Inheritance at 62 yrs old

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Topic Author
Astrid2
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Inheritance at 62 yrs old

Post by Astrid2 » Mon May 13, 2019 1:59 pm

I am 62 years old and retired from government employment and have a small retirement check every month. My monthly retirement check is not
going to be enough to live on for a long time. I have a 401k worth about 60k and about 50k in VTSAX. When employed I lived pay check to pay check and did not have much money to invest. I have recently come into a large inheritance which means I can invest now but at my age I am not sure how to approach this issue.

Your advice is appreciated.

JoeRetire
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Re: Inheritance at 62 yrs old

Post by JoeRetire » Mon May 13, 2019 2:16 pm

How much is the inheritance?
How much are your annual expenses?
How much is the pension?
Will you be collecting social security?
Are you married? If so, how old is your spouse, and what are the numbers for your spouse?

Topic Author
Astrid2
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Re: Inheritance at 62 yrs old

Post by Astrid2 » Tue May 14, 2019 2:27 pm

My inheritance is 300k
My annual expenses are approx 22,800. If I have an unexpected expense like a car repair bill or my property taxes go up then I dip into a small savings
account which is dwindling down to 5k.
My pension is 2400. monthly.
SS will be collected when I am 67.5 yrs old and will be 1550.
I am single.
Thank you for your advice. Since I have no "safe" investments like bonds, I was thinking much of my windfall should be in bonds. Correct?

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mhadden1
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Re: Inheritance at 62 yrs old

Post by mhadden1 » Tue May 14, 2019 2:52 pm

I would consider using a fund like Vanguard's LifeStrategy Moderate Growth, which is 60/40 stocks/bonds. Then you could keep all your 401k holdings in bonds and save a little tax, and still be around 50/50. A 4% withdrawal rate would give you an extra 12k per year to spend. Sounds like if you can hang on and keep your spending down until you draw SS, things will loosen up for you quite a bit. Good luck!
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furnace
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Re: Inheritance at 62 yrs old

Post by furnace » Tue May 14, 2019 3:12 pm

Your pension check is enough to cover your monthly expenses. Then in 5 years, your SS check will add 1500. Except for emergency spending or "treat yourself" spending, you won't need to touch the portfolio at all. This means you can invest aggressively.

Maybe take 45k from the inheritance and set it aside as emergency fund (earn 2% in high yield savings account). Invest the rest into a fund like VSTAX or a balanced fund. Try not to touch it until you have a true need. Avoid panic selling -- that's what your emergency fund is for. In 10 years, if history is any guide, your portfolio should double in value.

HomeStretch
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Re: Inheritance at 62 yrs old

Post by HomeStretch » Tue May 14, 2019 3:22 pm

The inheritance is a nice safety cushion. Consider delaying claiming Social Security until age 70. Your SS benefit will increase significantly and will have cost-of-living increases for life.

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tennisplyr
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Re: Inheritance at 62 yrs old

Post by tennisplyr » Tue May 14, 2019 6:01 pm

Read up in target retirement funds, maybe hold some ($20-$30k) in a savings account for emergencies. Here's info on Vanguard funds:

https://investor.vanguard.com/retiremen ... ment-funds
Those who move forward with a happy spirit will find that things always work out.

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BL
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Re: Inheritance at 62 yrs old

Post by BL » Tue May 14, 2019 6:37 pm

Sorry for your loss, but this inheritance will make a positive change in your retirement.

Suggest you search the Wiki for windfall. It may suggest you hold off on investing for a bit while you get used to it.

You could put the money into a treasury (no state tax, I believe) or Prime Money Market if you use Vanguard, while you think about what you want. A high interest savings account such as at Ally bank (I haven't used it myself) would also work. Banks and credit unions are insured: FDIC, --.

As mentioned, you could further delay SS to age 70 (essentially buying a Cola'd annuity cheaper than you could get on the market.) Use some inheritance money to do this "purchase": live on that money instead. (See SPIA below.)

This gives you time to decide on:

total stock market (+ MM, bonds, CDs)
or
Vanguard target date fund, maybe 2015 or 2020.
or
Life Strategy Conservative (60% bonds)
or
SPIA (single premium immediate annuity) after shopping Vanguard or independent insurance agents (not those selling a single company). Usually better to wait until age 75 or so for this.

If the decisions are too overwhelming, you could use Vanguard PAS to manage for a while at 0.3% AUM.

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One Ping
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Re: Inheritance at 62 yrs old

Post by One Ping » Tue May 14, 2019 6:58 pm

Astrid2 wrote:
Tue May 14, 2019 2:27 pm
My inheritance is 300k
My annual expenses are approx 22,800. If I have an unexpected expense like a car repair bill or my property taxes go up then I dip into a small savings
account which is dwindling down to 5k.
My pension is 2400. monthly.
SS will be collected when I am 67.5 yrs old and will be 1550.
I am single.
Thank you for your advice. Since I have no "safe" investments like bonds, I was thinking much of my windfall should be in bonds. Correct?
furnace wrote:
Tue May 14, 2019 3:12 pm
Your pension check is enough to cover your monthly expenses.
I agree with furnace, your pension should cover your expenses. Does your $22,800 annual expenses include taxes?

FYI - Running opensocialsecurity (https://opensocialsecurity.com/) shows the 'maximum' PV of SS benefits to be for a filing date of 68yr 2 mo for a 62 YO single female. With your pension and inheritance you should be able to easily reach that date, if you wanted to.
"Re-verify our range to target ... one ping only."

