$300000+ to invest

[Librarian]

DH 58, retired. I am 55; retiring w/in 6 mos.
We have an excellent pension that will allow us to live comfortably—about $100K/yr total. (MORE than enough to pay our bills comfortably)
No debt. $275000 home paid in full. 2 newer cars.
Other than 529s for 3 kids, never did any investing—just savings accounts. (Children are on their own, each receiving a smaller chunk of this trust to invest for their futures)
We are receiving about $300000+ from a trust soon.
What recommendations do you have for investing this?
We have been doing some research, so I guess this is more of that.
We would like to use the earnings from this to fund traveling.

 

[teetee]

I am 44 and half of my money (retirement accounts or not) are in total stock index fund. It is a complete "invest it and forget it" type fund.

Still beat at least half of actively managed mutual funds though.

I don't know if it works for you since you have been trained to have no risk tolerance by keeping majority of the money in the saving account over the years.

In some years you may have the return from the investment to fund your travel. In other years, you may have to work part time on a cruise ship and earn money from other peoples' travel to fund the amount that is lost in your investment.

 

[Librarian]

Thanks

I am 44 and half of my money (retirement accounts or not) are in total stock index fund. It is a complete "invest it and forget it" type fund.

Still beat at least half of actively managed mutual funds though.

I don't know if it works for you since you have been trained to have no risk tolerance by keeping majority of the money in the saving account over the years.

In some years you may have the return from the investment to fund your travel. In other years, you may have to work part time on a cruise ship and earn money from other peoples' travel to fund the amount that is lost in your investment.

Index fund is what we have been looking at.
529s have been in American Funds which have done well for them, especially the youngest the last few years (going to public instead of private college also helped).

Not so much as risk intolerant as not having extra to invest. 2 public servants raising 3 kids--the 529s were the extent of our "investing."
Admittedly, the excellent pension made it easy to not have to worry about it; we chose to make memories traveling with the children.

Our current budget will fund travel at to the extent we have been traveling over the years; we are hoping to do more. Your cruise ship comment cracks me up--I already have applied with a company to do workshops/lectures on cruise ships! No word yet, but that would be PERFECT!.

 

[travelover]

I think a good choice for an inexperienced investor would be to simply put the money into a target year fund. Pick a year when you'll both be retired. These funds use index funds to maintain an appropriate balance of stock and bonds with very low fees. So, it is literally a hands off proposition - they maintain the fund and rebalance for you, you just withdraw as needed and pay taxes on earnings. Good companies are Vanguard, Fidelity, Schwab. The last two have local brick and mortar offices.

 

[OldShooter]

... We have been doing some research, so I guess this is more of that. ...

Good reading: "The Coffeehouse Investor" https://www.amazon.com/Coffeehouse-Investor-Wealth-Ignore-Street/dp/159184584X This is Bill's first book. He has recently published a second one, but I think this is the one to begin with.

... We have an excellent pension that will allow us to live comfortably ...

Congratulations. But is it inflation adjusted? If not, you should probably plan that you will need income from other sources as inflation erodes the purchasing power of the pension. Same story if the pension fund is at all shaky financially. Sorry to be Debbie Downer here, but these are real potential issues.

 

[teetee]

I think a good choice for an inexperienced investor would be to simply put the money into a target year fund. Pick a year when you'll both be retired. These funds use index funds to maintain an appropriate balance of stock and bonds with very low fees. So, it is literally a hands off proposition - they maintain the fund and rebalance for you, you just withdraw as needed and pay taxes on earnings. Good companies are Vanguard, Fidelity, Schwab. The last two have local brick and mortar offices.

https://www.investopedia.com/articl...3015/targetdate-vs-index-funds-one-better.asp

Be aware that some target date funds are just a collection of actively managed funds, which have higher expense ratio than index funds with statistically lower avg returns.

Fidelity has several 0-expense index funds.

 

[Librarian]

Thanks

Good reading: "The Coffeehouse Investor" https://www.amazon.com/Coffeehouse-Investor-Wealth-Ignore-Street/dp/159184584X This is Bill's first book. He has recently published a second one, but I think this is the one to begin with.

Congratulations. But is it inflation adjusted? If not, you should probably plan that you will need income from other sources as inflation erodes the purchasing power of the pension. Same story if the pension fund is at all shaky financially. Sorry to be Debbie Downer here, but these are real potential issues.

Already started the Coffee House Investor; Bogleheads are next.

Yes, our pension is inflation adjusted & extremely solvent. All the school districts (plus some other groups) in our state belong except one. (and their attempt to do their own pension fund did NOT go well). We did attend an introductory meeting with a financial advisor who specializes in teachers & said with 2 of us being teachers, it is like the pension jackpot.

