Investing A Windfall When You're Already OK for FIRE

[kgtest]

Diversify. Spend 1/3 on equities, 1/3 on Real Estate and spend the rest. This allows me to buy the dip, take advantage of a buyer's market and adjust my spending as needed without really impacting much. BTD! Blow That Dough baby!

I like skiing, and beautiful women...so a condo in the mtns, and one on the beach. Then maybe a nice car or two...net jets membership...

Then, I would give away a little of my stash...to the vets that need a little extra.

I might hire out some things for a while, see how that pans out...yard work, cooking, a driver?

[OldShooter]

Quote:

Originally Posted by Vincenzo Corleone ... ideas for possible goals and - given a goal - how they would invest the windfall. ...

For goals, I'll go a tiny way out on a limb here to say that it seems most here want to ensure a comfortable and low-risk retirement while at the same time wanting to leave an estate to family beneficiaries and charity. That's pretty much where we are.

If the windfall is truly something you don't need and you have no family beneficiaries to consider, then your path pretty much leads to charity.

Not necessarily waiting for your death, though. Maybe sooner. I mentioned the community foundation we're working with. We actually have established a small fund there already. The purpose of the fund is to help people who are experiencing some kind of crisis. One gift, bird-dogged by a school counselor, was to buy winter clothing for a grade-schooler whose parents had nothing. Another was to make a down payment on a water well repair that was a financial catastrophe for the impoverished owner. A third was to buy all the car parts needed by a high school shop class to fix up a donated car, which was then given to a needy person. We're going to do some more cars if we can. We like that scenario. It is really both fun and satisfying when we hear from the foundation how our money is being used.

Not a charity, but we have some longtime friends who have always struggled a bit financially. He was in advertising and had several long periods out of work. For their 50th anniversary we gave them fifty $50 bills in an unmarked envelope. Fun to think about and fun to do.

Investment? At 72YO, we are 25% fixed income and 75% worldwide equities (VTWAX mostly). The 25% is probably more money than we will ever need. We have been very lucky in life.

[pacergal]

Most likely invest as I do already, ranging anywhere from 50:50 to 60:40, and up my spending and charitable giving to reflect a higher income.
More trips, probably a new house with an acre or two, hire house cleaner and gardener.

[pb4uski]

Quote:

Originally Posted by Vincenzo Corleone So, your finances are in great shape, your home is paid off, you have no other debt, etc., etc., etc. You feel confident that you can RE. Now imagine you've received a windfall that nearly doubles your net worth. Also imagine you have no interest in leaving anyone anything upon your death. I'd like to hear your opinion about how you'd invest the windfall. ...

Beer and hookers?

[RobbieB]

I don't have any goals, so I would invest as I have in the past.

But don't forget to Blow a Big Chunk too!

[target2019]

Quote:

Originally Posted by Vincenzo Corleone I thought about your response a little further and focused on the above quote. I suppose that's the issue. I suppose I'm looking for people to provide me ideas for possible goals and - given a goal - how they would invest the windfall. As I said, DW and I are already set for a decent-to-comfortable ER, so... <shrug>

One goal you might pursue is to encourage following generations to become as wise and educated as you've become. Consider schools where you and wife were taught. Maybe some combination of teacher and student grants or stipends.

So you're gonna try to invest like Yale or other endowment (sorta), and hopefully throw off sufficient funding for the goal.

[Bamaman]

I found myself in that position. My pontoon boat, travel trailer and car were aging. We started off by replacing them.

Then my wife found a huge house in foreclosure, and we paid cash for it at a very advantageous price (low.) Then we moved and took 6 months to recondition and sell our original house for a top price.

Put the $ into CD's and have not touched it--until we paid cash for another slightly smaller but newer house 2 mos. ago. Now I have to sell the big house to replenish our cash reserves--whenever we can get all our stuff out of our last house.

