Too cash heavy, but do not know how to begin - please help :)

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vtg
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Joined: Wed Oct 14, 2020 7:48 pm

Too cash heavy, but do not know how to begin - please help :)

Post by vtg »

Hey all -

As stated in the title, I am being advised by most of my most trusted confidants that I am making major financial mistakes but being too heavily leveraged in cash. I do have a few friends RobinHood'ing and making a killing so I am having a bit of FOMO, but I am also very risk adverse. Situation is below

Age: 40
Martial Status: Single
Children: None
Planned Children: None
State of Residence: SC

401k's: Maxxed out contributions; accounts are healthy
Roth: Not eligible

Cash: ~400k (High Yield Savings running at .6%)
Mortgage Balance: ~420k @ 3.125
Home Value: ~810k
Stocks: 1k USD in United for fun to ride out covid

Other debt: 0; None
Monthly Excess: ~3500k + Frequent substantial bonuses

I have considered recasting my mortgage down to like 300 to avoid paying that interest rate on the delta. I have also considered getting into some Vanguard index funds. I have a healthy emergency fund here and I would obviously like to pay off the house in the next 5-10 years which is within reach. Welcome any thoughts from the group on where to go from here..
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dogagility
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by dogagility »

vtg wrote: Wed Oct 14, 2020 7:58 pm Hey all -

As stated in the title, I am being advised by most of my most trusted confidants that I am making major financial mistakes but being too heavily leveraged in cash. I do have a few friends RobinHood'ing and making a killing so I am having a bit of FOMO, but I am also very risk adverse. Situation is below

Age: 40
Martial Status: Single
Children: None
Planned Children: None
State of Residence: SC

401k's: Maxxed out contributions; accounts are healthy
Roth: Not eligible

Cash: ~400k (High Yield Savings running at .6%)
Mortgage Balance: ~420k @ 3.125
Home Value: ~810k
Stocks: 1k USD in United for fun to ride out covid

Other debt: 0; None
Monthly Excess: ~3500k + Frequent substantial bonuses

I have considered recasting my mortgage down to like 300 to avoid paying that interest rate on the delta. I have also considered getting into some Vanguard index funds. I have a healthy emergency fund here and I would obviously like to pay off the house in the next 5-10 years which is within reach. Welcome any thoughts from the group on where to go from here..
First, Welcome to the forum.

Second, you are bleeding cash by keeping your portfolio in cash. My advice is to start here: https://www.bogleheads.org/wiki/Getting_started
All children spill milk. Learn to smile and wipe it up. -- A Farmer's Wife
tenkuky
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Joined: Sun Dec 14, 2014 4:28 pm

Re: Too cash heavy, but do not know how to begin - please help :)

Post by tenkuky »

Welcome.
Instead of FOMO, spend energy and your excess cash to reduce your debt. Some on here would suggest mortgage is last debt to tackle, but it is good SWAN (sleep well at night) to whittle that down.
Make a plan to pay extra towards it. Don't recast, but pay it down.
Secondly, while you state "not eligible for Roth" you could always do "backdoor Roth". Look at the wiki how to do this (assuming your traditional IRA balance is zero so as not to have a pro-rata problem).
Finally, start building your taxable account, with Total Stock Market Index.
You don't need more than 12-18 months of expenses in cash for emergency fund.
JBTX
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by JBTX »

vtg wrote: Wed Oct 14, 2020 7:58 pm Hey all -

As stated in the title, I am being advised by most of my most trusted confidants that I am making major financial mistakes but being too heavily leveraged in cash. I do have a few friends RobinHood'ing and making a killing so I am having a bit of FOMO, but I am also very risk adverse. Situation is below

Age: 40
Martial Status: Single
Children: None
Planned Children: None
State of Residence: SC

401k's: Maxxed out contributions; accounts are healthy
Roth: Not eligible

Cash: ~400k (High Yield Savings running at .6%)
Mortgage Balance: ~420k @ 3.125
Home Value: ~810k
Stocks: 1k USD in United for fun to ride out covid

Other debt: 0; None
Monthly Excess: ~3500k + Frequent substantial bonuses

I have considered recasting my mortgage down to like 300 to avoid paying that interest rate on the delta. I have also considered getting into some Vanguard index funds. I have a healthy emergency fund here and I would obviously like to pay off the house in the next 5-10 years which is within reach. Welcome any thoughts from the group on where to go from here..
Your options appear to be investing in taxable accounts or paying down mortgage. The extent to which you do depends on the composition and amount of your "healthy" tax advantaged accounts.

