House is for sale and proceeds will total about $1 mil (or we wont sell). Plan is to move into our rental as "primary residence". I have had no money outside the 401k in my lifetime. Thinking about a CD ladder for a couple of years with an AA of 75/25 total market index/bond fund as the eventual goal. Dollar cost average in over several years? Time horizon on this money is 20 years as DW and I are 60 and we have a 401k that should last a while. Any ideas how to proceed? Thanks.
Where to park $1 mil
- Thread starter joel2125
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Col. Klink
Recycles dryer sheets
You haven't provided enough information to give a complete answer e.g. you have a 401K that will "last a while". That said, the 75 / 25 AA for a sixty year old would for me be overly aggressive. Since this money will not be in a tax sheltered or deferred account, you might consider a balanced fund such as VG balanced index VBIAX. As an index, it should not generate the CG's of a managed fund and the fees are a low .07%.
RunningBum
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I've said many times here I don't believe in DCA in this type of case. Your safety comes from having proper diversification with a reasonable AA. Of course the market could tank the day after you plunge in, but it could also keep rising as you are minimally in, and tank the day after you have finally finished averaging in, such that you missed out on much of the gains and still took the loss. Do whatever lets you sleep at night but try to think logically about it before coming to a decision. If you have terrible timing and it does go bad the next day, just keep it invested and gain it back during the recovery.
VanWinkle
Thinks s/he gets paid by the post
If this money is for your heirs, then 75/25 may not be too aggressive. If the money is to support you after the 401K is gone, I would also think more conservatively(50/50). In a taxable account, I would go 40% total us stock index, 10% total foreign stock index, and 50% cds or total bond index.
You will get to re-balance yearly and tax loss harvest if the market swoons.
Best to you,
Dan
You will get to re-balance yearly and tax loss harvest if the market swoons.
Best to you,
Dan
1mil outside the market is 1mil losing to inflation. I would at minimum look at a few different MM yields and first PARK it there. Then, determine an asset allocation and just put it all into the market on a sunny day in the not so distant future.
I understand the jitters of having it sit in the bank...that won't help anyone but the bank lol.
I understand the jitters of having it sit in the bank...that won't help anyone but the bank lol.
Thanks so much for the input. I have $3.8 mil in the 401 k with 75/25. In that 75% I have 80% individual stock exposure which has done well for 20 years but I feel I need to ease out of that and into a total market index like the 20% of that 75%.We would be debt free and own two houses that are worth about $1.6 mil combined at current market levels. So we would have about 4.5-5 mil, no debt, two houses and I have accepted a much reduced work schedule so I don't yet need to touch the money so I think 75/25 is ok but totally understand that it is painful sometimes. I will get SS (hopefully) which would add about $50k/year to the mix. As for DCA I read a study a while back that said 80% of the time you do better just going all in at once. Can be a painful experience though. Because all cash generated is taxed I agree that it is a loser to let it sit there and do that unless you need the cash. My gestalt from your input is to just put 75% in either a total market index or all of it in a balanced fund with low fees, then close my eyes and join the nearest Buddhist Temple.
38Chevy454
Thinks s/he gets paid by the post
Your money from the house sale is going to be after tax money, as opposed to your 401k pre tax money. Do you have any other income source like pension or similar? Does the second rental provide nearly pure income since the house is paid off? I assume at some point in future you and your wife will get SS? Your plan is to live in the rental for a couple years and then sell it? Or it will be your permanent home? Reason I ask is that after your current house sale, have you used up the lifetime limit on house gain you can exempt from taxes? If so then if/when you sell the rental it will not be any tax advantage, it will be all cap gains taxable.
It sounds like you have enough income from your working now, so no need for access to the money is required. How long until you retire and may want to access the after tax money vs withdrawing from the 401k? No matter what, with your high 401k it will be a major RMD issue, so it may be good to do some withdrawals from that while keeping an eye on tax rates.
On to your original question, if you have no need for the after tax money for a longer period of time like 10 years or more, then I think the 75/25 AA is good. If you might want to tap into the money sooner, then it might be better to be slightly more conservative. No matter what it sure seems you could quit working now as you have considerable assets and unless your expenses are very high, it would be easy to live off your current savings at a nice std of living; even in high COL Calif.
It sounds like you have enough income from your working now, so no need for access to the money is required. How long until you retire and may want to access the after tax money vs withdrawing from the 401k? No matter what, with your high 401k it will be a major RMD issue, so it may be good to do some withdrawals from that while keeping an eye on tax rates.
On to your original question, if you have no need for the after tax money for a longer period of time like 10 years or more, then I think the 75/25 AA is good. If you might want to tap into the money sooner, then it might be better to be slightly more conservative. No matter what it sure seems you could quit working now as you have considerable assets and unless your expenses are very high, it would be easy to live off your current savings at a nice std of living; even in high COL Calif.
Thanks for that. I am self employed so I have no pension income. The non rental house generates about $800/mo income from VRBO etc. so that helps. My wife has not worked quite enough to qualify for SS so she will get half of mine. My CPA says if I live in the rental for two years calling it our primary, I will get out of $100k of the $157k of cap gains that I would owe if I sold it before moving in. No plans to sell that one so probably own it for at least a decade if all goes well. If this plan goes thru I won't work longer than two years max. If the whole thing stalls/ house doesnt sell I will slug it out for four years. Two kids still in college but the 529 should cover that. Expenses still high with four cars, five people on the health plan etc. but should taper down in the next 2-3 years. Otherwise we don't live large as a couple. Thanks again.
N02L84ER
Thinks s/he gets paid by the post
I would make the taxable account 100% total stock index funds or ETFs (US and international). Then I would sell enough stock in the 401K to get my balance back to my desired AA.
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