[mh]

I’d probably stuff it half in a stock index fund and half in a money market , then mull over for a month or two how I might like to spend the money market half then adjust accordingly

[travelover]

I'd think about donating it toward a cause you really believe in. That much cash could really change some lives for the better - think of women in third world countries that have fistulas and whose lives are ruined, kids that are blind only because of lack of access to medical care. Kind of like where Bill Gates has gone with his "extra".

[dtbach]

This pretty much describes my DW and me. We have enough with military pension and SS to cover all living expenses plus. I received an inheritance of a bit more than 1/3 of our net worth. I just invested it in the same manner as our standard AA. But then took that new net worth and upped our take as far as the 4% rule.

[SecondCor521]

If the question is about how I would invest it (per post #19), then I've already made my decision. Anything I need for myself is invested at the efficient frontier of SWR for my life expectancy, which is currently 90/10. Anything above that (which is what the hypothetical windfall would be) is 100 stocks, because it would go to my kids, hopefully in 30 or 40 years from now.

Besides just the investing part of it, I would also:

1. Buy an umbrella policy.
2. Reevaluate tax situation.
3. Review college funding situation.
4. Review charitable giving situation.
5. Review and update will as needed.

[Sunset]

I would invest it in some large ETF funds like VTI,VXUS,SCHD,BND, because I don't want to fuss too much with it.

Then I'd upgrade some things in life, even if it was just travel (business class or first class flights, world cruises on luxury lines). Take flying lessons. Basically upping the expenditure amount to include a bunch of the new amount while I'm still able to do stuff.

[DrRoy]

Invest in my comfort zone AA, but allocate some for fun and toys.

[Perryinva]

Did I miss the relative amount?. Double your NW could be $500k, $2M or $20M, ie, it depends on what “comfortable “ is to you. The amounts would change what I would do with it. $500k would not change my allocations while $2M would. If you meant whatever our own NW currently is for us that are FIRE, then for me, no real change, except a bit more aggressive SWR and donate a portion of that income to our favorited charities, but we would enjoy our life a bit more, too.

[Winemaker]

If the amount doubles my existing NW, I would pay off all mortgages of myself (1) and my kids (2) and approach all family businesses that I frequent and pay off any debt they might have. Some donations to church, local foodbank, LSotP, and City Mission.

If I hit the lottery for mega or power bucks, I would buy a mixed use vineyard/ forested area. The proceeds from the vineyard would go solely to the Wounded Warrior Foundation, and the forested area would be an area for disabled vets to use as an accessible hiking/ hunting area. I saw one for sale about 6 years ago that would have been perfect, but the lottery never came through.

[Nords]

Quote:

Originally Posted by Vincenzo Corleone So, your finances are in great shape, your home is paid off, you have no other debt, etc., etc., etc. You feel confident that you can RE. Now imagine you've received a windfall that nearly doubles your net worth. Also imagine you have no interest in leaving anyone anything upon your death. I'd like to hear your opinion about how you'd invest the windfall. 100% stocks? Play it super conservative? Invest it like you've invested your money up until receiving the windfall?

The question:
"How do you invest money you don't need?"
is usually followed by the question:
"How do you know you don't need it?"

You could keep it "absolutely safe" (against the risk to principal or inflation risk) by investing it in TIPs or I bonds or burying bullion in the back yard.

Or, since you don't need it, then you could put it into a high-risk high-return asset: place it all on the roulette wheel. (I'd pick red.) Yet somehow almost nobody gets around to doing that.

If you truly didn't need it in the first place then you could just disclaim the inheritance or donate it all to charity. Merely the act of keeping (and investing) the money implies that:
- you think you might need the money someday, or
- you're a Warren Buffett who can compound more money for future charities better than any charity could spend it today.
Yet even Buffett has concluded that he's not giving it away fast enough.

