$745K Coming in on Friday! What to Do?

[Dawg52]

My asset allocation will be about 45:55 (equities:fixed).


As you can see, I am constrained by the fact that over 3/4ths of my portfolio will have to be in my taxable account.

This is pretty much my situation. I like Wellesley as well but wanted to minimize my capital gains so I purchased DVY for my dividend play and BND(bond etf) along with a couple of muni etf's which hopefully all combined, performs close to Wellesley. DVY is a little heavy with financial stocks, as compared to Wellesley, so I have added a few non-financial dividend stocks to offset.

A little more work to get to the same place but hey, I'm retired. Gives me something to monitor when I'm not chasing the golf ball. Like today.....it's raining again!

 

[W2R]

JIMOh thanks for those ideas. I have a couple of years to think about them since it is not presently possible to do any such conversion and the TSP hasn't made the withdrawal rules applicable to these future, still hypothetical conversions public yet. Definitely food for thought.

Dawg52, that is great to see a more tax efficient substitute for Wellesley. I'll check it out, too!

This board is FULL of good ideas to bounce around and consider, which I greatly appreciate! I'm currently giving myself a "crash course" in investing and so these ideas are very timely - - I can think about them while I read and digest.

 

[W2R]

2/3 bond, 1/3 high dividend stocks

I checked with Vanguard, and my figures were incorrect. Yours were closer. According to Vanguard, Wellesley is

60.99% bonds
35.37% stocks
03.64% short term reserves.

So, I would suppose that means 64.63% fixed and 35.37 equity.

Thanks, Spanky!

So, that changes the percentages slightly, to

21% Total Stock Market Index VTSAX - (taxable account)
10% FTSE All-World Ex-US Index VFWIX - (taxable account)
30% Vanguard's Wellesley VWIAX - (taxable account, unfortunately)
15% Prime Money Market VMMXX or perhaps eventually CD's (taxable account)
21% "G Fund" Government Securities Fund (my entire TSP)
02% either REIT VGSIX or Small Value Index VISVX (my entire tiny Roth)

(after rounding to the nearest %)

 

[retiringby50]

Would you mind telling us how you invested the money? If that is too personal, just ignore me!!! I don't intend to pry but I am SO curious.

Edited: I was able to copy and paste the allocations here. It's the same as I had originally posted, mostly because I got busy, then just came back from a two-week vacation, and wanted to take care of the allocations right away.

10% Long-Term Investment-Grade Fund Investor Shares
10% Short-Term Investment-Grade Fund Investor Shares
15% International Value Fund
25% Windsor II Fund Investor Shares
10% Total Bond Market Index Fund Investor Shares
25% Capital Value Fund
5% Money Market

All the money is technically earmarked towards retirement. We both work (although I'm working part-time as a contractor), so that pays our mortgage and other expenses. I also put aside some money into a liquid CD for a future car and home remodeling. We decided that we want to remodel our home for US and not for the next buyers!

Several people mentioned tax-free bonds, but when I had looked into that, it seemed like paying taxes would still yield me more money based on my tax rate. Maybe I'm not calculating things correctly?

I'm just hoping to see the positive in all this soon! I had invested in late June through mid-July during a high, and now it seems so low. The international fund has dropped about 22%... and yes I bought more yesterday, but I just want to get to the part where I can sit back and notice a nice return finally. Otherwise, I get that sick feeling of "I should have left it all in money market!"

I've got to do more reading! I was getting lost reading your post and then the answers that came afterwards! Still a long way to go!

 

[W2R]

Thank you so much, retiringby50!! It's fascinating to see what others in similar situations have done.

I'm just hoping to see the positive in all this soon! I had invested in late June through mid-July during a high, and now it seems so low. The international fund has dropped about 22%... and yes I bought more yesterday, but I just want to get to the part where I can sit back and notice a nice return finally. Otherwise, I get that sick feeling of "I should have left it all in money market!"

I've got to do more reading! I was getting lost reading your post and then the answers that came afterwards! Still a long way to go!

I can really relate to your statement "I'm just hoping to see the positive in all this soon!" With the markets acting so flaky, it's a nerve-wracking time to invest. I think that until a person actually has something like this happen, it's hard to realize that (1) planning for it takes time and work that wasn't expected, and (2) having it just doesn't sink in overnight! I think that in my case, it will sink in more when I actually HAVE the windfall. Right now, it seems like mine is coming in bit by bit. My life hasn't changed at all, and probably won't for some time if ever.

 

[Spanky]

Several people mentioned tax-free bonds, but when I had looked into that, it seemed like paying taxes would still yield me more money based on my tax rate. Maybe I'm not calculating things correctly?

Use this formula: Current yield ÷ (100 – your federal income tax rate)

Fund - yield
Inter-Term Tax-Exempt Inv - 3.45%
Total Bond Mkt Index Inv - 4.48%


Marginal tax rate = 28%

The equivalent yield of Inter-Term Tax-Exempt: 3.45/(100-28) = 4.79% which is higher than that the yield of Total Bond Market fund.