If You Are Already Set, How Are People Investing Inheritance and Other Windfalls

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MrCheapo
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Joined: Tue Dec 22, 2020 3:43 pm

If You Are Already Set, How Are People Investing Inheritance and Other Windfalls

Post by MrCheapo »

Hi All,

Recall my situation:

50, retiring in 3-4 years.
Pension will cover my regular expenses
Tax deferred retirement now $1.2M was $1.5M
After tax was $1.6M now $1.4M including $500K in money market/bonds etc for slush including kids education.
Own my own home and no debt so despite the market downturn I'm still okay.

I will receive $500K from an inheritance in 6-8 months. So two related questions:

a) When to invest? Should I invest now the $400K from the money market funds and replenish it in 8 months from the inheritence. The kids don't go to university for another 18 months. Or should just dollar cost average in.
b) What to invest in? My current asset allocation is 55% domestic, 25% international and 20% bonds/money market. The domestic is 70% large cap, 20% mid cap and 10% small cap. Given the current set up should I skew this more towards domestic/international or small-mid/large cap?

I know a natural reply will be to gift the $500K but this market down turn has me a bit spooked, no pension is guaranteed.
Last edited by MrCheapo on Thu May 12, 2022 12:38 pm, edited 1 time in total.
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HMSVictory
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Location: Lower Gun Deck

Re: If You Are Already Set Up How Are People Investing Inheritance and Other Windfalls

Post by HMSVictory »

Hello MrCheapo,

We have no way of knowing where the market will head this year or next. What I do know is it will move higher over the long term.

Since you have all of your expenses covered via the pension you can invest in any AA you want - anything from 90/10 to 30/70 is reasonable.

I would invest the new $500k into my AA the day I get it and not worry about where the market is. Stop monitoring the daily or weekly moves of the market - turn off CNBC. The negative news cycle that runs 24/7 can drive you nuts. Create an IPS and execute on it. Over the long term you will come out ahead and don't worry about year to year moves in the market. It will take your total portfolio from $2.6M to $3.1M and as you indicated you have $500k for discretionary spending (which has no market risk). Your current AA looks good and favors stocks which is wise in my opinion.

:sharebeer
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mega317
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Re: If You Are Already Set Up How Are People Investing Inheritance and Other Windfalls

Post by mega317 »

MrCheapo wrote: Thu May 12, 2022 11:20 am Should I invest now the $400K from the money market funds and replenish it in 8 months from the inheritence.
It's not an awful idea, but absent other details if I was in your position I would not count my inheritance until it hatches. If you need 500k liquid (seems high) then just leaves things as they are until the inheritance actually hits.
https://www.bogleheads.org/forum/viewtopic.php?t=6212
Jack FFR1846
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Location: 26 miles, 385 yards west of Copley Square

Re: If You Are Already Set Up How Are People Investing Inheritance and Other Windfalls

Post by Jack FFR1846 »

DW and I are working on an inheritance and a lot of it is taxable, so consider that. Beyond that, we plan to retire in less than a year and want free cash to do so, so have put any distributions into high yield savings accounts. The bulk of the money is in the estate and DW is executor. Her sister and she are the only heirs. We know there will be a bunch of taxes.

Looking at your post, I see college coming. I'm past that but saved $1M for my 2 sons. First son cost about $300k and second son went to community college, then welding school, so only about $25k. My parents had a small 529 and I had a pile of paper savings bonds. I think I'd be absolutely sure you've got plenty in the emergency fund. Then college fund. Then into your asset allocation.
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Eagle33
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Re: If You Are Already Set, How Are People Investing Inheritance and Other Windfalls

Post by Eagle33 »

Have you read wiki topic Managing a windfall?
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