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Sandtrap
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Re: Inheritance at 62 yrs old

Post by Sandtrap » Tue May 14, 2019 9:01 pm

BL wrote:
Tue May 14, 2019 6:37 pm
Sorry for your loss, but this inheritance will make a positive change in your retirement.

Suggest you search the Wiki for windfall. It may suggest you hold off on investing for a bit while you get used to it.

You could put the money into a treasury (no state tax, I believe) or Prime Money Market if you use Vanguard, while you think about what you want. A high interest savings account such as at Ally bank (I haven't used it myself) would also work. Banks and credit unions are insured: FDIC, --.

As mentioned, you could further delay SS to age 70 (essentially buying a Cola'd annuity cheaper than you could get on the market.) Use some inheritance money to do this "purchase": live on that money instead. (See SPIA below.)

This gives you time to decide on:

total stock market (+ MM, bonds, CDs)
or
Vanguard target date fund, maybe 2015 or 2020.
or
Life Strategy Conservative (60% bonds)
or
SPIA (single premium immediate annuity) after shopping Vanguard or independent insurance agents (not those selling a single company). Usually better to wait until age 75 or so for this.

If the decisions are too overwhelming, you could use Vanguard PAS to manage for a while at 0.3% AUM.
+1
These are great suggestions.
OP: read: MANAGING A WINDFALL
https://www.bogleheads.org/wiki/Managing_a_windfall
GETTING STARTED
https://www.bogleheads.org/wiki/Getting_started
Outstanding write up on the 64/40 allocation by Bernstein.
http://web.archive.org/web/20061214061 ... in6040.pdf
R. Ferri on Bernstein's 60/40
http://www.etf.com/sections/index-inve ... nopaging=1
SPIA Rates
Immediate Annuity.com Calculator
https://www.immediateannuities.com
Vanguard VPAS services info:
https://investor.vanguard.com/advice/personal-advisor

megabad
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Re: Inheritance at 62 yrs old

Post by megabad » Tue May 14, 2019 9:19 pm

HomeStretch wrote:
Tue May 14, 2019 3:22 pm
Consider delaying claiming Social Security until age 70. Your SS benefit will increase significantly and will have cost-of-living increases for life.
+1

I like the idea of you investing a big chunk of it in low cost bond index fund and using these funds to help you delay social security. I might drop 50% of the inheritance in a bond index and 50% in a total stock market index.

lakpr
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Re: Inheritance at 62 yrs old

Post by lakpr » Tue May 14, 2019 9:33 pm

megabad wrote:
Tue May 14, 2019 9:19 pm
I like the idea of you investing a big chunk of it in low cost bond index fund and using these funds to help you delay social security. I might drop 50% of the inheritance in a bond index and 50% in a total stock market index.
I think the OP needs only to keep the $1550 per month * 30 months = $46,500 into bond funds. The 30 months is the difference between 67.5 years age (OP’s initial plan to collect SS), and 70 years age (our proposal to delay SS). Between the years of 67.5 and 70, draw down from this bond fund.

The rest of $253k, can easily be invested in a 60:40 blend fund. Vanguard Balanced Index fund, or Wellington fund, or Life Strategy Moderate Growth fund, all are excellent choices. They also rebalance daily, so the mix is always kept 60:40. Pick one fund among these, then sleep well at night.

-=================-
Edited to add: Realized that $46k in a bond fund, and 40% of $253k indirectly in bond funds = $100k, together make $150k in bonds. That is same as 50:50 in bonds vs stocks anyway, so megabad, you and I are really stating the same 50:50 divvying but in different terms.

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Reb Tevye
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Re: Inheritance at 62 yrs old

Post by Reb Tevye » Wed May 15, 2019 1:09 am

Astrid2,

Please take your time digesting all this. There is no need to do anything more than in the short term than invest it safely in a bank and earn some interest while you decide. Even if it takes some months.

It can be helpful if you indicate more of your investment experience, as in what have you done before and been comfortable with? Or when did you ever lose sleep? The more you can describe any goals, and personal temperament, that may also help with recommendations.

A thought... many people are your age and have a similar pension and a retirement pot the same size as your inheritance. Some of them will have it invested conservatively, some will be aggressive. And probably be equally content. I think the key for you, if you don’t already know for yourself, is finding where you’ll be content with your choice and accept how it plays out. Because no one here, or in an advisors office, will know how things will play out.

Using some money to fund delaying SS, to boost it ~20%, seems like a good part of the plan. And of course you can stop delaying at any time.
I’d boost your handy savings to 3-6 months for peace of mind.
And my 2 cents is there’s value in gradually taking your windfall investment steps toward your goal... ensuring you are comfortable with each increment of stock purchase, for example.
Probably anything from 30-70% stocks is reasonable for your total portfolio. It’s generally best to look at your portfolio as one pot.
Considering a (SPIA) annuity if you still are healthy in 5-10 years is reasonable. From actuarial tables, I see that a 62 year old female has a 30% chance of living past 90.

Portfolio complexity would probably not help, and more likely hurt.

If you value simplicity, a single balanced fund would work. Or a 50% stock allocation target makes the math easy, if you want separate stock and bond funds.
"So, what would have been so terrible if I had a small fortune?"

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