I'd probably pay down enough of the mortgage to where you can refi at a lower rate, and probably go 15 years. Then put $10k every year in ibonds and $10k in eebonds- assuming you will hold them 20 years to double. Keep about a years worth of EF - and invest whatever is left in a taxable account w index funds.
pkcrafter
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by pkcrafter »

vtg:
401k's: Maxxed out contributions; accounts are healthy
what are your holdings in the 401k?


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.
Topic Author
vtg
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by vtg »

pkcrafter wrote: Wed Oct 14, 2020 8:54 pm vtg:
401k's: Maxxed out contributions; accounts are healthy
what are your holdings in the 401k?


Paul
Roughly 750k spread across three accounts leveraging the basic 2045 target distribution index funds; contributing federal max currently, however my company does not offer any match.
ivgrivchuck
Posts: 299
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by ivgrivchuck »

vtg wrote: Wed Oct 14, 2020 7:58 pm Hey all -

As stated in the title, I am being advised by most of my most trusted confidants that I am making major financial mistakes but being too heavily leveraged in cash. I do have a few friends RobinHood'ing and making a killing so I am having a bit of FOMO, but I am also very risk adverse. Situation is below

Age: 40
Martial Status: Single
Children: None
Planned Children: None
State of Residence: SC

401k's: Maxxed out contributions; accounts are healthy
Roth: Not eligible

Cash: ~400k (High Yield Savings running at .6%)
Mortgage Balance: ~420k @ 3.125
Home Value: ~810k
Stocks: 1k USD in United for fun to ride out covid

Other debt: 0; None
Monthly Excess: ~3500k + Frequent substantial bonuses
Holding cash or bonds (apart from emergency fund) when you have a mortgage is a losing deal. You are getting 0.6% and paying 3.1%.

On one extreme: Use all your cash (apart from emergency fund) to pay back the mortgage
On another extreme: Use all your cash (apart from emergency fund) to buy stocks (like VTI)

You probably don't want to go into either of those extremes, but find the sweet spot in the middle. It depends on your risk tolerance.
44% VTI | 36% VXUS | 10% I-bonds | 10% EE-bonds
pkcrafter
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by pkcrafter »

Roughly 750k spread across three accounts leveraging the basic 2045 target distribution index funds; contributing federal max currently, however my company does not offer any match.
vtg, you used the word "leverage," what does that mean? The usual meaning is:
Leveraged investing is a technique that seeks higher investment profits by using borrowed money.
What is the name of the target fund? Is there a ticker?


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.
lgb
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by lgb »

If you pay off your house (keeping what you need for a 6 month emergency fund and using your excess and substantial bonuses to get you to the whole amount to not just kind of get to the finish line with that, but to actually win the race and cross the finish line and kill off the mortgage), you may feel more at ease funneling all remaining available into actual investments, your excess and substantial bonus and now your mortgage payment.

I can't say I've done exactly that myself, but after paying off our house there was a new level of contentment that may move the needle for you in one direction or another that might be the key to helping you start investing more of what you have available. I'd steer clear of your friends robinhood success, of course you'll hear about it when things are good and it will be spookily quiet when not :happy - you won't care as you'll realize even clearer if you do the above, someone in your situation may not need all that much to be content - removing the burden I suspect the mortgage may have on you. Then you probably need to have some written goals - if you don't have other things motivating you. (kids, college savings that some have) - you can start your own personal list of 'stuff' you want to do/have/give/help etc... and again, get across the finish line and do them one by one and keep adding to your list.
mortfree
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by mortfree »

400k cash

120k as emergency fund / cash pile
120k to mortgage
160k to VTI (or VTSAX)

