going forward. Not a piggy bank.

**Note: Financial "professionals" will be eager to "help" you with your money. Resist this. Study. Learn. When you know enough about how to pick a good financial advisor, or wealth manager, etc, etc, you will likely not need one.

**Post updates on how you are doing with the above. At some point suggestions will be to tweak your evolving portfolio or seek Vanguard VPAS services, etc.

aloha
j

User avatar
sergeant
Posts: 934
Joined: Tue Dec 04, 2007 11:13 pm

Re: Young and rich

Post by sergeant » Sun Jun 17, 2018 11:23 pm

Your salary is 250k. Your net worth is a bit over a million. How much of this was the inheritance? You have a chance to become rich but you're not there yet. Do it right and in a couple decades you may be rich.
Lincoln 3 EOW!

Dottie57
Posts: 4648
Joined: Thu May 19, 2016 5:43 pm

Re: Young and rich

Post by Dottie57 » Mon Jun 18, 2018 9:20 am

Why don’t you put your money into a 50/50 or 60/40 allcation until your first bear market? See how you react to a large loss. Then reset your allocation if you feel your allocation is too conservative.

User avatar
Sandtrap
Posts: 5363
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii😀 Northern AZ.😳 Retired.

Re: Young and rich

Post by Sandtrap » Mon Jun 18, 2018 10:20 am

Dottie57 wrote:
Mon Jun 18, 2018 9:20 am
Why don’t you put your money into a 50/50 or 60/40 allcation until your first bear market? See how you react to a large loss. Then reset your allocation if you feel your allocation is too conservative.
+1
Great advice.

WhiteMaxima
Posts: 1455
Joined: Thu May 19, 2016 5:04 pm

Re: Young and rich

Post by WhiteMaxima » Mon Jun 18, 2018 10:24 am

treat inherit as windfall. pretend it never exist. Put it side in a well diversified folio.

KlangFool
Posts: 10412
Joined: Sat Oct 11, 2008 12:35 pm

Re: Young and rich

Post by KlangFool » Mon Jun 18, 2018 10:28 am

afoolwithmoney wrote:
Sun Jun 17, 2018 8:45 pm

That puts us about 67% invested. Eventually I hope to put about $250k into a house but that's probably 2-5 years away.
afoolwithmoney,

What is your budget for the house? 1 million? 2 million?

California is a non-recourse loan state. You can walk away from the house if it is underwater. Do you really want to put more than 20% down on the house? Do you really want to put too many eggs into the housing basket?

KlangFool

KlangFool
Posts: 10412
Joined: Sat Oct 11, 2008 12:35 pm

Re: Young and rich

Post by KlangFool » Mon Jun 18, 2018 10:31 am

OP,

You are rich if you do not live in California. So, do you really want to commit to staying in California by buying an expensive house in California? Think about this before you buy the house.

KlangFool

smitcat
Posts: 1987
Joined: Mon Nov 07, 2016 10:51 am

Re: Young and rich

Post by smitcat » Mon Jun 18, 2018 10:42 am

"EDIT:
One kid on the way (in a few weeks)
We live in CA.
Total salary is $250k. 401k's maxed out."

Congratulations on your impending son/daughter, great news.
Your salary increase of near 40% in one year is stupendous - can you count on that in the future?

kaeltor
Posts: 101
Joined: Sat May 12, 2018 11:20 am

Re: Young and rich

Post by kaeltor » Mon Jun 18, 2018 12:27 pm

mpsz wrote:
Sun Jun 17, 2018 11:05 pm
eye.surgeon wrote:
Sun Jun 17, 2018 10:55 pm
You would do well to never again refer to yourself as rich, or you risk believing it and acting like it. Although you are fortunate, and ahead of the game, you are neither rich nor have you won the game yet. In some parts of the country, your net worth is the median price of a home, which you do not yet own.
Another +1 to this, and a +1 to the previous advice to tell no one.

This advice isn't intended to discourage you, and you likely just chose "young and rich" because it's an attention-grabbing title. But many people who start thinking they're "rich" will overspend. Telling people about your wealth or buying flashy things will make you a target in ways that you may not want.

I would decide on an asset allocation that works for you -- I like 110 minus age in bonds (so ~20-30% in bonds for you depending on where you are in your 30's). Invest the $1 MM and your existing savings according to this asset allocation and work on building the second million.
I completely agree with this advice. Unless you are at 5million+ you aren't really going to be completely financially secure unless you are living a very modest lifestyle.

afoolwithmoney
Posts: 16
Joined: Sun Aug 30, 2015 10:31 pm

Re: Young and rich

Post by afoolwithmoney » Mon Jun 18, 2018 1:20 pm

smitcat wrote:
Mon Jun 18, 2018 10:42 am
"EDIT:
One kid on the way (in a few weeks)
We live in CA.
Total salary is $250k. 401k's maxed out."

Congratulations on your impending son/daughter, great news.
Your salary increase of near 40% in one year is stupendous - can you count on that in the future?
Thanks! We're excited!

Unlikely that much of an increase will happen again so quickly - getting my PhD really helped boost my own salary from 30k to $160k pretty fast :)

But yeah the advice here has been good, I only say I'm "rich" because my net worth and income puts me at the top in the world, which is a bit crazy. I try not to spend like a rich person but I also choose to use that word (at least, anonymously and online) to remind myself how lucky I am and how most people aren't so lucky. We also donate a lot monthly for that reason.

