Where to invest

[linda]

I have plans to sell my house soon. We will have about 800K from the sale of the house. I plan to retire in about 4 years in 2009. How should I invest the proceed of the sale so that I can retire comfortablely. I am currently living and working in Santa Clara, CA. In retirement, I think I would like to stay living in the Santa Clara area. My husband and I both have about 400K in our 401k at work. After selling our home, we will rent.

[maddythebeagle]

what are your ages? and what are you comfortable with? I would max out the 401k before you left and if you are over age 50, you could sock away a little more with the catch-up. That is a start, I am sure others will give suggestions. This has come up recently (people getting a lump sum). You should look back at the posts the last couple of months for some more ideas.

[wildcat]

Sit on it. No need to make any drastic moves. If you are only 4 years away you should be in conservative camp (esp with 1.2 mil) but you did not mention age.

[Art]

I agree with Wildcat. I see nothing wrong with maxing out annually in I-Bonds ($120,000/year, paper and electronic) at 4.8%, tied to the CPI-U, and virtually liquid after 1 year (except for 3 mos. of interest if redeemed in under 5 years).

I can't think of a better place to park your cash- and congrats on having the foresight to sell (your home) high, and rent. I think you will do very well if you trust your gut, distrust the markets (real estate and stock) and max out on I-Bonds.

[linda]

Thanks for suggestions.

I am 47 and my husband is 49. Just waiting for the kids to finish college before retiring.

[wildcat]

Linda -

As I said I would sit on it until you come up with a plan you are comfortable with. I know that doesn't tell you much but I would imagine you have a few reasonable choices in terms of allocation w/o running FIRE calc - 60/40, 50/50 or 40/60. It really depends on what you are comfortable with. Also you need to account for the high cost of living. Health insurance provided or are you paying? Run your numbers on FIRE calc. It is not perfect but it will give you an idea of where to go.

[Alan]

We sold up 18 months ago and moved to rental. We stuck the proceeds in a single conservative Vanguard fund 65% bonds/ 35% Stocks that has been around since 1970 and has for us returned close to their historic norms of 9%. (dividends re-invested). Of course past returns don't ensure ......

We also max out on I-Bonds each year, building a ladder for retirement. Works great on-line through treasurydirect.

[Marshac]

Originally Posted by wildcat

As I said I would sit on it until you come up with a plan you are comfortable with.*

Agreed. Find a nice 5% CD, put it in there, and you should see a safe real rate of return of around 2% (assuming inflation #s are correct). You're close, now is not the time to play games and take risks.... especially over the next 6 months IMO

[linda]

Thanks for all the kind suggestions.

I will definitely look into CDs and max out on the I-Bonds.

Alan, you mentioned a Vanguard Fund - I like to investigate further.
Which Vangruard fund did you put your money into and what was
your return in the past 18 months?

[REWahoo]

Originally Posted by linda

Alan, you mentioned a Vanguard Fund - I like to investigate further.
Which Vangruard fund did you put your money into and what was
your return in the past 18 months?

Linda, it looks like Alan was referring to Vanguard's Wellesley Income Fund. Here is a link to the Vanguard website and information on historical returns.

http://flagship2.vanguard.com/VGApp/...FundIntExt=INT

REW

[Alan]

Linda,

REW is correct - I was referring to the Wellesley Income fund Admiral shares.


Alan

[linda]

I have another question. If I want to invest a $100K in Vanguard Wellesley Fund, is it best to put in the entire amount of $100k at one time or should I put in 10% of the $100K per month for 10 months.

Here's the plan I am considering with the money from the sale of our house:
1. Max out I-Bond - $120K
2. Vanguard Wellesley fund - $100K
3. CD account - $680K

I have enjoyed reading all the comments on this forum. It have been very helpful
and inspiring.

[wildcat]

Well I would look at from 2 perspectives.

1) Throw the money in now so you can start collecting the yield or

2) DCA into the fund so you naturally hedge any drops in NAV

It is not a real volatile fund so keep that in mind

[Alan]

When I sold my house 18 months ago I faced the same question of DCA or jump in immediately. I decided that since the Wellesley fund was so stable that I would put in the full $200K immediately (I had also been in it for about a year myself). I certainly have not regreted it as my personal return from my own spreadsheet calculation and via the Vanguard website has been close to 9% over the 2.5 years that I have been in it.

[REWahoo]

linda,

I agree with Alan and did not dollar cost average when I rolled over my 401(k) a couple of months ago and put half of it in Wellesley. Only time will tell if that was the best way to do it, but the fund's stable track record convinced me it was OK to go that route.

REW