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500k Lump Sum...What to do in this market?
12-14-2018, 05:17 PM
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#1
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Dryer sheet aficionado
Join Date: Apr 2014
Posts: 28
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500k Lump Sum...What to do in this market?
Just received Lump Sum of $500k from a Pension Distribution......I am a 3 Fund ETF Index believer.....Would you just invest to your chosen AA in this market? I am 40/60....60 Years old and have 1.5 Million total including this new 500k Lump. Also have a small non inflation indexed pension (14.5k) and a strong SS record. Working PT and hope to call it totally quits at 62. Think 90k a year is possible with a 3% withdrawal rate if you include 32k SS and 14k Pension.
Thoughts?
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12-14-2018, 05:55 PM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2005
Posts: 10,252
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Since things are in correction territory, this is the proverbial time that lots of folks have been waiting to invest for.
Investing is all about losing money, so I say just go for it and invest the whole sum as soon as you want to.
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12-14-2018, 06:02 PM
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#3
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Thinks s/he gets paid by the post
Join Date: Feb 2007
Location: Upstate
Posts: 2,944
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Quote:
Originally Posted by macav933
Just received Lump Sum of $500k from a Pension Distribution......I am a 3 Fund ETF Index believer.....Would you just invest to your chosen AA in this market? I am 40/60....60 Years old and have 1.5 Million total including this new 500k Lump. Also have a small non inflation indexed pension (14.5k) and a strong SS record. Working PT and hope to call it totally quits at 62. Think 90k a year is possible with a 3% withdrawal rate if you include 32k SS and 14k Pension.
Thoughts?
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Where is the other $1 Million (1.5 - .5) invested? At your chosen AA?
Free Internet Advice from a Stranger: At 3% WR, 1.5 yields 45K inflation adjusted. Add the 32K SS gives 77K. That leaves 13K which the 14K gives but is not inflation adjusted. Putting the 14K out of the equation, 90K - 32K = 58K. 58K* x WR = 1.5M yields WR = 3.87%. So yes, you can do it - but the WR is pretty close to 4% (but you also have 14K to invest every year).
In terms of investing, this will sound glib, but who knows? Given that, I would DCA in to my target AA, perhaps weighted based on market activity, i.e. increase the DCA amount if market continues to sell off, slow it down if market rallies.
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12-14-2018, 06:23 PM
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#4
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Dryer sheet aficionado
Join Date: Apr 2014
Posts: 28
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Yes....the other 1 mill is invested at my AA of 40/60. 4% WR is a little rich in my opinion given today’s Bond yields. My goal is to keep my WR as close to 3% as possible. I nibbled a little today and bought some Total Market Index as well as the International Market Index which is at its 52 week old and down some 17% from its high. I wouldn’t mind a further market sell off...
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12-14-2018, 07:09 PM
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#5
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Thinks s/he gets paid by the post
Join Date: Mar 2013
Location: Southern California
Posts: 3,995
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I'd probably invest about 1/3 of it right now since we are in the midst of a correction. Then I would DCA the rest of it over the next 18-24 months.
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12-14-2018, 10:08 PM
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#6
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Thinks s/he gets paid by the post
Join Date: Jan 2007
Location: Thousand Oaks
Posts: 1,111
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Quote:
Originally Posted by Ready
I'd probably invest about 1/3 of it right now since we are in the midst of a correction. Then I would DCA the rest of it over the next 18-24 months.
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It all depends on if you think you know how to time the market. If you do , you can come up with some DC averaging scheme. If it’s going to be in there for a number of years, it’s been demonstrated that, in the end, just going all in tends to work better than averaging
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12-15-2018, 01:39 AM
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#7
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Thinks s/he gets paid by the post
Join Date: Sep 2011
Location: Placerville
Posts: 1,788
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Quote:
Originally Posted by Ready
I'd probably invest about 1/3 of it right now since we are in the midst of a correction. Then I would DCA the rest of it over the next 18-24 months.
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That's what I'm doing. I recently fired my FA from managing my funds, which triggered a sell-off of the funds available only with managed funds. With the cash, I bought in at the last two lows @ $100,000 each and likely to invest more if it continues to drop next week @$25,000 a pop until I'm all back in.
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12-15-2018, 06:21 AM
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#8
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Thinks s/he gets paid by the post
Join Date: Oct 2010
Posts: 1,211
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I would just invest it as directed by my asset allocation. I don't know how to properly time the stock market.
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12-15-2018, 07:34 AM
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#9
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Full time employment: Posting here.
Join Date: May 2014
Location: Lakewood
Posts: 916
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Sounds like you’re doing quite well for yourself with a sound AA, a pension, SS, and a realistic/conservative expectation of future market performance. Congratulations!
I’d take a fraction of that lump sum, maybe 5-10%, and do something extravagant, exciting, and fun. Perhaps an African safari or a ski trip.
I’d invest the rest according to your AA immediately. Not doing so feels like adjusting your AA from bonds/stocks to cash/bonds/stocks. What’s the point of setting an AA if you’re going to change it on mildly bumpy market performance?
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12-15-2018, 04:39 PM
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#10
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Thinks s/he gets paid by the post
Join Date: Jul 2015
Location: Beaverton
Posts: 1,382
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If you're antsy go 6 month, 12 months and two year Treasuries
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12-15-2018, 11:46 PM
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#11
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gone traveling
Join Date: Dec 2010
Posts: 538
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Isn't the bond market headed towards 3%? Do you really need that $90k a year right now? If you were 1:2 stock: bond, that might put you at 3% very soon, and you need not be in a hurry to increase the stock fraction.
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12-16-2018, 04:22 AM
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#12
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Thinks s/he gets paid by the post
Join Date: Dec 2015
Location: Michigan
Posts: 4,939
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Quote:
I'd probably invest about 1/3 of it right now since we are in the midst of a correction. Then I would DCA the rest of it over the next 18-24 months.
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I would say 1/2 now and the rest over 6-12 mo.
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