User avatar
BeBH65
Posts: 1271
Joined: Sat Jul 04, 2015 7:28 am

Re: Young and rich

Post by BeBH65 » Mon Jun 18, 2018 1:30 pm

afoolwithmoney wrote:
Sun Jun 17, 2018 8:45 pm
Wife and I are incredibly lucky, in our 30s with an inheritance that puts our net worth at $1 million. All the advice I see out there for people our age suggests being 90% or more invested in the stock market. But that calculation is, as I understand, designed around the face that future income will dwarf our current savings. But with this kind of money this young, is 90% a good idea?
Tailor the portion you put in equity to the amount that you can and are willing too lose considering the stockmarket can lose 50% in the next crash.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

bltn
Posts: 211
Joined: Mon Feb 20, 2017 9:32 pm

Re: Young and rich

Post by bltn » Mon Jun 18, 2018 2:49 pm

Dottie57 wrote:
Mon Jun 18, 2018 9:20 am
Why don’t you put your money into a 50/50 or 60/40 allcation until your first bear market? See how you react to a large loss. Then reset your allocation if you feel your allocation is too conservative.
This really is good advice. I would only add that you should subtract the amount that you intend for the down payment for your house and a six months of income emergency fund from your total funds to decide on the amount in your investment account. This is the amount to be allocated as suggested above.
In your position, aside from the house purchase, I would continue to live my normal life and consider the windfall just a modest headstart in the race for financial security. I would save and spend as though the inheritance never happened. I would never mention this money , or any of my future wealth accumulation, to anybody. I personally prefer that my friends and neighbors know nothing of my net worth. Life is much simpler that way.

DC3509
Posts: 280
Joined: Wed Jul 12, 2017 7:25 am

Re: Young and rich

Post by DC3509 » Mon Jun 18, 2018 6:52 pm

kaeltor wrote:
Mon Jun 18, 2018 12:27 pm
mpsz wrote:
Sun Jun 17, 2018 11:05 pm
eye.surgeon wrote:
Sun Jun 17, 2018 10:55 pm
You would do well to never again refer to yourself as rich, or you risk believing it and acting like it. Although you are fortunate, and ahead of the game, you are neither rich nor have you won the game yet. In some parts of the country, your net worth is the median price of a home, which you do not yet own.
Another +1 to this, and a +1 to the previous advice to tell no one.

This advice isn't intended to discourage you, and you likely just chose "young and rich" because it's an attention-grabbing title. But many people who start thinking they're "rich" will overspend. Telling people about your wealth or buying flashy things will make you a target in ways that you may not want.

I would decide on an asset allocation that works for you -- I like 110 minus age in bonds (so ~20-30% in bonds for you depending on where you are in your 30's). Invest the $1 MM and your existing savings according to this asset allocation and work on building the second million.
I completely agree with this advice. Unless you are at 5million+ you aren't really going to be completely financially secure unless you are living a very modest lifestyle.
I find a lot of the comments to this thread very interesting. Most of the people who have replied have been trying to impress on the OP that OP didn't actually inherit that much money, that OP should hoard it all, not spend any, etc.

Reality check -- the vast, vast, vast, vast majority of people in the United States -- let alone people globally -- will never have a net worth of $5 million dollars. Here is the official graph on it:

https://dqydj.com/net-worth-brackets-we ... e-percent/

If you get up to $5 million, you are in the top 97-98%. There are literally hundreds of millions of people who will retire and have a net worth of far less than $5 million and still feel financially "secure." These sorts of replies only show how out of touch a lot of people are who post here.

Now to the OP's specific inheritance -- using the same stats -- if you have $1 million dollars net worth in your 30s, you are in the top 1 percent for your age group. The people who keep posting and trying to convert $1 million into $40,000 -- the OP is in his 30s. He isn't drawing down 4% tomorrow. The much more realistic way of looking at the math is what if the OP takes $750K of it (consistent with his post), invests it in a low-cost index fund, and forgets about it? And never invests another dime, splurges on cars, boats, vacations, quits funding his 401K, etc.? Even if he doesn't contribute another nickel to anything, the $750,000 will grow to $7.5 million in 30 years, assuming 8% return. No, the OP hasn't won the game yet, but he its like he scored 10 runs in the 3rd inning.

As for the people who keep posting that you can't change anything, or tell anyone, or do anything differently -- I agree that the OP shouldn't blow this money. But if he wants to take a small chunk of it and do something fun -- be it a vacation he might not otherwise take, a better car, some other life experience, etc. -- then I say go for it. I imagine whoever you inherited the money from did not leave this to you with the intent that you would never enjoy any of it for 30 years and feel bad about inheriting it.

Now, that all being said -- I recommend you put the $250K in the Vanguard bond fund; do something fun; and then invest the rest in a split between Vanguard Total Stock and Vanguard International. And yes, forget about it, but know that you are MUCH further ahead than most people your age. And there is nothing wrong with that, even if you acquired the money in an inheritance.

sschullo
Posts: 2431
Joined: Sun Apr 01, 2007 8:25 am
Location: Rancho Mirage, CA
Contact:

Re: Young and rich

Post by sschullo » Mon Jun 18, 2018 7:12 pm

I think you will be OK because you are wise enough to come here and seek advice. Sooooo, whatever you do with all the good advice you have received make sure your wife is on board with you! She must agree to invest this huge amount of money and leave it alone long term, and that it will be best for both of you, and your family in the future.
That is a huge challenge! Can you really invest it and leave it alone for years?
The temptation to buy two expensive new cars, a bigger house and private school for the children will be very compelling.
And then what if a family member comes begging?
Books have been written about lottery winners losing it all in about five years.
As I said, I think you and your wife will be fine as you came here. There are many wise people on this board. Take their advice!
Good luck
Public School K-12 Educators: "Ask NOT what your annuity sales person can do for you, ask what you can do to be a Do-It-Yourselfer (DIY)."

Post Reply