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What to do with inheritance check?
Old 06-10-2021, 05:58 AM   #1
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What to do with inheritance check?

About to receive inheritance check from sale of parents house. Unfortunately it was too expensive for any one sibling to buy out the other three so we all agreed best to sell.
Not sure what to do with the money. Its in the low 6 figures and I want to put most of it towards retirement funding. It will help us feel a lot more comfortable when we get ready to retire.
Its just the wife and in our late 50s Still Working and no kids.
House is paid off and zero debt.
Timeline for needing money probably 5 to 10 years. Would like to invest it total stock market funds but feel like we would buying at high point right now.
Seems there is no where to put this money and get a decent return without large risk. We are probably overly weighted in stocks verse bonds right now but its been ok so far. Any suggestions?
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Old 06-10-2021, 06:03 AM   #2
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If you're overweighted in stocks, you can use the $ to buy bonds and rebalance.
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Old 06-10-2021, 06:07 AM   #3
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Check goes into taxable brokerage, CD, and/or hi-yield savings until we decide long-term investment.
We've used all three options at various times.
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Old 06-10-2021, 06:09 AM   #4
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Use proceeds to fund income taxes on Roth conversions (401k/IRA)?

This is my basic strategy while the current low tax rates are in effect.

I hope to transfer nearly all of my after tax funds to Roth funds.

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Old 06-10-2021, 06:10 AM   #5
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Originally Posted by JDPascale View Post
Would like to invest it total stock market funds but feel like we would buying at high point right now.
I would DCA into your AA. Feels like things are high? Sure, but also feels like the start of another bull. No one knows. I'd rather see some dips and bumps than sit on the sidelines and watch the horses run too far off in the distance.
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Old 06-10-2021, 06:27 AM   #6
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Originally Posted by gauss View Post
Use proceeds to fund income taxes on Roth conversions (401k/IRA)?

This is my basic strategy while the current low tax rates are in effect.

I hope to transfer nearly all of my after tax funds to Roth funds.

-gauss

^^^^ Do this. Use the inheritance (after tax money) to pay the tax bill on Roth conversions. Since your timeline for the money is 5-10 years, I would go with mostly stock funds. But depends on your risk tolerance, so might be best to just put in at your chosen AA ratio. Tax rates are not going to be any lower, take advantage of the current rates on Roth conversions now. Tax rates may not go higher either, since most of the political talk is aimed at high earners and congress has very slim margins. It could be tax rates staying for a while. But they almost certainly will not be lower in future.
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Old 06-10-2021, 06:41 AM   #7
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If you time frame is 5-10 years, I would favor a total market index fund with low or no fees (FZROX is one example).

If you are concerned about the market right now, as Aerides stated, DCA in to maintain your AA.

Do not try to time the market. I had just started retirement when I received my share from the sale of our parents home and invested it. This was early November 2018. The market fell by almost 8% before the end of 2018. But it is up almost 70% since then, even with the pandemic. I am no genius, I just take the long term view for money I do not need right away.


Edited to add: I just noticed you said you felt you were over-weighted in stocks. If you choose not to add to the stock side, then the use of it to pay taxes on Roth conversions is also a sound idea.
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Old 06-10-2021, 07:00 AM   #8
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I think investing in something that will give you income in retirement to replace the lost paycheck is also a good way to go. That steady deposit in your checking account every month is very comforting. In my case rental property provides about 40% or my pre retirement earnings and was the smartest thing I did with my share of our fathers house when we sold it. We also had rented it for his last years in assisted living so it fell under the 1031 rules (likely going away it seems) so that helped to avoid some tax issues.
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Old 06-10-2021, 07:45 AM   #9
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If you have an asset allocation target, then invest the whole thing, at one time, to maintain the balance. If you don't have an asset allocation target define one and stick to it.
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Old 06-10-2021, 09:24 AM   #10
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Some good advice here imo: https://www.bogleheads.org/wiki/Managing_a_windfall

I am in a similar but not identical situation in that I inherited a couple hundred thousand from my mom's estate in April after we sold both of her properties. We've been blessed to the extent that this isn't a large portion of our net worth so I have left it uninvested, sitting in a checking account.

I am planning on retiring in 6 months so being over allocated in cash is a good problem to have and there's no pressing reason to invest the money. My AA goal is 60/40 and I'm currently at 58/42 but I think there's a market correction coming in 2021 so my plan is to buy total market index funds on sale to get back to 60% when that happens. If it doesn't correct, that wouldn't be terrible either.
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Old 06-10-2021, 02:34 PM   #11
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Since you are risk averse to going total stock index at current levels. decide on some asset allocation to part bond/part equities.

Put the bond portion into GNMA fund such as VFIIX, and can reasonably hope for a 5 to 10 year average return in the 3% area, maybe more. Dollar cost average the equity portion into your preferred total stock index fund over two to three years.
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Old 06-10-2021, 03:27 PM   #12
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Thanks for all the great advice. I will be taking a look at it all when I get off of work today.
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Old 06-10-2021, 03:39 PM   #13
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I received a good chunk of money in 2019 via inheritance. I was reluctant to drop it all in. So I DCA over about 18 months. I would have been better off dropping it all in but my sleep at night factor was better with DCA

YMMV...this time it's different, etc
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Old 06-10-2021, 03:55 PM   #14
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Every market high has been preceded by another market high at some time in the past. Not many of them have significant market drops beforehand. Donít time the market. People lose a lot in opportunity costs by waiting for a market drop.
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Old 06-11-2021, 04:16 AM   #15
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If you have an asset allocation target, then invest the whole thing, at one time, to maintain the balance. If you don't have an asset allocation target define one and stick to it.
+1. Or invest it at a lower AA.
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