Extra $3500
2000 to mortgage
1500 to VTI (or VTSAX)

bonus
Mortgage

Simple. Can you do it?
ivgrivchuck
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by ivgrivchuck »

mortfree wrote: Thu Oct 15, 2020 1:53 am 400k cash

120k as emergency fund / cash pile
120k to mortgage
160k to VTI (or VTSAX)

Extra $3500
2000 to mortgage
1500 to VTI (or VTSAX)

bonus
Mortgage

Simple. Can you do it?
Not a bad plan.
44% VTI | 36% VXUS | 10% I-bonds | 10% EE-bonds
3funder
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by 3funder »

Assuming you are as risk-averse as you claim to be, I have a few suggestions:

1) If you have gains or have broken even, sell the United stock. If your initial investment, which is extremely small to begin with, grew by a multiple of 25, for example, (which it probably won't), it wouldn't matter, as you've saved a lot of money in retirement accounts.

2) Use 50% of the cash to pay down your mortgage, retain 25% as an emergency fund, and invest the remaining 25% in an even mix of stocks and bonds (I recommend spreading it equally among VTI/VTSAX, VXUS/VTIAX, and BND/VBTLX).

3) Direct 50% of the excess monthly cash flow to your mortgage and 50% to your taxable account, per your chosen asset allocation. Once your mortgage is paid off, direct the entirety of the excess monthly cash flow to your taxable account.

There are many ways to skin this cat; this is one of them.
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KingRiggs
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by KingRiggs »

PLEASE read up on the "Backdoor Roth" process. You are missing out on tax-free growth that you should be taking advantage of.
Advice = noun | Advise = verb | | Roth, not ROTH
Mrxyz
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by Mrxyz »

Change mortgage to 15 year if it is 30 year at present.
You are getting 3% return by paying off mortgage which is pretty good.
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ruralavalon
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by ruralavalon »

KingRiggs wrote: Thu Oct 15, 2020 9:24 am PLEASE read up on the "Backdoor Roth" process. You are missing out on tax-free growth that you should be taking advantage of.
Please see the wiki article "Backdoor Roth" .
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Katietsu
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by Katietsu »

Given how aggressive your 401k is invested, you have pretty close to a 60/40 portfolio. So, your overall allocation is reasonable.

Do start the Roth IRA using the backdoor approach if needed. That is a no lose.

Do you have any stable value funds with a decent interest rate in the 401k? If so, I would consider moving some funds from the 2045 TDF into the stable value while opening a taxable brokerage account to invest the same amount in equities. This would increase the rate on cash, improve the tax placement and add no additional risk.
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dziuniek
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by dziuniek »

So you got monthly excess and pretty much enough to pay off your mortgage.....

Either lump sum into the market (or DCA is you have the jitters)

or

Pay Off Mortgage.

Either will work....

Hard to answer without knowing how much you've got saved in retirement / or college funds /etc...

Define healthy and what your annual expesnses are.
ivgrivchuck
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by ivgrivchuck »

3funder wrote: Thu Oct 15, 2020 6:17 am Assuming you are as risk-averse as you claim to be, I have a few suggestions:

1) If you have gains or have broken even, sell the United stock. If your initial investment, which is extremely small to begin with, grew by a multiple of 25, for example, (which it probably won't), it wouldn't matter, as you've saved a lot of money in retirement accounts.

2) Use 50% of the cash to pay down your mortgage, retain 25% as an emergency fund, and invest the remaining 25% in an even mix of stocks and bonds (I recommend spreading it equally among VTI/VTSAX, VXUS/VTIAX, and BND/VBTLX).

3) Direct 50% of the excess monthly cash flow to your mortgage and 50% to your taxable account, per your chosen asset allocation. Once your mortgage is paid off, direct the entirety of the excess monthly cash flow to your taxable account.

There are many ways to skin this cat; this is one of them.
Otherwise good, but one should not purchase bonds while holding a mortgage. Any potential investments towards bonds are better spent by paying down the mortgage quicker.
44% VTI | 36% VXUS | 10% I-bonds | 10% EE-bonds
Topic Author
vtg
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by vtg »

vtg, you used the word "leverage," what does that mean? The usual meaning is:
What is the name of the target fund? Is there a ticker?

