Opinions of the financial advice I got

[UpQuark]

I've sold my house and expect to get the money this next week I guess on closing day on Wednesday (though I'm not familiar with wires so maybe I won't really have the money to invest until after Memorial Day).
I talked with the free financial advisor at Fidelity and he recommended the following:
1. All the money I expect to need for the remainder of 2022 and for all of 2023 to put/leave in the Money Market core position.
2. Put the money needed for the first half of 2024 in a 1 yr CD
3. Put the money needed for the second half of 2024 in an 18 mth CD
4. Invest the rest of the money (he recommended I hire them to do it for me, but I will probably try to figure it out for myself, I am VERY disappointed in my Target-retirement-year funds that are supposedly managed but appear to suffer as much or more than the market as a whole in spite of theoretically being in an appropriately conservative position).


The advisor didn't mention i-bonds but I thought I should buy some, but when I tried to set up an account in TreasuryDirect it locked my account and wants paperwork I cannot get (though on the phone they said due to people having trouble getting the appropriate paperwork they will likely unlock the account on a lesser proof, so I sent that in but still waiting to see if the account ever unlocks).


Does the advisor's suggestions sound good? Please let me know what you would do. Thanks!

 

[disneysteve]

Cash you need for the rest of this year into a high-yield savings account. Those are paying 0.6-0.7% right now. I don't know what the Fido MM is paying so compare.


Cash you don't need until 2024 I'd say brokered CDs or Treasuries, whichever has the higher yield for the duration you want. Right now, the brokered CDs are paying more. 12 months are at 2.1% and 18 months are at 2.5%. You want to check the after-tax yield though depending on your state since the Treasuries are free of state and local taxes so even if the yield is slightly lower, you might come out ahead.


How to invest the rest depends on the big picture, what your overall portfolio looks like, and what your asset allocation is.


If not for the sale of the house, how were you expecting to fund the next couple of years, or was this the plan all along?

 

[OldShooter]

That sounds pretty solid. As far as the long money (#4) you could just put it all in the world's stocks, VTWAX, as we do or you could buy the whole US, VTSAX, seasoned to taste with the rest of the world, VTIAX. Or the ETF equivalents of these funds.

Re I bonds they are such a good deal that you should buy what you can but recognize that you can't buy enough of them short term to be a serious inflation hedge.

You didn't mention other assets and savings, particularly tax sheltered retirement savings, but your allocation between fixed and equities should be done on a total-portfolio basis considering the tax aspects.

My standard list of reading recommendations:

"If You Can" by William Bernstein https://www.etf.com/docs/IfYouCan.pdf (free 16 page download)

"The Coffee House Investor" by Bill Schultheis https://www.coffeehouseinvestor.com/ (This is Bill's first book; read it before reading his second one.)

"The Bogleheads Guide to Investing" by Taylor Larimore et al https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365

 

[UpQuark]

...
If not for the sale of the house, how were you expecting to fund the next couple of years, or was this the plan all along?

My original retirement plan was to stay in my paid-off house and spend my time puttering around the house, barns, and garden. I'd saved up cash for year-one of retirement, and money in a Stable Value Fund for year-two of retirement. The remainder of retirement funds allocated 60:40 (sort of). But the cash amounts I saved up were based on the very low expenses of staying put.

Now that I retired I suddenly decided I want to travel for awhile and then live in civilization (currently living in rural area), both of which cost significantly more. I'd been reading about the crazy housing prices, so as fast as I could I got my house on the market, and I think I'll be able to afford my revised more expensive retirement. I'm probably the only person in the world hoping the stock market doesn't recover for at least a few more weeks until I can get my money in it.

 

[disneysteve]

I'm probably the only person in the world hoping the stock market doesn't recover for at least a few more weeks until I can get my money in it.

I'm sure you're not the only one. Personally, I'm still waiting for my cousin's estate to get closed at which time about 550K gets released to me. I'll be needing to invest a good chunk of that in the market. I wouldn't be at all disappointed if I get to do that while things are down 20%.

 

[38Chevy454]

I think the plan sounds ok. I agree the longer term money can just invest in whatever AA is good for you. I wouldn't be in a rush to put that in the market given the volatility and unknown aspects of inept government currently. You could do invest amounts over time, or just put it all in when you're ready.

Only thing I didn't see is if any cash needs to be set aside for taxes. That cash needs to come off the top first.

