I have 500k to invest but keep procrastinating

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Reuben1980
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I have 500k to invest but keep procrastinating

Post by Reuben1980 »

I’m 42. Have a house paid off, brand new car paid off. No student loans. Have two kids 12 and 6 years old. My wife works too, we make between 110k to 150k annually most comes from my job as she only makes 30k. We r debt free. I have been reading a lot . I’ve learned about investing. Started 2 years ago with Roth ira and 40k up to the company match and maxing out the Roth. My problem is not these retirement accounts. I’m having trouble deciding what to do. I have been working very hard and saving since 1999 and paid my taxes. I now have more than 500k in savings acc plus 20k I bonds and 11k roth 12k 401k. I’m having trouble investing a lump sum. I’m not used to it as I came from a poor family. I’m nervous and I’ve read a lot and do understand it now. But I keep on procrastinating and my money keeps on loosing to inflation. Any idea what to do? Thx
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typical.investor
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Re: I have 500k to invest but keep procrastinating

Post by typical.investor »

Welcome!
Reuben1980 wrote: Wed Aug 03, 2022 2:37 am I’m 42. Have a house paid off, brand new car paid off. No student loans. Have two kids 12 and 6 years old.
Nice job getting the 500k
Reuben1980 wrote: Wed Aug 03, 2022 2:37 am now have more than 500k in savings acc plus 20k I bonds and 11k roth 12k 401k. I’m having trouble investing a lump sum. I’m not used to it as I came from a poor family. I’m nervous and I’ve read a lot and do understand it now. But I keep on procrastinating and my money keeps on loosing to inflation. Any idea what to do? Thx
Shouldn't you have more in the ROTH and 401k? Are you maxing your contributions?

Half my family was poorer than the other half. I notice the half that was a little better off invested when they could.

Anyway, how are you invested in the ROTH and 401k? How has it done? I bet even with the recent downturn that it's done better than the money in the bank.
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PicassoSparks
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Re: I have 500k to invest but keep procrastinating

Post by PicassoSparks »

I am sympathetic to your situation. My spouse has similar struggles—saved up a big pile and then really didn’t like putting all this money at risk. So we started moving the money in carefully. We put it in a very conservative allocation to start. Over time, we’re going to add more.

What I hear you describing is a psychological/emotional block.

The theoretically optimal move is to lump sum. Another option is to move the money in gradually, on a schedule. 2/3 of the time, this doesn’t do as well as the theoretically optimal move. But it still does better than the current move which is to keep all your money invested in cash which is an asset that is currently losing value against the eternal erosion of inflation.

At the very minimum, you need to get the money you have in bank accounts down to below the FDIC insurance limit to make sure it is safe. If nothing else, it should be in a money market account or a low duration inflation protected bond fund to help protect the purchasing power you have now.

What steps have you taken to get started? Before you decide about asset allocation, you need to have an account at a brokerage. Take things in steps. Set up a place to send the money. Start sending the money there, start buying low cost index funds, learn more as you get more comfortable.

You can do this!
HomeStretch
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Re: I have 500k to invest but keep procrastinating

Post by HomeStretch »

Welcome to the forum!

While cash in the bank seems “safer”, it is losing out to inflation. A low-cost diversified portfolio with at least 40-50% equities is less risky as it will help your portfolio keep up with inflation.

A good place to start investing the $500k is for you and spouse to:
(1) have 6-12 months of expenses as an emergency fund in a high yield savings account;
(2) each buy $10k per year in I-Bonds. After the 1 year holding period is up, I-Bonds can function as part of your emergency fund;
(3) each contribute up to the IRS limit of $20.5k to your 401k plans (assuming you have low-cost diversified fund choices available); and
(4) each contribute $6k to a Roth IRA.
(5) open a taxable brokerage account at Fidelity/Vanguard/Schwab and invest some of your idle cash in short-term U.S. treasuries (which are safe, marketable) if they have a higher after-tax yield than your current bank account.

Do either of you have an employer 401k plan that offers a “mega backdoor Roth” (link below to BH wiki page)? This is a great way to invest for retirement in a Roth account that will grow tax free.
https://www.bogleheads.org/wiki/Mega-backdoor_Roth

Consider posting in the “Asking Portfolio Questions” (link below):
https://www.bogleheads.org/wiki/Asking_ ... _questions
KlangFool
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Re: I have 500k to invest but keep procrastinating

Post by KlangFool »

OP,

Max up your Trad 401K and Roth IRA to reduce your taxes.

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markjk
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Re: I have 500k to invest but keep procrastinating

Post by markjk »

Reuben1980 wrote: Wed Aug 03, 2022 2:37 am I now have more than 500k in savings acc plus 20k I bonds and 11k roth 12k 401k. I’m having trouble investing a lump sum. I’m not used to it as I came from a poor family. I’m nervous and I’ve read a lot and do understand it now. But I keep on procrastinating and my money keeps on loosing to inflation. Any idea what to do? Thx
This is a behavioral question. You already know the facts as you stated them above. Your money is losing purchasing power daily as inflation is eating it away. You have a fear of investing because you don't want to lose money but you are losing purchasing power (the value of money) by not investing. In short, by trying to be safe you are actually guaranteeing yourself a loss year over year forever.

One technique is to dollar cost average. Pick a sum you will automatically invest per week, month, etc. by moving money from that savings account into the investment account. Then just let it go. That can help you get over the mental fear of putting such a large sum in all at once. Statistically, putting it all in at once tends to work out better over time but dollar cost averaging is a close second.

