Low seven figure windfall looking for advice

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AlexC
Posts: 43
Joined: Mon Aug 03, 2009 3:41 pm

Low seven figure windfall looking for advice

Post by AlexC » Tue Aug 14, 2018 8:14 am

FIrstly, let me say thank you to all of the generous Boggleheads who share their advice on this amazing forum - it's been an invaluable education. Spouse and I recently sold home for 1 million+ net and are looking for direction on what to do with funds. Current situation:

Me 56 - partner in LLC + W2 income
Spouse 50 - state university employee, will retire next year with small COLA'd pension
Current portfolio $1.5 million all in tax sheltered 401ks, 457B, 403B and Roth IRAs (all from backdoor)
Current asset allocation 65/35 all Vanguard or Fidelity index funds
Currently 28% tax bracket, 9% high tax state
No kids
Will rent for at least a year till decide next move

Only debt is $300k mortgage on home in Europe - estimated value $1+ million. May retire to Europe as I hold dual citizenship
Live well below means, do not anticipate that changing much in retirement at around age 62

Cash windfall shifts portfolio to very conservative AA, not sure if we should go that conservative
Thinking of two $500k CD ladders but maybe should look more at bond funds or tax free munis? Though never a market timer, somewhat reluctant to invest in equities right now given the strength/length of current bull market.

Looking for advice/options/opinions. Hugely thankful for both any input and having this 'challenge'!

Jack FFR1846
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Re: Low seven figure windfall looking for advice

Post by Jack FFR1846 » Tue Aug 14, 2018 8:23 am

What's the % on the European mortgage? Personally, I'm very debt averse and would pay off that mortgage unless it's some unbelievable rate like 1%. I paid my mortgage off years ago and have never regretted it. It's very nice to write a check for $0 every month instead of thousands.
Bogle: Smart Beta is stupid

Dottie57
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Re: Low seven figure windfall looking for advice

Post by Dottie57 » Tue Aug 14, 2018 8:34 am

Jack FFR1846 wrote:
Tue Aug 14, 2018 8:23 am
What's the % on the European mortgage? Personally, I'm very debt averse and would pay off that mortgage unless it's some unbelievable rate like 1%. I paid my mortgage off years ago and have never regretted it. It's very nice to write a check for $0 every month instead of thousands.
Pay ff mortgage is good. If I had that nice amount, I would put at least (bare minimum) 20% in stock index for growth.

AlexC
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Joined: Mon Aug 03, 2009 3:41 pm

Re: Low seven figure windfall looking for advice

Post by AlexC » Tue Aug 14, 2018 11:25 am

European mortgage is 2.63%. We got the mortgage as a currency hedge since we convert dollars to pay mortgage in euros. Has been a good idea thus far but is of course unpredictable.

Will probably go with some in stock index but oy, the market is a little scary right now.

Dandy
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Re: Low seven figure windfall looking for advice

Post by Dandy » Tue Aug 14, 2018 2:45 pm

You don't seem to have a need to take much risk given your income, assets and windfall and that you do and plan to live somewhat below your means. So, you need to figure out what overall allocation now makes sense. It may be that a shift to more asset preservation vs growth is in play. Maybe a 55/45 or 50/50 allocation might be in order.

I agree that today's somewhat high equity valuations make lump sum investing a bit scary. I would move toward the new allocation gradually and consider a diversity of fixed income e.g. some "safe" CDs, some short term bond funds and some intermediate bond funds.

Keep an eye on taxes by having some of that fixed income in muni bond funds and/or Treasuries.
VG LTD term tax exempt and Intermediate Tax exempt funds are decent selections as would be Treasury Bills or short term Treasury fund.

AlexC
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Joined: Mon Aug 03, 2009 3:41 pm

Re: Low seven figure windfall looking for advice

Post by AlexC » Tue Aug 14, 2018 10:07 pm

Thanks Dandy, very helpful.

AlphaLess
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Re: Low seven figure windfall looking for advice

Post by AlphaLess » Tue Aug 14, 2018 10:53 pm

AlexC wrote:
Tue Aug 14, 2018 11:25 am
European mortgage is 2.63%. We got the mortgage as a currency hedge since we convert dollars to pay mortgage in euros. Has been a good idea thus far but is of course unpredictable.
Can you explain how a mortgage in EUR on a European home is a hedge?
"You can get more with a kind word and a gun than with just a kind word." George Washington

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Sandtrap
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Re: Low seven figure windfall looking for advice

Post by Sandtrap » Tue Aug 14, 2018 11:01 pm

1. Read:MANAGING A WINDFALL
https://www.bogleheads.org/wiki/Managing_a_windfall

2. Given you short term horizon and tentative status over the next year or so, your instincts are correct.
Short Term CD ladder (brokered CD's), Treasuries, etc. (no bond funds).

3. Address your debts.

j

msk
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Re: Low seven figure windfall looking for advice

Post by msk » Wed Aug 15, 2018 12:29 am

Basically your future seems assured with or without the recent windfall, so I see no need for major risk aversion. Personally I would pay off any mortgage and put the rest into Worldwide Stocks, e.g. VT if you are a US tax resident, VWRD if an EU tax resident. There is as much chance of a 50% market fall as a doubling over the next several years. The extra money may come in very handy in your 70s. Who knows?! Extra $ always welcome. About the only certainty we have is that inflation will prevail, and a high probability that it will run faster than deposit rates on CDs.

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