 

[Badger]

I'm probably the only person in the world hoping the stock market doesn't recover for at least a few more weeks until I can get my money in it.

I don't think this will be a problem. How often have you seen the market rebound as fast as it dropped? If you have an account with Fidelity or Vanguard it would be easy and fast to put a money in a MM account and a few CDs and then slowly buy into equities over time.

Cheers!

 

[pb4uski]

I'm guessing that their money market core position doesn't pay much so I would consider an online savings account for that money.. 0.6% to 1%+ depending on who you go with. Or alternatively, perhaps a few months in the money market and the rest is 3, 6, 9 and 12 month Treasuries that will pay 1-2%.

For the CD money, look at both CDs and US Treasuries... at different point of time UST have slightly higher yield and they are functionally the same as brokered CDs. Currently, for less than one year maturities, UST are slightly better than CDs and CDs are slightly better for longer maturities.

For the rest of the money, if you want simple find a solid balanced fund with an AA comensurate with your risk appetite, like Vanguard Wellesley, Wellington, STAR, or one of the Life Strategy funds like Life Stradegy Moderate Growth.

 

[target2019]

I've sold my house and expect to get the money this next week I guess on closing day on Wednesday (though I'm not familiar with wires so maybe I won't really have the money to invest until after Memorial Day).
I talked with the free financial advisor at Fidelity and he recommended the following:
1. All the money I expect to need for the remainder of 2022 and for all of 2023 to put/leave in the Money Market core position.
2. Put the money needed for the first half of 2024 in a 1 yr CD
3. Put the money needed for the second half of 2024 in an 18 mth CD
4. Invest the rest of the money (he recommended I hire them to do it for me, but I will probably try to figure it out for myself, I am VERY disappointed in my Target-retirement-year funds that are supposedly managed but appear to suffer as much or more than the market as a whole in spite of theoretically being in an appropriately conservative position).

The advisor didn't mention i-bonds but I thought I should buy some, but when I tried to set up an account in TreasuryDirect it locked my account and wants paperwork I cannot get (though on the phone they said due to people having trouble getting the appropriate paperwork they will likely unlock the account on a lesser proof, so I sent that in but still waiting to see if the account ever unlocks).

Does the advisor's suggestions sound good? Please let me know what you would do. Thanks!

I would do as you are doing! Get free advice from Schwab, look around at other options, and solicit opinions here.

What would I do?
1) I'd look at my asset allocation and decide if it was right for me going forward.
2) I'd put the check in a hi-yield account or a MYGA.
3) I'd find some 1-yr and 18-month rates and maybe go with those two CD's.
4) I'd go with VTI US Total Market for the remainder, in a brokerage, but might look at something like SCHD (dividend), up to the additional income level I'd like to generate.
YMMV.

 

[mebden]

Cash you need for the rest of this year into a high-yield savings account. Those are paying 0.6-0.7% right now. I don't know what the Fido MM is paying so compare.


I'm just quoting disneysteve put all the money in a high-yield savings account as the bank I'm using now is giving 1.25% and take the money out in pieces to pay for your yearly needs and start investing in the market at your connivence and the online bank I'm using is Bask Bank.

 

[nwsteve]

Fidelity does offer a "premium" money market currently paying .6+ (FZDXX). Fund does require 100k to open but once open you can transfer out without losing the premium rate (I have on IRA account with this fund with less than $100.
So move 100K of your sale cash to cover the next 12+ months and put the rest in options above. I BOnd, while limited in amount, it can't be beat for security and return for near future would be my next choice. Balance to equities.

 

[Sunset]

OP - Definitely put $10K pp into an I-bond at treasury direct. Even if you cash it out after 1 year you have made more interest than any other game in town.

I do agree having 2 or 3 years cash (cash, CDs) available so you don't have to sell stocks at low price is a good idea.

 

[PatrickA5]

Fidelity does offer a "premium" money market currently paying .6+ (FZDXX). Fund does require 100k to open but once open you can transfer out without losing the premium rate (I have on IRA account with this fund with less than $100.
So move 100K of your sale cash to cover the next 12+ months and put the rest in options above. I BOnd, while limited in amount, it can't be beat for security and return for near future would be my next choice. Balance to equities.

+1

The non-premium option (SPRXX) is up to .49. I expect it to probably pass the lower Ally type rates (.60-.70) in the near future.