This is all a natural reaction to investing. Especially with large sums. Let the facts and objective data drive your decision making. How you get over that emotional hurdle is more personal. Everyone has to figure out what works for them. What really clicked for me years back was running calculations on how much purchasing power I was actually losing with money sitting in a bank. It's astonishing when you run the numbers and when I did it, I was only looking at 2% - 3% inflation. The loss would be especially jarring today with inflation running hot and such a large sum of money as in your situation. Run that calculation and it will probably help.
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JoeRetire
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Re: I have 500k to invest but keep procrastinating

Post by JoeRetire »

Reuben1980 wrote: Wed Aug 03, 2022 2:37 amI’m having trouble investing a lump sum. I’m not used to it as I came from a poor family. I’m nervous and I’ve read a lot and do understand it now. But I keep on procrastinating and my money keeps on loosing to inflation. Any idea what to do?
If you can't convince your self to invest the lump sum, perhaps you should invest a little at a time.
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retiredjg
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Re: I have 500k to invest but keep procrastinating

Post by retiredjg »

You have identified your problem. Consider if several small solutions might get you moving in the right direction.

1. You are already comfortable with investing in the 401k but you are not filling it up. Use some of the cash to live on while you put more from your salaries into your 401k. This should be a pretty easy change.

2. It is unclear if your wife has a Roth IRA or not. If not, fill that one too.

3. Start dollar cost averaging some of that extra money into a taxable account. Start with a small amount - maybe $500 every two weeks. Or $100 every week. Whatever you can do. Do not look at this a a weekly decision to buy. Make the decision once and just do it every week (or every two weeks) after that. The only change you might allow yourself is to invest more, not less, on any certain "investment day".

4. Consider if the stock to bond ratio you have chosen is too aggressive - is that why you are afraid to invest more? Consider investing at a more conservative stock to bond ratio until you are more comfortable.


If you want help with how to construct a good portfolio, see the link at the bottom of this message for how to ask that kind of question. It is a bit of work but you will learn a lot about your financial situation by doing it.
homebuyer6426
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Re: I have 500k to invest but keep procrastinating

Post by homebuyer6426 »

If you had started investing just $10,000 per year in the total US stock market from 1999, you would have approximately one million dollars from that investment today.
cjcerny
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Re: I have 500k to invest but keep procrastinating

Post by cjcerny »

Reuben1980 wrote: Wed Aug 03, 2022 2:37 am I’m 42. Have a house paid off, brand new car paid off. No student loans. Have two kids 12 and 6 years old. My wife works too, we make between 110k to 150k annually most comes from my job as she only makes 30k. We r debt free. I have been reading a lot . I’ve learned about investing. Started 2 years ago with Roth ira and 40k up to the company match and maxing out the Roth. My problem is not these retirement accounts. I’m having trouble deciding what to do. I have been working very hard and saving since 1999 and paid my taxes. I now have more than 500k in savings acc plus 20k I bonds and 11k roth 12k 401k. I’m having trouble investing a lump sum. I’m not used to it as I came from a poor family. I’m nervous and I’ve read a lot and do understand it now. But I keep on procrastinating and my money keeps on loosing to inflation. Any idea what to do? Thx
Doesn’t sound like you are afraid to invest. Sounds like you are afraid to invest in stocks. That’s okay. They aren’t for everyone. Maybe your courage will grow as time passes.

That being said, get started, immediately, with the whole pile. Put it all in a short term govt bond index fund—the safest bond fund there is. If you’re feeling fancy, maybe put 5 or 10 % in a stock index fund. Then, do nothing. Just sit back and do nothing but watch what it does for a couple of years. As confidence grows, consider a larger stock percentage. Lather, rinse, repeat until your stock percentage is as high as you can handle without stress.
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Re: I have 500k to invest but keep procrastinating

Post by goodenyou »

I find it helpful to mentally partition your money in different timeframes. If you could take $1-2 or 300k of the $500k and convince yourself that is long term money and you have over 20+ years for it to potentially recover from a loss, you will be able to tolerate short term loss aversion. I tend to look at volatility in my qualified plans differently for this reason. As your portfolio grows larger, you tend to tolerate the volatility a bit more. You have to get your asset allocation right to tolerate the volatility without panic selling.
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Tamalak
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Re: I have 500k to invest but keep procrastinating

Post by Tamalak »

Invest you must. If your risk tolerance is low then it's fine to lean heavily into bonds. But get it in there. Money can work safely, it can work dangerously, but it must work.
Coopsdaddy
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Re: I have 500k to invest but keep procrastinating

Post by Coopsdaddy »

Fallowing as we are in the same position.
Good job saving!
Coopsdaddy
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Re: I have 500k to invest but keep procrastinating

Post by Coopsdaddy »

Fallowing as we are in the same position.
Good job saving!
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AnnetteLouisan
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Re: I have 500k to invest but keep procrastinating

Post by AnnetteLouisan »

Welcome, and congratulations on amassing a half a million dollars after taxes. You and your spouse also can buy $10k (or more) in I bonds for each other that start to accrue the 9+ percent interest by putting them in a “gift box” on treasury direct, for delivery in a future year, but I agree with the others that maxing out your tax advantaged fund vehicles comes first.
Last edited by AnnetteLouisan on Wed Aug 03, 2022 8:45 am, edited 1 time in total.
7eight9
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Re: I have 500k to invest but keep procrastinating

Post by 7eight9 »

