Suggestions for too much cash in IRA?

[prudent_one]

My nice neighbor asked me what ideas I had about putting $250K cash to work in his IRA. A not-unusual story - he sold off a lot of his IRA investments March 2020 as the market slumped, let it sit all this time. Now he wants to redeploy it low risk. Since it's in an IRA, it looks like he can use bond funds or brokered CDs. The brokered CDs look awful (like 0.15% for 1 yr). He's got all the stock allocation he wants at the moment so he wants fixed income type things.

He won't need any of this money for at least two years at the earliest and is concerned about buying bonds with rates expected to increase. This isn't an area I follow so I thought I'd crowdsource some wisdom.

 

[TheWizard]

Put it all in an S&P 500 index fund.
*shurg*

For fixed income alternatives, I like my TIAA Traditional paying 3.0%.
Not everyone is eligible for this, of course...

 

[WhenIsItTime]

OMG!!! Not sure how old your nice neighbor is, but normally IRA $$ can ride out a storm.

The S&P 500 highest close in March 2020 was $3,130. That’s about 38% short of today. Maybe portion was in bonds.

Sorry I’m captain obvious. This is why some people should pay an advisor.

 

[racy]

I, too, would send your neighbor to a fee-only advisor, essentially to hold his/her hand during market corrections. Let the advisor suggest some fixed income alternatives.

 

[pb4uski]

My nice neighbor asked me what ideas I had about putting $250K cash to work in his IRA. A not-unusual story - he sold off a lot of his IRA investments March 2020 as the market slumped, let it sit all this time. Now he wants to redeploy it low risk. Since it's in an IRA, it looks like he can use bond funds or brokered CDs. The brokered CDs look awful (like 0.15% for 1 yr). He's got all the stock allocation he wants at the moment so he wants fixed income type things.

He won't need any of this money for at least two years at the earliest and is concerned about buying bonds with rates expected to increase. This isn't an area I follow so I thought I'd crowdsource some wisdom.

He could consider a MYGA... multi-year guaranteed annuity... essentially the insurance company version of a CD. Not FDIC insured but better yields.

https://www.blueprintincome.com/fix...eaUyws9o9Wzl85S-Pk1e8XDBleTHpW5BoC-DQQAvD_BwE

Four 3-year offerings for insurers rated A+ or better with yields ranging from 1.2% to 1.85%.

Nine 5-year offerings for insurers rated A+ or better with yields ranging from 1.0% to 2.25%.

He may be able to buy the MYGA through his brokerage or he may need to do it through an IRA rollover to a qualified annuity with the insurer.... I'm not sure about the details of how it works.

 

[qwerty3656]

I was reading "Make Your Money Last" by Jane Bryant Quinn and one thing that caught my eye was that she was not opposed to life-time annuities for part of your savings. I'm not an expert and would suggest looking at the book, but if I was in your neighbors position (somewhat foolishly selling at the bottom of the market and now looking for income options), I might consider a lifetime annuity.


https://www.amazon.com/Make-Your-Money-Last-Indispensable/dp/1476743770

 

[pb4uski]

^^^ Interest rates were higher when she wrote that book. I wouldn't lock in today's low interest rates by buying a SPIA right now.