When my father passed away from Alzheimer's, his assets boosted the net worth of my spouse and me by 15%. We'd already had over six years to think through the situation, and we realized that our estate plan didn't address our own eventual disability. (Death? Sure. Disability? Not so much.) We already had enough money to handle our care for the rest of our lives, but it would've been hard for our caregivers to access it.

Taking care of my father (and his father) placed tremendous stress on our family caregivers. My spouse and I decided that we wanted to reduce that stress by giving our caregivers the tools we wish we'd had: the money and the immediate access to it without gatekeepers.

My father passed away two years ago this month. After distributing his estate between my brother and me, I parked my inheritance in a Fidelity taxable account in only my name. (My spouse has enough assets of her own.) We invested that in our asset allocation: still >90% stocks (as we've done for the last 30+ years). Our latest implementation of that is the Vanguard total stock market index fund.

We've completely overhauled our estate plan. On the disability part, our (adult) daughter has a Fidelity durable power of attorney over that account. (My spouse didn't want her name on the DPOA.) Our daughter can use that account whenever she wants to pay for our disability care. There are no gatekeepers, no reports for the probate court, and (hopefully) less stress than I went through with my father.

Technically she could also have a really great party or donate it all to a cult, but she knows it's in her best interest to spend it on our disability care. That issue gets back to the original question: we didn't need the money in the first place.

This way we've already reduced our daughter's stress about caring for us, and we've given her friction-free access to the tools. It also makes me feel good to know that I've done my part to stop this multi-generational caregiver problem.

This post covers the rest of our estate planning, with that caregiver aspect in mind:
https://the-military-guide.com/famil...ur-disability/

[RxMan]

Be one of those people that leaves a $500 tip at a local diner or restaurant. That seems like it would be a really fun thing to do.

[Aiming_4_55]

Quote:

Originally Posted by RxMan Be one of those people that leaves a $500 tip at a local diner or restaurant. That seems like it would be a really fun thing to do.

I've had some thoughts recently, what can I do in a small way to bring "cheer" to someone in an unexpecting way. A nice tip is always something that can be appreciated. This story was nice also...pop star pays for grocery cart of food during the Thanksgiving holiday.

https://myfox8.com/2019/11/29/pop-st...r-their-items/

PALM SPRINGS, Calif.-- It's not every day you run into a top-selling pop singer at your local Walmart, but that's what happened to shoppers in Palm Springs, California.

Australian artist Sia reportedly went to a Walmart and TJ Maxx where she spent time hugging customers and paying for their merchandise.

The "Chandelier" singer told shoppers her name was "Cici" and she had won the lottery.

It's understandable it took them some time to figure it out.

The celebrated artist is known for concealing her face with wigs and turning her back to the audience while performing.

A few of the shoppers shared videos of what happened, and we're pretty sure that's Sia shining "bright like a diamond."

[FREE866]

Quote:

Originally Posted by euro Find a charity of your choice and give it all away!

+1


Totally!


So many amazing people out there have spearheaded phenomenal charities that help people, animals, etc

[sengsational]

Many people on this board say they have enough money and are living exactly as they please, and within their means. This is doubtless true for many/most and also the formula for a happy life. All good.

So what would a windfall that doubles the net worth mean to such a person?

One school of thought says that "living exactly as (one) please(s)" is static, and the windfall money could be given away without blinking an eye. I'm not so sure that holds water, though. Maybe what we are saying is that we are living exactly as we please, given our available assets. In other words, we're happy to live within our means and seek nothing more. But now that our means have doubled, we can live within those new means, and seek nothing more under the new circumstances.

As long as one does not become too attached to any particular lifestyle, it seems harmless to leverage the windfall to places inaccessible to your before. Those might make you more happy or might make you less happy. Keep the ability to retreat, and you'll be no worse off.

For those reasons, I personally, would take the windfall and do "something crazy" with part of it, and invest the rest of it in my target asset allocation. That something crazy might involve an increase in the spending burn rate, and that's fine. If it doesn't work out, I'd always have a place I know works for me.