AnnetteLouisan wrote: Wed Aug 03, 2022 8:25 am Welcome, and congratulations on amassing a half a million dollars after taxes. You and your spouse also can buy $10k in I bonds for each other that start to accrue the 9+ percent interest by putting them in a “gift box” on treasury direct, for delivery in a future year, but I agree with the others that maxing out your tax advantaged fund vehicles comes first.
To piggyback on this great idea - if you like I Bonds you can buy multiple years for each other and store them in the "gift box". My wife and I bought a total of $120,000 of I Bonds this year. You can too.
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tvubpwcisla
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Re: I have 500k to invest but keep procrastinating

Post by tvubpwcisla »

You can't go wrong with low cost Index Funds. You seem like a smart individual. Prior to investing, setup an Investment plan and then stick to it.
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Re: I have 500k to invest but keep procrastinating

Post by KneeReplacementTutor »

Time + Opportunity cost. Sitting on the sidelines isn't free. Write up an IPS and execute it. https://www.bogleheads.org/wiki/Investm ... _statement
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Taylor Larimore
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Re: I have 500k to invest but keep procrastinating

Post by Taylor Larimore »

Reuben1980 wrote: Wed Aug 03, 2022 2:37 am I’m 42. Have a house paid off, brand new car paid off. No student loans. Have two kids 12 and 6 years old. My wife works too, we make between 110k to 150k annually most comes from my job as she only makes 30k. We r debt free. I have been reading a lot . I’ve learned about investing. Started 2 years ago with Roth ira and 40k up to the company match and maxing out the Roth. My problem is not these retirement accounts. I’m having trouble deciding what to do. I have been working very hard and saving since 1999 and paid my taxes. I now have more than 500k in savings acc plus 20k I bonds and 11k roth 12k 401k. I’m having trouble investing a lump sum. I’m not used to it as I came from a poor family. I’m nervous and I’ve read a lot and do understand it now. But I keep on procrastinating and my money keeps on loosing to inflation. Any idea what to do? Thx
Reuben1980:

Welcome to the Bogleheads Forum!

A bear market in stocks is the best time to invest. Consider the many benefits of The Three-Fund Portfolio:

The Three-Fund Portfolio:

Best wishes.
Taylor
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3funder
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Re: I have 500k to invest but keep procrastinating

Post by 3funder »

KlangFool wrote: Wed Aug 03, 2022 6:30 am OP,

Max up your Trad 401K and Roth IRA to reduce your taxes.

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manuvns
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Re: I have 500k to invest but keep procrastinating

Post by manuvns »

Automate with investments on a weekly basis ! time will take care of it
Thanks!
j9j
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Re: I have 500k to invest but keep procrastinating

Post by j9j »

Good job earning and saving.

Lump sum invest is the right technical answer, but it being hard mental hurdle with that large part of your networth.

If you do not for see needing the money in 5 years. I would also immediately suggest maxing contributions to Roth and ibonds.

Then increasing your contribution to 401k accounts. Use these accounts to start investing.

Since you have large portion of cash, these retirement accounts could be all stock index(Voo/vxus) funds to start.

That would give you a bit of time determining your asset allocation among the three main index fund(us, intl, total bond) discussed here.
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Reuben1980
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Re: I have 500k to invest but keep procrastinating

Post by Reuben1980 »

Thank you all for the good advice. I’m very familiar with what everyone is saying due to reading, the common sense of investing, The Bogleheads guide to investing which is my favorite so far, the psychology of money, quit like a millionaire, the magic of thinking big , the simple path to wealth and currently the 4 pillars of investing. My wife isn’t convinced on this stuff. I can’t convince her. She doesn’t contribute to her 401k. So I’ve left that alone for now. But luckily, I don’t want to say this is just my money bcs she has been taking care of my kids as I was earning and working hard. She recently started working. So I can make decisions to do whatever. Someone asked why this money isn’t in roth or 401k, I wish I knew these things. I didn’t know. I thought I was saving to buy rentals but haven’t done that too. Didn’t know about a lot of things. But I do have a brokerage with 5k in it. I like to be in a Target date fund vffvx for my Roth. But for my brokerage I want to be in control. I don’t control my 401k too it’s TDF as well. I want my portfolio to be 50% Vtsax 20% vtiax 30% municipal bonds since its going to be in a taxable. I just need to stop procrastinating. I’m stressed bcs of this fear. They say the only way to overcome fear is by taking action and psychologically I get frightened. I think for me DCAing. I’m gonna start with 45k to my Vtsax currently have 5k invested and I just hope to do it. I’ll post it if i do.
the_wiki
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Re: I have 500k to invest but keep procrastinating

Post by the_wiki »

I agree with a lot of what has been said. Here is what I would do, starting today:

1. Set up a Roth IRA for your wife and contribute the maximum $6000 to it every year.
2. Adjust your contributions at work to max out all your 401K, Roth option at work.
3. if 1 & 2 cause you to not have enough money to live, then use your savings to offset. Then you are converting taxable money into tax-advantaged money.
4. Set up a broker and invest a big chunk of that $500k. If you cannot bring yourself to lump sum invest a huge chunk of the $500k, then set up monthly automatic deposits of $50k or 25k or whatever you are comfortable with to bring the savings balance down gradually. Since this is taxable, I would consider a Robo-Portfolio like Betterment or Wealthfront that has Tax loss harvesting. They do charge a little more fees ($25 per $10,000) than a standard index fund, but they also employ tax savings techniques to where they typically save you a lot more taxes than the fees cost. They also build your porfolio for you, so it takes that obstacle to investing away. You don't have to decide what to buy, just how much and how risky you want to be.
5. Don't check on your balances too often and don't move money around if it starts losing a little or you see other stocks doing better. Just stay the course. This is not a sprint, it is a marathon.

