Investing While Unemployed

[IHateDebt]

Last month my company had to take drastic cost cutting measures and, unfortunately, I was one of the casualties. I had been following the BH investing philosophies pretty religiously for the last 5-7 years. I was able to eliminate all of my debt (credit cards, mortgage, car loans, etc) and generally keep my expenses in check. My wife is still working as a teacher and is unlikely to have any disruption in her employment. We currently have around $525K in retirement money. We also have around $150K in cash due to a large influx of money I received from my 2019 bonus and severance when my position was eliminated.

Right now a good portion of our retirement is in cash because I had to roll over my 401K into my Vanguard IRA. This is taking far too long and it's making me very uncomfortable as the stock market goes up and down like a rollercoaster. I'm starting to get nervous that I'm going to wind up locking in big losses if the market starts to go up.

Two questions:
1. Once my funds clear in Vanguard, should I invest it all back into the stock market right away (according to my investment plan of course) even if it's a loss from where I sold it a little over a week ago or should I invest it gradually over a period of time?
2. Now that I no longer have access to retirement savings, should I start investing our savings in taxable accounts or should I stay in cash until I can find a new job? And if so, how do you think I should approach this?

[daheld]

Two questions:
1. Once my funds clear in Vanguard, should I invest it all back into the stock market right away (according to my investment plan of course) even if it's a loss from where I sold it a little over a week ago or should I invest it gradually over a period of time? I would.


2. Now that I no longer have access to retirement savings, should I start investing our savings in taxable accounts or should I stay in cash until I can find a new job? And if so, how do you think I should approach this? I would continue to contribute to a taxable account in the meantime. You obviously have to consider emergency funds (of which it sounds like you have plenty), but I would continue to save and contribute to some form of retirement savings if possible.

[Kobinator]

Potential alternative on #2: did you invest in 401k fully when employed? If not, then you could keep the cash now but bump up 401k contributions to max when you regain employment. This allows you to keep cash in the near-term, which would reassure me in a time of personal and global uncertainty.

If you did invest in 401k fully, then sure, I'd continue to invest in a taxable account in the near term.

[retiredjg]

Welcome to the forum.

1. Once my funds clear in Vanguard, should I invest it all back into the stock market right away (according to my investment plan of course) even if it's a loss from where I sold it a little over a week ago or should I invest it gradually over a period of time?

When money comes out of the market for whatever reason (like to move it), it should go back into the market immediately. This should be seen as a sideways move, not starting over.

The fact that the market might have gone down should be considered a good thing. Prices have gone down. You get more shares per dollar when prices are down.

2. Now that I no longer have access to retirement savings, should I start investing our savings in taxable accounts or should I stay in cash until I can find a new job? And if so, how do you think I should approach this?

What about putting new savings into Roth IRA? If you are not eligible, you can invest in a taxable account (broad index funds are good for this). The only reason you would stay in cash is because your emergency fund is not large enough. If it is, go ahead and invest. If you don't know, invest some and save some.

[BrownEyedGirl_27]

Sorry about your job loss.

What are your ages?

What is your annual spending?

I don’t know what advice to give without some more information. Good for you not having debt.

[aristotelian]

While you are low income, you probably want to place a higher priority on Roth. Roth contributions can always be withdrawn at any time. You could always keep your Roth contributions in a money market or short term bond fund for additional security beyond your emergency fund until you are gainfully employed again. This would allow you to take advantage of your Roth limit without risking your liquidity in the stock market. https://www.investopedia.com/articles/p ... y-fund.asp

What is your cashflow like on just the one income? If you can cover basic expenses on one income I would stay invested but if your cashflow is negative I would definitely set aside some cash.

[IHateDebt]

Thanks for the responses. Sorry for replying to this so late, but it's been a crazy few days. I might have a job opportunity, but it will be at a reduced compensation of around 20%. I'm debating whether or not I should take it. In this environment, I might do it until I can find something that fits my skill set a little better. I'm still trying to work through all of this.

To answer some of the questions that were posed. My wife and I are in our early 40s. Normally we like to vacation, go out to dinner, etc and our spending is on the high side. But when we have to, we can really dial it back. We can get by on around $2K/mo to cover everything. That will only last so long before my wife kills me.

I don't think Roth will be an option this year. I made a lot of money the first quarter this year. The company I worked for had a great 2019 and we were on track for another record 2020 before it all fell apart. I was paid my bonus weeks before the virus started shutting everything down. And then I was given a pretty decent severance when my position was eliminated.