 

[travelover]

https://www.investopedia.com/articl...3015/targetdate-vs-index-funds-one-better.asp

Be aware that some target date funds are just a collection of actively managed funds, which have higher expense ratio than index funds with statistically lower avg returns.

Fidelity has several 0-expense index funds.

Good point, one needs to look at the expense ratio. The companies I mentioned all have low cost target year funds available.

 

[chris2008]

Make sure you are not HIS jackpot...

Check out the couch potato index portfolio, you might like it and move your savings into it step by step.

 

[Librarian]

LOL

Make sure you are not HIS jackpot...

Check out the couch potato index portfolio, you might like it and move your savings into it step by step.

Yeah we were going to go with him but I wasn't nuts about his fees & he wanted copies of our bank statements--HUH? That made me uncomfortable.
Asked my folks if their financial guy ever asked for those & they said NOPE.
He is "vetted" by our school district so he's not a scam artist, but we decided not to go with him.

 

[athena53]

Asked my folks if their financial guy ever asked for those & they said NOPE.
He is "vetted" by our school district so he's not a scam artist, but we decided not to go with him.

Good decision. Wonder what process is involved in getting "vetted". I'm about to inherit about that much and am planning on a "set it and forget it" mix of ETFs in Fidelity. Your idea of a good mix of ETFs may differ from mine, especially since you're younger and have young children and I'm an empty-nester with a high tolerance for risk, but there are model portfolios out there for everyone.

Another thought is to put your $$ into the market gradually. Hard to define "gradually" but you don't want to invest it all now and find that it was the top of the market. Maybe 10% every few months? You'll miss out on some returns if the market keeps going up but if it goes down you'll be able to buy more shares with the same amount of money.

 

[travelover]

...........He is "vetted" by our school district so he's not a scam artist, but we decided not to go with him.

My wife is a retired educator and when I met her, I helped her with her investments at her school's sponsored 403(b). My assessment was that the schools had basically thrown the employees to the wolves. They had her is some silly overpriced annuity and her "advisor" there was basically just looking out for himself. Hopefully your program is better, but it might not be a sure thing.

 

[OldShooter]

Good point, one needs to look at the expense ratio. The companies I mentioned all have low cost target year funds available.

A couple of years ago I did some looking at target date funds, which from the name make you want to think that they are all the same. They aren't.

One difference is how the equity portion is invested, indexed or run by stock pickers. The latter are to be avoided. One horror story:
Reuters/FIdelity: https://www.reuters.com/article/us-...ers-on-risky-path-to-retirement-idUSKBN1GH1SI

Another one, a big one, is the shape of the glide path. One I looked at had 10% fixed income until a few years before the target date, then a big step up, then at target date another step up in fixed income that stayed level going forward. Others have much smoother paths. So my takeaway was that it's not enough to look at target dates. It's also important to select funds with glide paths that suit the buyer's needs. once the glide path suits, then the target date can be selected to get the current AA that the buyer prefers.

 

[UnrealizedPotential]

Since your pension covers all your expenses and then some and the stock market is rich compared to historical standards, I personally would not be in any hurry to invest this money. Imo. You will undoubtedly need to invest it at some point.

I cannot advise you what to do, only what I would do. I would wait. We are due for a big correction IMO. All three major indexes are stretched big time . The Pe's are at historical highs. Maybe wait a year or two to see what happens with the stock market. Why take a major risk when the odds are not in your favor?

But it's your call.

 

[ivinsfan]

What happens to the pension income when one of you dies? Will there be a shortfall that needs to be addressed?

 

[OldShooter]

Already started the Coffee House Investor; Bogleheads are next.

Yes, our pension is inflation adjusted & extremely solvent. All the school districts (plus some other groups) in our state belong except one. (and their attempt to do their own pension fund did NOT go well). We did attend an introductory meeting with a financial advisor who specializes in teachers & said with 2 of us being teachers, it is like the pension jackpot.

Fantastic! The noise you hear is all the jealous people seeing your situation.

If you are already launched on reading, I'll give you some fun ones -- definitely not to be taken as investment advice:

"Extraordinary Popular Delusions and The Madness of Crowds" Charles McKay, published 1841. Stories from the South Sea Madness and the Tulip Bubble.

"Where Are the Customers' Yachts?" by Fred Schwed. Published 1940, so the market references tend to be out of date but the humor is not.

"Reminiscences of a Stock Operator" by Edwin Lefèvre. Published 1923. The bad old days. Really.