And man, don't beat yourself up at all. You are doing amazing. Most people don't have $500k at 40 even with great returns from investments. if you have done it without a 401k and all that, you are destined for some truly big bucks once you get some compounds interest and tax savings working for you!
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retiredjg
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Re: I have 500k to invest but keep procrastinating

Post by retiredjg »

I do not suggest using a robo advisor because the portfolio will be quite complex. Unwinding this in a taxable account is not much fun. And if tax loss harvesting is turned on, you would need to avoid certain funds in your other accounts.

On the other hand, Vanguard PAS might be a good choice for the taxable account. Low fees and they will get your money into the market (although I don't know how long they would take).

Vanguard also has a robo digital advisor, but I don't know much about it.
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Re: I have 500k to invest but keep procrastinating

Post by dboeger1 »

I really wish there was more of a default instinct/recommendation to start with a conservative allocation and shift more aggressive as one becomes more comfortable investing, as opposed to extended DCA for the sake of avoiding a crash. I mean, I guess they're ultimately similar anyway if you include cash in the asset allocation as a bond alternative, although that was more valid when bond yields were much lower. I'd just rather get over that psychological hump of thinking that cash is somehow safe and a conservative 50/50 portfolio is super dangerous. If you have a long time horizon and don't need the money any time soon, it's actually the other way around, you lose purchasing power in cash over time. ERN has an excellent analysis of retirement lengths and safe withdrawal rates which is basically an extended version of the Trinity Study (4% rule) to account for more variables:

https://earlyretirementnow.com/2016/12/ ... t-1-intro/

One of the things you'll notice if you look at the chart with all the green/yellow/orange boxes is that higher stock allocations are more critical for longer retirement time horizons because you need growth to keep up with inflation. For a traditional 30-year retirement, even a 50/50 portfolio produces respectable results (95% success) at the often-recommended 4% withdrawal rate. Assuming the same 4% withdrawal rate for a 60-year retirement, you need a 100/0 all-stock allocation just to get up to 89% success rate, which is lower than most people recommend. You'll notice that higher bond allocations give pretty abysmal results over the very long term. I don't mean to say they don't introduce some element of safety, but they're effectively like an extended emergency fund; they're not there to fund your retirement 60 years from now, they're there in case you lose a job or something much sooner than that and need to start withdrawing sooner, in which case the all-stock portfolio may not be totally appropriate.

I realize you guys aren't looking to retire just yet, but in a sense, you're making a choice every day about what to do with your money just by leaving it somewhere, so if you plan to invest this money for a very long time, these results are very relevant. There's something to be said for "buying your stocks first" when you're just getting started investing, because you want to be exposed to them for as long as possible. Having decent-yielding bonds is usually at least better than holding cash (maybe not in recent months, but understand that recent bond volatility was among the highest on record going back centuries among multiple issuing superpowers, so it seems unlikely to repeat that same magnitude of bond losses again, though it could happen).
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AnnetteLouisan
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Re: I have 500k to invest but keep procrastinating

Post by AnnetteLouisan »

The fear is very understandable when money was scarce growing up. Moving from poverty to over a half million in liquid assets over twenty years by your own earnings, plus primary financial responsibility for your wife and kids … of course you want to proceed with due deliberation since this is the bedrock of your family’s security. You never want to be poor again and this is unfamiliar territory. Good idea to start with a smaller amount first until you are comfortable.

I would read the prospectus for any fund you are considering investing in and ask questions about the type of risks to which your fund may be subject so you aren’t blindsided.

Do you have long term disability insurance through work (income replacement)? It’s often recommended for people with a spouse and kids (and anyone really) who depends on their income.

The fact that you have no debt and off home at your age is really impressive so I’m sure you will do this correctly once you get a handle on it. I’ve been on here almost a year and I invested about $130k so far including treasuries.
Last edited by AnnetteLouisan on Wed Aug 03, 2022 7:52 pm, edited 1 time in total.
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Re: I have 500k to invest but keep procrastinating

Post by pkcrafter »

Reuben1980 wrote: Wed Aug 03, 2022 11:55 am Thank you all for the good advice. I’m very familiar with what everyone is saying due to reading, the common sense of investing, The Bogleheads guide to investing which is my favorite so far, the psychology of money, quit like a millionaire, the magic of thinking big , the simple path to wealth and currently the 4 pillars of investing. My wife isn’t convinced on this stuff. I can’t convince her. She doesn’t contribute to her 401k. So I’ve left that alone for now.

OK, but you and she must realize that to have enough in retirement, you have to not just save, you have to earn as well..

But luckily, I don’t want to say this is just my money bcs she has been taking care of my kids as I was earning and working hard. She recently started working. So I can make decisions to do whatever. Someone asked why this money isn’t in roth or 401k, I wish I knew these things. I didn’t know. I thought I was saving to buy rentals but haven’t done that too. Didn’t know about a lot of things.
But I do have a brokerage with 5k in it. I like to be in a Target date fund vffvx for my Roth.

But for my brokerage I want to be in control. I don’t control my 401k too it’s TDF as well.
Actually, you are in control and you have made choices. If you don't like what you have, it's very easy to change it. Consider all investments as parts of a single portfolio.

I want my portfolio to be 50% Vtsax 20% vtiax 30% municipal bonds since its going to be in a taxable.

Your asset allocation (AA) would be 70% stock, 30% bond. Based on what you've written, that allocation is probably too aggressive for your true tolerance.

I just need to stop procrastinating. I’m stressed bcs of this fear. They say the only way to overcome fear is by taking action and psychologically I get frightened. I think for me DCAing. I’m gonna start with 45k to my Vtsax currently have 5k invested and I just hope to do it. I’ll post it if i do.

