first time investor need advice

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purrdue
Posts: 2
Joined: Tue Oct 03, 2017 2:10 am

first time investor need advice

Post by purrdue » Tue Oct 03, 2017 2:59 am

Emergency Funds- 1,300,000
Debt-None
Tax Filing Status-Single
Tax Rate-lowest
Reside in Texas
Age 47
30/50 stock/bonds
20% intl stocks


Last night I took the plunge and bought
UTSAX Vanguard Total Stock 30% 15,000
UTIAX Vanguard Total Intl Stock 20% 10,000
VBTLX Vanguard Total Bond 35% 17,500
VTABX Vanguard Intl Bond 15% 0 didn't invest in that 1 yet

Retirement:
I will inherit approx. 300,000 as an inherited IRA
I have no IRA myself

First I would like to thank everybody that have already responded to my post. I am currently receiving SSDI payments of 1300 they are quite low as I was only in the work force for less than 10 years. I had been being supported by my parents. My dad recently passed suddenly and left his assets to me. I will continue to be supported by my mother until she passes and that is when I would need to supplement my income. At that time I could probably survive on 3,000 dollars a month. I also will have no heirs. So I will most likely leave my estate to charity. I would like to be somewhat conservative because if I lost all the money I would be up schitts creek. Hopefully it will be at least 10 years before I would need it.


I have been sitting on 300,000 I should of invested 10 years ago because it would of doubled. Now I am inheriting an additional 1 million, in combined inherited IRA, cash, and life insurance. Not sure when I will need to use the money but when I do I will need no more than 50,000 in living expenses a year. I will have to make this money last for the rest of my life because I am not working due to disability. I am 47 years old, I have no debt and own house. I'm thinking about investing in these Vanguard funds (VTSAX, VTIAX, VBTLX,VTABX) I am a bit scared to do lump sum given how high the market has gotten. I would probably be more comfortable doing dollar cost avg. I know that if I don't start investing I will outlive my money. Can 1 million properly investing in those funds allow me to withdraw no more than 50,000 a year to live on when I need it. I am open to any suggestions. Are there investment firms that you would recommend over vanguard. Thank you for any advice.
Last edited by purrdue on Tue Oct 03, 2017 4:31 pm, edited 3 times in total.

RadAudit
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Joined: Mon May 26, 2008 10:20 am
Location: Second star on the right and straight on 'til morning

Re: first time investor need advice

Post by RadAudit » Tue Oct 03, 2017 7:16 am

Welcome to the forum.

As to investing $1 mil, look here https://www.bogleheads.org/wiki/Three-fund_portfolio and here viewtopic.php?t=88005 - first post in the thread. You can use four funds; but, three can do.

I'm with you on investing that much at one time can be concerning. Historically, it will work out better; but, for me it would be a fail on the stomach acid (sleep well at night) test. DCA might be the way to go in your case. But you might want to go quick - all in in about a year?

As for a $50k / yr draw on $1mil. Don't know for sure; should be doable with a slightly more aggressive tilt to equities than I'm using. What are you living off of now? When will that income stream stop? When do you expect to start the withdrawal? And, the real kicker - how long do you expect you will live?

Others will be along shortly with better and more specific suggestions. In the mean time, you might want to start to think about editing your post in to this format viewtopic.php?t=6212 Might help us to get a better handle on your situation.

Best of luck. You are on the right track by using low cost funds. Most of the advice you'll need is readily available from the good people on this forum.
"Everything will be all right in the end. If everything is not all right, then it is not the end." - The Best Exotic Marigold Hotel

dbr
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Re: first time investor need advice

Post by dbr » Tue Oct 03, 2017 9:49 am

The conventional analysis of what you can withdraw from a portfolio over time with safety you will not run out of money is about 4% of initial portfolio value for about 30 years. To last longer than that you can only withdraw less. Some people think in today's conditions these numbers might be less. A book that addresses this whole issue is available on this site: http://www.retirementoptimizer.com/ Caluclators like FireCalc, CFireSim, RetirementOptimizer, and so on can show you what is likely to happen. Based on everything we know starting at $50,000 inflation indexed annually out of $1.3M is probably on the cusp that will very likely be doable but could fail. Flexibility is indicated depending on whether or not things go well or badly. Later in life single premium immediate annuities may be helpful but probably not at earlier age.

There is no way to asset allocate out of this problem. A simple three fund portfolio balanced at perhaps 60/40 stock to bond is going to be as optimum as exists. Reduction of investment expenses to minimal is needed as investment costs and taxes have to be taken out of whatever income is generated. An account at Vanguard would be a suitable place to hold your assets.

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Sandtrap
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Location: Hawaii😀 Northern AZ.😳

Re: first time investor need advice

Post by Sandtrap » Tue Oct 03, 2017 9:54 am

1 Tell nobody about your windfall.
2 Read the Boglehead Wiki "Managing a Windfall" https://www.bogleheads.org/wiki/Managing_a_windfall
3 Resist the urge to "do something" with your assets.
4 Resist the urge to confer with financial professionals, etc, that will urge you to "do something".
5 Protect your "sleep factor".
Repeat # 1-5

Congratulations. :D

Actionably:
Random thoughts.

Your need for reliable income and inability to work (?) at such a young age puts you in a precarious position with unique needs.

$1.3 million would marginally (at best?) sustain an annual WDR of $50k/year. That's over 5% and unrealistic to most.

Is there any way you would be able to generate other income streams to take pressure off the portfolio to "produce"?
This is a big one that can alter your situation favorably.

Because of your disability and need for reliable income you might want to look into an SPIA. Perhaps fixed with % COLA annually. Part of your assets allocated to an SPIA may help anchor an income stream no matter market fluctuations and protect you from "Black Swan" events.