Paul
sorry bad language there, no ticker its one of their portfolios like Fidelity Target 2045 fund, I honestly have no idea whats inside :(
Topic Author
vtg
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by vtg »

mortfree wrote: Thu Oct 15, 2020 1:53 am Simple. Can you do it?
Brilliant - love it - I think I can :)
Topic Author
vtg
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by vtg »

3funder wrote: Thu Oct 15, 2020 6:17 am Assuming you are as risk-averse as you claim to be, I have a few suggestions:
There are many ways to skin this cat; this is one of them.
Thank you so much - very much inline w/ the type of ideas I needed to get started.
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vtg
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by vtg »

KingRiggs wrote: Thu Oct 15, 2020 9:24 am PLEASE read up on the "Backdoor Roth" process. You are missing out on tax-free growth that you should be taking advantage of.
Investigating now :) Looks like a solid way to invest 6k a year
protagonist
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by protagonist »

Others will prob. disagree , but if I were in your shoes I would keep $50K in cash for emergencies plus what you may need to pay your taxes and fund your retirement account, and put the rest towards your mortgage, with a plan to pay the house off completely within the next couple of years if not sooner.

If you are getting 0.6% interest on ~400K and paying 3.125% interest on ~400K you are losing money. The stock market is pretty unpredictable with all the stuff going on in the world right now and the bond/CD market is dicey with interest rates near zero. It is a perfect time to get out of debt. Once your house is paid off, you will also have the security of knowing you own it , the psychological value of which is hard to put a price on. At that point you can re-assess and start putting excess money into a financial portfolio (outside of your retirement account).
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vtg
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by vtg »

protagonist wrote: Thu Oct 15, 2020 5:21 pm Others will prob. disagree , but if I were in your shoes I would keep $50K in cash for emergencies plus what you may need to pay your taxes and fund your retirement account, and put the rest towards your mortgage, with a plan to pay the house off completely within the next couple of years if not sooner.
If I make paying down the mortgage the core of this plan, would it make sense to recast it down like 150k now to avoid paying interest on that 150k and then plan to just be done with it in the next 3-5?
pkcrafter
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by pkcrafter »

vtg wrote: Thu Oct 15, 2020 4:48 pm
vtg, you used the word "leverage," what does that mean? The usual meaning is:
What is the name of the target fund? Is there a ticker?

Paul
sorry bad language there, no ticker its one of their portfolios like Fidelity Target 2045 fund, I honestly have no idea whats inside :(
Is it Fidelity Target 2045 or Fidelity Freedom 2045? Which ever it is, the allocation is about 90% stocks. That's not a good fund for someone who is risk averse.


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.
ivgrivchuck
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by ivgrivchuck »

protagonist wrote: Thu Oct 15, 2020 5:21 pm Others will prob. disagree , but if I were in your shoes I would keep $50K in cash for emergencies plus what you may need to pay your taxes and fund your retirement account, and put the rest towards your mortgage, with a plan to pay the house off completely within the next couple of years if not sooner.
That's a fine plan as well. It's all about one's risk tolerance. 3% risk free return is not bad, when stock market long term predicted return is 5%-5.5%.

Especially since OP seems to be a risk averse person, this might even be the best plan for him.
44% VTI | 36% VXUS | 10% I-bonds | 10% EE-bonds
MikeG62
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by MikeG62 »

vtg wrote: Thu Oct 15, 2020 6:33 pm
protagonist wrote: Thu Oct 15, 2020 5:21 pm Others will prob. disagree , but if I were in your shoes I would keep $50K in cash for emergencies plus what you may need to pay your taxes and fund your retirement account, and put the rest towards your mortgage, with a plan to pay the house off completely within the next couple of years if not sooner.
If I make paying down the mortgage the core of this plan, would it make sense to recast it down like 150k now to avoid paying interest on that 150k and then plan to just be done with it in the next 3-5?
Yup that's what I would do if in your shoes. Maybe not pay off fully in 3-5 years, but pay if much sooner than if you left it as is.
Real Knowledge Comes Only From Experience
3funder
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by 3funder »

ivgrivchuck wrote: Thu Oct 15, 2020 2:56 pm
3funder wrote: Thu Oct 15, 2020 6:17 am Assuming you are as risk-averse as you claim to be, I have a few suggestions:

1) If you have gains or have broken even, sell the United stock. If your initial investment, which is extremely small to begin with, grew by a multiple of 25, for example, (which it probably won't), it wouldn't matter, as you've saved a lot of money in retirement accounts.