Again, this idea seems to be too aggressive for your current risk tolerance. Start with an asset allocation that you can be somewhat comfortable with.

AA and losses...


https://investor.vanguard.com/investor- ... allocation

What Was the Stock Market Crash of 1929? I'm not posting this to scare you, but you must know what risk can do.

The stock market crash of 1929 began on October 24. While it is remembered for the panic selling in the first week, the largest falls occurred in the following two years as the Great Depression emerged. In fact, the Dow Jones Industrial Average (DJIA) did not bottom out until July 8, 1932, by which time it had fallen 89% from its September 1929 peak, making it the biggest bear market in Wall Street’s history. The Dow Jones did not return to its 1929 high until November 1954.


Stay in the comfort zone, at least until you get familiar with the ride. Notice that the performance numbers in the model portfolio link includes the market crash of 1929.
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frugalor
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Re: I have 500k to invest but keep procrastinating

Post by frugalor »

Congrats on your 500K cash! What is your yearly expense? It's not a bad idea to put away 10 years of living expenses in safe assets like i-bonds and treasuries.

If you have any money you don't need in 10 years, dollar cost average into VTI is a good idea.
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Re: I have 500k to invest but keep procrastinating

Post by an_asker »

7eight9 wrote: Wed Aug 03, 2022 8:39 am [...]
My wife and I bought a total of $120,000 of I Bonds this year. You can too.
How did you manage that with the annual limit of $10,000 per person?
GoldenFinch
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Re: I have 500k to invest but keep procrastinating

Post by GoldenFinch »

an_asker wrote: Wed Aug 03, 2022 8:07 pm
7eight9 wrote: Wed Aug 03, 2022 8:39 am [...]
My wife and I bought a total of $120,000 of I Bonds this year. You can too.
How did you manage that with the annual limit of $10,000 per person?
You can buy them for future years and as gifts for your spouse. There is a lot of information about how to do this in the IBond mega thread.
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Re: I have 500k to invest but keep procrastinating

Post by fabis »

Keep the 500k in savings and just dollar cost average into an asset allocation you're comfortable with.
Esg68
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Re: I have 500k to invest but keep procrastinating

Post by Esg68 »

I year CD's are paying 3% now. That's $15,000 a year in interest on 500K.
7eight9
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Re: I have 500k to invest but keep procrastinating

Post by 7eight9 »

GoldenFinch wrote: Wed Aug 03, 2022 8:38 pm
an_asker wrote: Wed Aug 03, 2022 8:07 pm
7eight9 wrote: Wed Aug 03, 2022 8:39 am [...]
My wife and I bought a total of $120,000 of I Bonds this year. You can too.
How did you manage that with the annual limit of $10,000 per person?
You can buy them for future years and as gifts for your spouse. There is a lot of information about how to do this in the IBond mega thread.
Exactly. We each bought our $10,000 allocation for the year. Then we each bought an additional $50,000 (5 x $10,000 I Bonds) for each other and put them in our respective "gift boxes".
I guess it all could be much worse. | They could be warming up my hearse.
Starfish
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Re: I have 500k to invest but keep procrastinating

Post by Starfish »

I would think about this the other way. Cash and the mortgage paid off should burn your pockets. You lost literally hundreds of thousands to inflation only in the last couple of years and that is many years of saving.
Every time I have cash I don't know how to get rid of it faster.
oken
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Re: I have 500k to invest but keep procrastinating

Post by oken »

Reuben1980 wrote: Wed Aug 03, 2022 2:37 am I’m 42. Have a house paid off, brand new car paid off. No student loans. Have two kids 12 and 6 years old. My wife works too, we make between 110k to 150k annually most comes from my job as she only makes 30k. We r debt free. I have been reading a lot . I’ve learned about investing. Started 2 years ago with Roth ira and 40k up to the company match and maxing out the Roth. My problem is not these retirement accounts. I’m having trouble deciding what to do. I have been working very hard and saving since 1999 and paid my taxes. I now have more than 500k in savings acc plus 20k I bonds and 11k roth 12k 401k. I’m having trouble investing a lump sum. I’m not used to it as I came from a poor family. I’m nervous and I’ve read a lot and do understand it now. But I keep on procrastinating and my money keeps on loosing to inflation. Any idea what to do? Thx
I sympathise. I only starting investing a few years ago and was almost immediately hit by the covid downturn.
The blessing was that I didn't go all in and managed to think of the downturn as a buying opportunity. However, I still couldn't convince myself to buy in faster and so didn't manage to buy everything at 30% off. =)

I think DCA helps, as does thinking of buying in now as stocks being on sale.
If prices go up, the value of what you've bought in goes up.
If prices go down, the sale is even better and you still have cash (since you're doing DCA) to buy more at better discounts.
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arcticpineapplecorp.
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Re: I have 500k to invest but keep procrastinating

Post by arcticpineapplecorp. »

Reuben1980 wrote: Wed Aug 03, 2022 2:37 am I’m having trouble investing a lump sum. I’m not used to it as I came from a poor family. I’m nervous and I’ve read a lot and do understand it now. But I keep on procrastinating and my money keeps on loosing to inflation. Any idea what to do? Thx
welcome to the group.

do you think the market will be higher than it is today when you need the money years/decades from now?

if so, then don't worry what happens if you invest the money and then the market falls. It doesn't matter long term. It only appears to matter in the short term. But you don't need the money now, so what does it matter if it falls now?