Also, have you looked into collecting early Social Security based on disability?

Is it possible to further reduce your living expenses. Perhaps move from a HCOL to LCOL. Perhaps downsize. Thoughts.

As others have suggested. It would be helpful to edit or add to your initial post in the proper format so the experts here can get a better overview of your status and help.
Shared experiences to benefit all -- not an exspurt -- per forum guidelines :) Golf score allocation 50/50 swings vs putts.

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ruralavalon
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Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: first time investor need advice

Post by ruralavalon » Tue Oct 03, 2017 11:00 am

Welcome to the forum :) .
purrdue wrote:
Tue Oct 03, 2017 2:59 am
I have been sitting on 300,000 I should of invested 10 years ago because it would of doubled. Now I am inheriting an additional 1 million, in combined inherited IRA, cash, and life insurance. Not sure when I will need to use the money but when I do I will need no more than 50,000 in living expenses a year. I will have to make this money last for the rest of my life because I am not working due to disability. I am 47 years old, I have no debt and own house. I'm thinking about investing in these Vanguard funds (VTSAX, VTIAX, VBTLX,VTABX) I am a bit scared to do lump sum given how high the market has gotten. I would probably be more comfortable doing dollar cost avg. I know that if I don't start investing I will outlive my money. Can 1 million properly investing in those funds allow me to withdraw no more than 50,000 a year to live on when I need it. I am open to any suggestions. Are there investment firms that you would recommend over vanguard. Thank you for any advice.
I would recommend Vanguard over any other investment firm.

Do you currently have any investing/retirement accounts anywhere, like

In general:
1) Read the Boglehead Wiki "Managing a Windfall" https://www.bogleheads.org/wiki/Managing_a_windfall
2) Take your time to learn a little, there is no rush.
3) Beware of anyone (family, friend, neighbor, banker, broker, anyone at all) trying to sell you anything (stocks, bonds, mutual funds, ETFs, real estate, insurance, annuity, anything at all).
4) Read one or two books on general investing. Please see the wiki article "books: recommendations and reviews".
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

dwickenh
Posts: 719
Joined: Sun Jan 04, 2015 9:45 pm
Location: Illinois

Re: first time investor need advice

Post by dwickenh » Tue Oct 03, 2017 11:09 am

You have received some good advice already. If your total invested amount will be 1,300,000, then 4% of that amount is 52,000 per year. This is if you are living only on your investments. Per Sandtrap's post above, you can likely get early SS, or other aid programs that may soften the blow to your portfolio. My personal opinion is that I would invest with Vanguard, Fidelity, or Schwab for low costs. 30% equities and 70% fixed income(bonds) for a start with dollar cost averaging over 1-2 years. You might slowly ratchet up the stocks to 50% over the next 3-5 years.

I think you can accomplish your goal, just take it slow and methodical to reduce mistakes. Post here for some great advice from people much smarter than me.

Best to you,

Dan
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

SimplicityNow
Posts: 212
Joined: Fri Aug 05, 2016 10:31 am

Re: first time investor need advice

Post by SimplicityNow » Tue Oct 03, 2017 11:12 am

To answer your question we will need more information.

There is a sticky post at the top of this forum that gives you a recommended format for providing information.

At the very least we would need to know:

1) Other sources of income

2) Yearly expenses

3) Is social security or SSI in the picture and if so how much will you receive?

In the meantime you have been given good advice. Especially, don't seek out financial advisors and don't share the news of your windfall.

marcopolo
Posts: 226
Joined: Sat Dec 03, 2016 10:22 am

Re: first time investor need advice

Post by marcopolo » Tue Oct 03, 2017 11:17 am

Sandtrap wrote:
Tue Oct 03, 2017 9:54 am

$1.3 million would marginally (at best?) sustain an annual WDR of $50k/year. That's over 5% and unrealistic to most.
I think it is about 3.8%, not over 5%. Still a bit tight at age 47, but not completely unrealistic.
I agree with the rest of the really good advice.
Once in a while you get shown the light, in the strangest of places if you look at it right.

purrdue
Posts: 2
Joined: Tue Oct 03, 2017 2:10 am

Re: first time investor need advice

Post by purrdue » Tue Oct 03, 2017 9:01 pm

I hope I didn't make a first newbie mistake. After I posted my question for investing help. I purchased shares in VTSAX,VTIAX, VTBLX without regard to the end of year tax consequence. If the funds received quarterly dividends in sept. will I escape this years taxes on them. I did update my original post following the guidelines and once again thank you for all ur helpful replies.

SimplicityNow
Posts: 212
Joined: Fri Aug 05, 2016 10:31 am

Re: first time investor need advice

Post by SimplicityNow » Wed Oct 04, 2017 12:02 pm

purrdue wrote:
Tue Oct 03, 2017 9:01 pm
I hope I didn't make a first newbie mistake. After I posted my question for investing help. I purchased shares in VTSAX,VTIAX, VTBLX without regard to the end of year tax consequence. If the funds received quarterly dividends in sept. will I escape this years taxes on them. I did update my original post following the guidelines and once again thank you for all ur helpful replies.
VTSAX and VTIAX pay distributions 4 times a year usually March, June, September and December.

VTBLX pays a dividend monthly.

Qualified dividends are taxed at the long term capital gains rate but depending on your income, you may pay nothing.

Not a reason to wait until 2018 IMO.

Is the $50,000 per year expenditure ABOVE the $1,300/month you are receiving from SSI?

You said your mom will pay your expenses until she is deceased. Will you receive an additional windfall at that time or will you rely solely on the SSI and draw from your 1.3M?

Also realize that the IRA portion of the 1M inheritance will be subject to tax as well. Was your father over 70 1/2 at his death and withdrawing from his IRA?

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