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Fired and about to invest a lump sum
Old 12-07-2011, 09:04 AM   #1
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Fired and about to invest a lump sum

I have now retired and need to make a decision on where to put the lump sum money from my pension. I have a Vanguard account where I am thinking I will put the money and then invest. My tendency is to keep it simple with a 40/60 equity bond split in something like the Total Stock Market, Total International stock market and the Total bond Market. I am thinking of mixing in some TIPS with the bond portion as well. I am also looking at buying a CD with a portion of the money. What do people think of investing in the Vanguard CD's vs bank or credit union. I know they don't compound but they also have long term ones that are higher rates. FDIC insured as far as I can tell from the Vanguard site info. My other option is to roll some into my 401K managed by T Rowe Price where I have a company fund that averages around 4 percent a year but not FDIC insured. My other options there are limited more than in the Vanguard account. Looking for any comments on the suggested strategies.
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Old 12-07-2011, 09:14 AM   #2
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If the 40/60 equity / fixed split feels right for your risk tolerance, I would go with 60% Total Bond, 12% Total International, and 28% Total Stock.

KISS or as Jack Bogle puts it, "The elegance of simplicity"

Forget TIPS they have negative after tax real yields right now.
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Old 12-07-2011, 09:17 AM   #3
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It sounds a little like the Scott Burns Couch Potato Margarita Portfolio: AssetBuilder Inc. - Registered Investment Advisor- Couch Potato Cook Book

Why not just put it all in Wellesley (VWINX)?
Vanguard Wellesley Income Inv: MUTF:VWINX quotes & news - Google Finance
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Old 12-07-2011, 09:33 AM   #4
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Originally Posted by afntrn56 View Post
I have now retired and need to make a decision on where to put the lump sum money from my pension. I have a Vanguard account where I am thinking I will put the money and then invest. My tendency is to keep it simple with a 40/60 equity bond split in something like the Total Stock Market, Total International stock market and the Total bond Market. I am thinking of mixing in some TIPS with the bond portion as well. I am also looking at buying a CD with a portion of the money. What do people think of investing in the Vanguard CD's vs bank or credit union. I know they don't compound but they also have long term ones that are higher rates. FDIC insured as far as I can tell from the Vanguard site info. My other option is to roll some into my 401K managed by T Rowe Price where I have a company fund that averages around 4 percent a year but not FDIC insured. My other options there are limited more than in the Vanguard account. Looking for any comments on the suggested strategies.
This sounds basically good to me. I'd leave the TIPS alone and maybe do some investment grade corporate bonds instead or maybe munis depending on your tax position.

I'd keep a year (maybe two) of expenses in your bank shared between savings and a checking account and use a CD ladder or really short term bonds for your low risk investments.
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Old 12-07-2011, 10:16 AM   #5
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The one caution about brokerage (including Vanguard) CDs vs. those at a bank is that brokerage CDs typically have no early surrender option at all (you have to sell at whatever you can get in the market), while bank CDs will typically let you surrender early for a few months to a year's worth of interest. If rates spike, the bank CDs will be a lot more attractive than the brokerage CDs.
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Old 12-07-2011, 06:16 PM   #6
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Rick Ferri just had a blog post on this:
4 Rules for Investing a Lump Sum

Quote:
Was this money from an employer pension plan? If the answer is yes, then the cash was recently in stock and bond investments and it should go right back in. For example, if your 401(k) was recently invested 50 percent in stock funds and 50 percent in bond funds before it was liquidated to cash for the distribution, then the cash should go right back into stocks and bonds.
Of course there are three other rules to consider in the post, but not all of them are applicable to your situation.
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Old 12-07-2011, 06:55 PM   #7
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If the 40/60 equity / fixed split feels right for your risk tolerance, I would go with 60% Total Bond, 12% Total International, and 28% Total Stock......
+1 That is essentially what I do except my AA is 60% equities (12% international/48% domestic) and 40% bonds.
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Old 12-07-2011, 07:30 PM   #8
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If your target is 40-60 my mix would probably look like this:
5% cash
15% short-term bond or equivalent (CDs and investment grade corp)
15% interm-term bond (invest. grade corp, 4-5 year duration)
5% convertible securities
10% foreign bond (maybe LSGLX)
5% infl. protected bond
5% B/BB bonds
8% international stock (some value and some growth but probably not index given uncertainty in Europe)
27% total stock
5% reits and commodities (or maybe PRPFX)

... or something close.
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