2) Use 50% of the cash to pay down your mortgage, retain 25% as an emergency fund, and invest the remaining 25% in an even mix of stocks and bonds (I recommend spreading it equally among VTI/VTSAX, VXUS/VTIAX, and BND/VBTLX).

3) Direct 50% of the excess monthly cash flow to your mortgage and 50% to your taxable account, per your chosen asset allocation. Once your mortgage is paid off, direct the entirety of the excess monthly cash flow to your taxable account.

There are many ways to skin this cat; this is one of them.
Otherwise good, but one should not purchase bonds while holding a mortgage. Any potential investments towards bonds are better spent by paying down the mortgage quicker.
Mathematically speaking, I agree.
inbox788
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by inbox788 »

MikeG62 wrote: Fri Oct 16, 2020 8:44 am
vtg wrote: Thu Oct 15, 2020 6:33 pm
protagonist wrote: Thu Oct 15, 2020 5:21 pm Others will prob. disagree , but if I were in your shoes I would keep $50K in cash for emergencies plus what you may need to pay your taxes and fund your retirement account, and put the rest towards your mortgage, with a plan to pay the house off completely within the next couple of years if not sooner.
If I make paying down the mortgage the core of this plan, would it make sense to recast it down like 150k now to avoid paying interest on that 150k and then plan to just be done with it in the next 3-5?
Yup that's what I would do if in your shoes. Maybe not pay off fully in 3-5 years, but pay if much sooner than if you left it as is.
Why recast? Lower interest rate? How much lower? Lower monthly payment? With 3-5 years, if zero cost and little trouble, the lower interest rate may be helpful, but if the rate doesn’t change, savings may be minor vs. simply paying down principal. Less time is less savings. And if you have to pay fees or points, you’d have to do the math and use better estimates.

OP, how much is your emergency fund? Or is the 400k the emergency fund?

If you have a separate emergency fund, consider just paying off mortgage today. Without a mortgage, you can be more aggressive with your investments, but you don’t have to if you want to be more conservative.

Also, does the Target Date Fund have the word “index” in it? How much are the fees? Fidelity has expensive active Target Date funds if you’re careful to avoid. Compare FFFGX to FIOFX.
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StormShadow
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by StormShadow »

vtg wrote: Wed Oct 14, 2020 7:58 pm I do have a few friends RobinHood'ing and making a killing so I am having a bit of FOMO, but I am also very risk adverse.
...
I have considered recasting my mortgage down to like 300 to avoid paying that interest rate on the delta. I have also considered getting into some Vanguard index funds. I have a healthy emergency fund here and I would obviously like to pay off the house in the next 5-10 years which is within reach. Welcome any thoughts from the group on where to go from here..
Stay away from stocks/mutual funds... at least until you feel psychologically ready to assume more risk.

Paying down your mortgage, buying CD's, maybe buying some bonds and having a healthy emergency fund are fine investment plans in the meantime... and will help you sleep peacefully at night.
inbox788
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by inbox788 »

pkcrafter wrote: Thu Oct 15, 2020 10:19 pmIs it Fidelity Target 2045 or Fidelity Freedom 2045? Which ever it is, the allocation is about 90% stocks. That's not a good fund for someone who is risk averse.
Either is adequate with a 25 year retirement horizon. I wouldn’t worry about the high stock allocation. All the target funds with long investment timeframes have high stock allocation. Sometimes, for a risk averse person, it’s better not knowing how the sausage is made. A lot of risk averse investors are paying high fees to advisors taking similar risks if not more to make up for the higher fees. I’d choose the index fund if available, but fund choice is secondary to AA and sometimes limited in retirement plans.
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vtg
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by vtg »


Why recast? Lower interest rate? How much lower? Lower monthly payment?