But if the market recovers and goes higher in the future, you want to be buying now when you have the money.

if you have money to invest that you don't need now and you don't invest it, you're market timing because you're either looking for a better time to invest or afraid to invest because you think the market will fall. you can't know what will happen in the short term in advance.

do you believe in market timing? If not, then invest when you have the money you don't need now.

some thoughts on DCA vs lump sum:

I'll let Larry Swedroe have the final word:
Here is another way to think about DCA. Assume that staying fully invested in equities is suboptimal, meaning you should sell all your equities and then DCA back into the market. At the next investment period you have some money in the stock market already. While you planned to periodically reinvest in the market, you also determined that staying fully invested is suboptimal. You run into this difficulty: Do you continue to buy equities, sell your existing holdings, or do both? Logicaly, DCA cannot be effective...

While DCA is not an optimal investment strategy, it has value when facing the "lesser of two evils," that is, when an investor simply cannot "take the plunge" and invest all at once for fear of what could happen to the stock market. Fear causes paralysis. If the market rises after they delay, they think, "How can I buy now at even higher prices?" If the market falls, "I can't buy now. That bear market I was afraid of is here." Once deciding not to buy, how do you decide to ever buy again?

The Only Guide You'll Ever Need for the Right Financial Plan, by Larry Swedroe, page 182, appendix B
if you have a plan, just follow it. DCA makes one feel good because if they have some (but not all) invested and the market goes up, they made money (just on what was invested, not all). If the market falls, they feel smart because they didn't lose more money (because it wasn't all invested).

Larry says:
Investors and advisors do not always base decisions on logic or evidence. Emotions, such as fear often play a far greater role in decision making.
But make a plan, write it down and stick to it no matter what.

(also a financial therapist might help:
https://financialtherapyassociation.org/
https://financialtherapyassociation.org ... therapist/

learn what your money script might be:
https://www.claritywealthdevelopment.co ... ey-script/)
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
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squirrel1963
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Re: I have 500k to invest but keep procrastinating

Post by squirrel1963 »

Reuben1980 wrote: Wed Aug 03, 2022 11:55 am My wife isn’t convinced on this stuff. I can’t convince her. She doesn’t contribute to her 401k.
......
......
I want my portfolio to be 50% Vtsax 20% vtiax 30% municipal bonds since its going to be in a taxable. I just need to stop procrastinating.
My dad used to get a lot of grief when he bought treasuries because my mom thought that money under the mattress was safer, so I understand that, it's tough.

Your plan of 70% stocks 30% muni sounds really good, I encourage you to execute it, maybe buy 50k at a time if the lump sum investment scares you.

Maybe also think of keeping 100K in treasuries to allay your wife fears.
Remember that anything is better than cash. If you have to do 100% in bonds because that's the only thing your wife will accept, then so be it, but try get at least 50% stocks.

Let us know how it goes
| LMP | safe portfolio: TIPS ladder + I-bonds + Treasuries | risky portfolio: US stocks / US REIT / International stocks |
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BL
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Re: I have 500k to invest but keep procrastinating

Post by BL »

Not who you asked, but I-bonds can be bought in trusts as well as in gifts. You can buy this year to gift your spouse next year and/or future years using the gift as the annual limit for that year. We each purchased a gift for each other and will gift it next year instead of buying 10,000 next year. This gets started with a high interest rate, 9.6%, now, so it is worth considering.

Have you thought about giving your spouse cash to replace whatever she is willing to invest? Tax deduction, Roth can grow tax-free, and she has "her" money to spend. (Even more, because she would get the entire amount instead of after taxes if she is the one deducting tax on her pay.) It is just a mental "game", but if it feels good, that is fine. Maybe she has a nice target date fund or something else that works for her in her 401k and Roth IRA. A balanced fund with both stocks and bonds usually doesn't lose (or gain) as much at a time, so it may be easier to look at. Prices are a bargain right now, so it is a perfect time to start!

There are threads here on how to buy treasuries and bank CDs at the mentioned brokerages. I have been learning and buying them this past week, first practicing with 1 unit($1,000), and the CD rates are better than banks and credit unions. The money market at Vanguard now yields about 2% which is a good place to park money until you buy something else.
Katietsu
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Re: I have 500k to invest but keep procrastinating

Post by Katietsu »

Give yourself a pat on the back. A paid off house, car, no debt and $500k in liquid assets is more than most Americans.

I have a different perspective than many of those who have responded. I can relate to wanting to keep the cash and not to risk a decrease in value.

I like to start with the easy stuff. Is your cash at least earning the most you can safely earn? Until recently, it was so little as to not be worth much effort. But the 2-3% that you can safely earn now with HYSA, treasuries and CDs is thousands of dollars a year for you. FYI, in your tax bracket, municipal funds are generally not the best option.

Next, have you fully contributed to a Roth IRA for you and for your wife? Even if your wife is currently adamant about no stocks or mutual funds in her name, get the money into a Roth for now. Next, set your 401k contributions to the max. The target date fund sounds fine. Just by taking this step, you will be slowly increasing your equity holdings even if you do nothing else.

How much do you spend a year? For me, when we were starting out, I needed to have two years worth of expenses in cash before I was willing to make voluntary 401k contribution and such. So, for your wife’s peace of mind, see if having some amount like this protected could help her feel comfortable with the investing thing.

Is you wife adamant about not using her employer retirement plan? Maybe she could use something like target date 2025 which is conservative and contribute just $100 a paycheck as a way to get started.

If you are ready to put $45,000 in VTSAX, then go for it. But if after this thread, you have not done it yet by the end of the week, then maybe start smaller with say, $25,000. Then commit to putting in another $25,000 soon. For instance, you could decide to put in $25,000 every other month or when the market falls 5%, whichever happens first. Make a similar plan for VTIAX.