 

[Librarian]

Good decision. Wonder what process is involved in getting "vetted". I'm about to inherit about that much and am planning on a "set it and forget it" mix of ETFs in Fidelity. Your idea of a good mix of ETFs may differ from mine, especially since you're younger and have young children and I'm an empty-nester with a high tolerance for risk, but there are model portfolios out there for everyone.

Another thought is to put your $$ into the market gradually. Hard to define "gradually" but you don't want to invest it all now and find that it was the top of the market. Maybe 10% every few months? You'll miss out on some returns if the market keeps going up but if it goes down you'll be able to buy more shares with the same amount of money.

No our children are young adults.
We are not in a rush. Yes, we may lose some in returns, but want to make the best decisions for us.

 

[Librarian]

It is a state progam

My wife is a retired educator and when I met her, I helped her with her investments at her school's sponsored 403(b). My assessment was that the schools had basically thrown the employees to the wolves. They had her is some silly overpriced annuity and her "advisor" there was basically just looking out for himself. Hopefully your program is better, but it might not be a sure thing.

Numerous public servant groups pensions.
They have made changes over the years to maintain solvency.

 

[Librarian]

This has been my concern.

Since your pension covers all your expenses and then some and the stock market is rich compared to historical standards, I personally would not be in any hurry to invest this money. Imo. You will undoubtedly need to invest it at some point.

I cannot advise you what to do, only what I would do. I would wait. We are due for a big correction IMO. All three major indexes are stretched big time . The Pe's are at historical highs. Maybe wait a year or two to see what happens with the stock market. Why take a major risk when the odds are not in your favor?

But it's your call.

I have heard this from numerous economists.
We have talked to our kids & said don't be in a hurry to get into stocks at this time.
Plus we are all learning so a little patience has multiple benefits right now.

 

[Librarian]

We have options

What happens to the pension income when one of you dies? Will there be a shortfall that needs to be addressed?

We are opting for our spouse to receive 75% of our continued pension benefits if one of us dies. We could choose none or 50-75-100%.

 

[Ballhawker]

Another idea

I'm in a somewhat similar situation, and I decided to invest the inheritance in several quality companies that pay high dividends. For the moment I'm reinvesting the dividends, but at any point I can flip the switch and those dividends will hit my bank account instead. The dividends will fund our travel and other fun activities beyond basic expenses, which are covered by inflation indexed pension.

I'll be the contrarian of the bunch on this board- I think that this market looks a lot like the mid-1990's. IMO we are in the middle of a long term bull market due to the massive liquidity and interest rate environment we are in. Stocks are the only place to find yield right now, and the market always seeks yield. Interest rates are likely to go up, so bonds are not at all attractive over the next few years.

Check out Chris Ciovacco on YouTube- he is an excellent financial advisor and analyst.

 

[Austin704]

Perhaps consider setting aside some of this money to grow untapped for the future. Pensions are nice (I have one) but having sufficient investments / cash to fall back on as you grow older can help you sleep well at night.

Since your pension is more than your current expenses, you could consider investing all of the $300k and leaving it for the long-term and using the excess pension income for your travels. This way you've got a large chunk of money going to work for your future immediately and you can use the pension excess for fun in the short run.

 

[mrfeh]

I have heard this from numerous economists.
We have talked to our kids & said don't be in a hurry to get into stocks at this time.
Plus we are all learning so a little patience has multiple benefits right now.

Do NOT try to time the market. The best time to invest in equities (assuming you don't need this money anytime soon) is yesterday.

https://www.bogleheads.org/wiki/Bogleheads®_investing_start-up_kit

 

[Ballhawker]

Do NOT try to time the market. The best time to invest in equities (assuming you don't need this money anytime soon) is yesterday.

https://www.bogleheads.org/wiki/Bogleheads®_investing_start-up_kit

Yes! And the 2nd best time to invest is today.

 

[Badger]

My wife is a retired educator and when I met her, I helped her with her investments at her school's sponsored 403(b). My assessment was that the schools had basically thrown the employees to the wolves. They had her is some silly overpriced annuity and her "advisor" there was basically just looking out for himself. Hopefully your program is better, but it might not be a sure thing.

+1 This is an all too familiar story in educational systems and hasn't improved much in a number of decades. I helped prevent these problems with my wife's 403b since I had the opportunity to have her money placed in a MM account in the only company that wasn't some kind of insurance annuity. I didn't want them to be invested in their expensive MF and found I could have that money moved every so often into a no load Vanguard fund of our choice. i made sure there was a little money left in the 403b MM to keep the account open.
I would do the same thing with a large chunk of money especially at this point in time.


Cheers!