OP, how much is your emergency fund? Or is the 400k the emergency fund?

400 is currently all the cash available; emergency and all. :)

Recast wont change the interest rate but it should lower the total amount of interest I pay over the next, say 5 years, until the mortgage is gone completely.
MikeG62
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by MikeG62 »

vtg wrote: Fri Oct 16, 2020 12:35 pm

Why recast? Lower interest rate? How much lower? Lower monthly payment?

OP, how much is your emergency fund? Or is the 400k the emergency fund?

400 is currently all the cash available; emergency and all. :)

Recast wont change the interest rate but it should lower the total amount of interest I pay over the next, say 5 years, until the mortgage is gone completely.
Vtg has a good point - the recast might result in fees. Maybe better off just making extra payments toward principal (even including a large one time slug). The point being get the principal lower so the interest charged is lower.

Of course doing a recast might result in lower monthly payments (as lower mortgage amount more than offsets the impact of paying off the mortgage over a shorter term). If lower monthly payments are really important then maybe that factors into the equation. However given you seem pretty flush with cash, I doubt this is a big factor for you.

Ultimately I believe that paying off at least a good size chunk of the mortgage is a guaranteed return of 3.0%. Can’t get that in fixed income these days and way better than the 0.60% you are getting on the excess cash now.
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inbox788
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by inbox788 »

vtg wrote: Fri Oct 16, 2020 12:35 pm400 is currently all the cash available; emergency and all. :)

Recast wont change the interest rate but it should lower the total amount of interest I pay over the next, say 5 years, until the mortgage is gone completely.
How much is the emergency fund? What else is the rest? It’s not something we can answer if you don’t know the answer. It’s a little like you telling us you’re hungry and we try to tell you what and how much to eat.

Whats the math behind recast, monthly payment and interest paid? Does required monthly payment go up or down? I think you save MORE paying a lump sum now by avoiding fees and costs.
protagonist
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by protagonist »

ivgrivchuck wrote: Fri Oct 16, 2020 1:41 am
protagonist wrote: Thu Oct 15, 2020 5:21 pm Others will prob. disagree , but if I were in your shoes I would keep $50K in cash for emergencies plus what you may need to pay your taxes and fund your retirement account, and put the rest towards your mortgage, with a plan to pay the house off completely within the next couple of years if not sooner.
That's a fine plan as well. It's all about one's risk tolerance. 3% risk free return is not bad, when stock market long term predicted return is 5%-5.5%.

Especially since OP seems to be a risk averse person, this might even be the best plan for him.
I don't think of myself as particularly risk-averse (I'm still close to 50% in stock at age 68), but I am debt-averse. You are correct....if OP wants to take more risk, believing that he can get 5-5.5% in the stock market, and does not mind dealing with the fact that he has to pay 3.125% interest (which is above average inflation, and even tax-adjusted may still be above inflation going forward) on a large principal, then other options could be considered.


Investing involves a lot of unknown variables, and one size does not fit all.
Last edited by protagonist on Fri Oct 16, 2020 5:45 pm, edited 1 time in total.
protagonist
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Re: Too cash heavy, but do not know how to begin - please help :)

Post by protagonist »

MikeG62 wrote: Fri Oct 16, 2020 8:44 am
vtg wrote: Thu Oct 15, 2020 6:33 pm
protagonist wrote: Thu Oct 15, 2020 5:21 pm Others will prob. disagree , but if I were in your shoes I would keep $50K in cash for emergencies plus what you may need to pay your taxes and fund your retirement account, and put the rest towards your mortgage, with a plan to pay the house off completely within the next couple of years if not sooner.
If I make paying down the mortgage the core of this plan, would it make sense to recast it down like 150k now to avoid paying interest on that 150k and then plan to just be done with it in the next 3-5?
Yup that's what I would do if in your shoes. Maybe not pay off fully in 3-5 years, but pay if much sooner than if you left it as is.
Personally I would pay it off as soon as I could, while still funding my retirement. But that's me. I don't like being in debt....never did....and that approach has served me very well throughout my lifetime.
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