Are you intending to head to $400,000 equities, $100,000 bonds, and no cash? Given you hesitation and your wife’s dismissal of investing, the asset allocation seems out of sync. Could that be part of your paralysis at starting?
Zeno
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Re: I have 500k to invest but keep procrastinating

Post by Zeno »

Good luck, OP
Last edited by Zeno on Sun Aug 07, 2022 8:17 pm, edited 2 times in total.
ythsia
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Re: I have 500k to invest but keep procrastinating

Post by ythsia »

I am retired high tech executive and during the past 5 years I have retooled myself in the financial services arena. I am not here to solicit business outright except to share my own experiences and how I could have done better if I had known what I know today. In addition, because I have put 2 daughters through private universities on the East Coast as well as my own college education and funding obstacles, I have become more or less an authority on college financial aid process and procedure.

You mentioned that you have managed to save 500k through hard work and dedication to savings. What most parents don't know (like myself) these hard earn savings will come and haunt you when your children are applying to colleges. You earn an decent income but based on averages the income is on the 'lower' side (especially for California). [Please don't be offended.] Because of this large savings you have amassed, it will hurt your children's chances of receiving needs-based financial aid. Therefore, you need to develop a strategy to legally shield this savings (visibility) from the college financial aid office. There are only a few strategies available to you.
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Reuben1980
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Re: I have 500k to invest but keep procrastinating

Post by Reuben1980 »

Thx guys for the info and adequate advice from everyone. I think that I’m also guilty of market timing these past afew months. I believe in the American and the western countries economy. And I trust the United States economy the most. My mother is Armenian and my father is Kurdish grew up in some terrible situations running for safty from (I don’t wanna mention groups hope ur familiar with history) . I’ve seen terrible things. So it’s hard for me to be almost a millionaire if I liquidate my property. I’m hoping to take action in order to overcome this terrible fear. It’s in my head
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Re: I have 500k to invest but keep procrastinating

Post by goodenyou »

Reuben1980 wrote: Thu Aug 04, 2022 12:37 am Thx guys for the info and adequate advice from everyone. I think that I’m also guilty of market timing these past afew months. I believe in the American and the western countries economy. And I trust the United States economy the most. My mother is Armenian and my father is Kurdish grew up in some terrible situations running for safty from (I don’t wanna mention groups hope ur familiar with history) . I’ve seen terrible things. So it’s hard for me to be almost a millionaire if I liquidate my property. I’m hoping to take action in order to overcome this terrible fear. It’s in my head
Very familiar with the history. I married an Armenian woman. Shout out to the Armenians!
"Ignorance more frequently begets confidence than does knowledge" | “At 50, everyone has the face he deserves”
Wenonah
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Re: I have 500k to invest but keep procrastinating

Post by Wenonah »

What about just calling Schwab or Vanguard and talking to a personal advisor and just seeing how you feel at either place. Take some low cost advice from a reputable company.
HomeStretch
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Re: I have 500k to invest but keep procrastinating

Post by HomeStretch »

Reuben1980 wrote: Wed Aug 03, 2022 11:55 am … She doesn’t contribute to her 401k. …
If her employer offers a 401k matching contribution, she is missing out on free money. She can always choose a safer 401k investment option (such as a treasury fund or stable value fund) for peace of mind.
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AnnetteLouisan
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Re: I have 500k to invest but keep procrastinating

Post by AnnetteLouisan »

It can be very hard to trust anyone or anything coming from a refugee immigrant background seeing the kinds of things you have seen. A lot of Bogleheads have a wide margin for error if things go wrong with their investments (family wealth, a strong social and business network, highly marketable skill sets). You do not necessarily have all or any of that. I don’t blame you and your wife for wanting to be extra secure in any decision you make with your hard earned assets. Trust your gut, you’ve done really well so far.

I would read The Millionaire Next Door (most Bogleheads have, I would guess) and the book Getting Rich in America, in addition to the excellent information on the Bogleheads wiki. I assume you know of the very successful Armenian Americans like Kirk Kerkorian and Steve Jobs. The Millionaire Next Door also details success stories of immigrants in America. There are a number of them on Bogleheads.

There are special financial planning issues of which immigrants should be aware, like the need for estate documents and term life and long term disability insurance. Hopefully your employer offers a good range of subsidized benefits. Sometimes people in your position don’t know what they don’t know, so continuing to learn before doing anything drastic could be a very good call. Getting your kids into good schools is as important as investing in your position.

Definitely max out your and your wife’s 401k though if possible, at least to the extent of the match, if there is one.

I wish you prosperity, happiness and a great American life for him and your family.
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Reuben1980
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Re: I have 500k to invest but keep procrastinating

Post by Reuben1980 »

ythsia wrote: Thu Aug 04, 2022 12:28 am I am retired high tech executive and during the past 5 years I have retooled myself in the financial services arena. I am not here to solicit business outright except to share my own experiences and how I could have done better if I had known what I know today. In addition, because I have put 2 daughters through private universities on the East Coast as well as my own college education and funding obstacles, I have become more or less an authority on college financial aid process and procedure.

You mentioned that you have managed to save 500k through hard work and dedication to savings. What most parents don't know (like myself) these hard earn savings will come and haunt you when your children are applying to colleges. You earn an decent income but based on averages the income is on the 'lower' side (especially for California). [Please don't be offended.] Because of this large savings you have amassed, it will hurt your children's chances of receiving needs-based financial aid. Therefore, you need to develop a strategy to legally shield this savings (visibility) from the college financial aid office. There are only a few strategies available to you.
Thx much for ur comment. I’ve started 529 this year for my 6 year old and for my 12 year old I have 20k in i bonds. I’ll add another 10k in November hopefully by the time they go to college this could help a little. I don’t want to pay for everything bcs I need to see them how they’re going to turn out. I’m optimistic but Hopefully they choose the right path. How do u shield this and what strategies r best? Thx much for ur comments. Yes I’ve lived in 2 different immigration camps and one of them was on a dessert . 8 years in a dessert. Came to the USA in 1998. I wish I new how things work but no one teaches these things. Instead I had to learn other things which they were my priority especially the language. I speak 5 languages due to living and immigrating to a lot places. But I think I’ve done the impossible. Like you said coming from that background sometimes you must take it easy. I’m read the books u have recommended. I’m currently reading the four pillars of investing. I will write a book myself one day when I’m completely figured everything out. The things that I’ve seen must be written in a book.
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goodenyou
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Re: I have 500k to invest but keep procrastinating

Post by goodenyou »

Reuben1980 wrote: Thu Aug 04, 2022 11:51 am
ythsia wrote: Thu Aug 04, 2022 12:28 am I am retired high tech executive and during the past 5 years I have retooled myself in the financial services arena. I am not here to solicit business outright except to share my own experiences and how I could have done better if I had known what I know today. In addition, because I have put 2 daughters through private universities on the East Coast as well as my own college education and funding obstacles, I have become more or less an authority on college financial aid process and procedure.

You mentioned that you have managed to save 500k through hard work and dedication to savings. What most parents don't know (like myself) these hard earn savings will come and haunt you when your children are applying to colleges. You earn an decent income but based on averages the income is on the 'lower' side (especially for California). [Please don't be offended.] Because of this large savings you have amassed, it will hurt your children's chances of receiving needs-based financial aid. Therefore, you need to develop a strategy to legally shield this savings (visibility) from the college financial aid office. There are only a few strategies available to you.
Thx much for ur comment. I’ve started 529 this year for my 6 year old and for my 12 year old I have 20k in i bonds. I’ll add another 10k in November hopefully by the time they go to college this could help a little. I don’t want to pay for everything bcs I need to see them how they’re going to turn out. I’m optimistic but Hopefully they choose the right path. How do u shield this and what strategies r best? Thx much for ur comments. Yes I’ve lived in 2 different immigration camps and one of them was on a dessert . 8 years in a dessert. Came to the USA in 1998. I wish I new how things work but no one teaches these things. Instead I had to learn other things which they were my priority especially the language. I speak 5 languages due to living and immigrating to a lot places. But I think I’ve done the impossible. Like you said coming from that background sometimes you must take it easy. I’m read the books u have recommended. I’m currently reading the four pillars of investing. I will write a book myself one day when I’m completely figured everything out. The things that I’ve seen must be written in a book.
You have a similar history to my father in law. Armenian in Palestine 1948. Lived in Jordan as a refugee. Schooled in Cyprus. Speaks 7 languages. Came to the US for education and PhD. Professor Emeritus in Chemical Engineering from a very well known institution. He did well for himself as well as for his 2 daughters. Best of luck!
"Ignorance more frequently begets confidence than does knowledge" | “At 50, everyone has the face he deserves”
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Reuben1980
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Re: I have 500k to invest but keep procrastinating

Post by Reuben1980 »

Katietsu wrote: Wed Aug 03, 2022 10:15 pm Give yourself a pat on the back. A paid off house, car, no debt and $500k in liquid assets is more than most Americans.

I have a different perspective than many of those who have responded. I can relate to wanting to keep the cash and not to risk a decrease in value.

I like to start with the easy stuff. Is your cash at least earning the most you can safely earn? Until recently, it was so little as to not be worth much effort. But the 2-3% that you can safely earn now with HYSA, treasuries and CDs is thousands of dollars a year for you. FYI, in your tax bracket, municipal funds are generally not the best option.

Next, have you fully contributed to a Roth IRA for you and for your wife? Even if your wife is currently adamant about no stocks or mutual funds in her name, get the money into a Roth for now. Next, set your 401k contributions to the max. The target date fund sounds fine. Just by taking this step, you will be slowly increasing your equity holdings even if you do nothing else.

How much do you spend a year? For me, when we were starting out, I needed to have two years worth of expenses in cash before I was willing to make voluntary 401k contribution and such. So, for your wife’s peace of mind, see if having some amount like this protected could help her feel comfortable with the investing thing.

Is you wife adamant about not using her employer retirement plan? Maybe she could use something like target date 2025 which is conservative and contribute just $100 a paycheck as a way to get started.

If you are ready to put $45,000 in VTSAX, then go for it. But if after this thread, you have not done it yet by the end of the week, then maybe start smaller with say, $25,000. Then commit to putting in another $25,000 soon. For instance, you could decide to put in $25,000 every other month or when the market falls 5%, whichever happens first. Make a similar plan for VTIAX.

Are you intending to head to $400,000 equities, $100,000 bonds, and no cash? Given you hesitation and your wife’s dismissal of investing, the asset allocation seems out of sync. Could that be part of your paralysis at starting?
thx much. I’m only earning the HSA APY and I like online banking now. I don’t even know why at least didn’t have it in online banking previously. Yes just the safe interest. I’ve locked in money in CDs before, it’s ok now but as I’m learning about taxation on these stuff and after inflation it’s not great. Plus I don’t like locking it for certain period of time. I’ll eventually need to do better.
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