Recommendation on what to do with proceeds on sale of home

[retbjwsjfl]

Hi everyone, we are getting ready to list our home. When it sales we will think we will have around $900K in proceeds from the sale. This will be our last home purchase as we intend on renting for the remainder of our days. I'm considering just dollar cost averaging a weekly amount into our brokerage account ETFs for a few years ($250K per year), as I'm leery of putting a large chunk in the market all at once. What are your thoughts? My DW and I are in our mid 50s, net worth is ~$4M, of which 700K is in a traditional TSP account, $1.5M in Roth's, and the remaining in traditional brokerage and HYSAs. I have a military pension, and plenty of cash in HYSAs so the proceeds of the sale are not really needed for anything in particular in the next 5+ years. If you have a perspective that could be useful, I would love to read about it. I appreciate it and have a great day!

 

[RetiredHappy]

No recommendation because the crystal ball doesn't really exist. I always invest as soon as I get the money because I believe in time in the market instead of timing the market. Only hindsight is 20/20.

 

[TickTock]

I have a military pension, and plenty of cash in HYSAs so the proceeds of the sale are not really needed for anything in particular in the next 5+ years.

Given the above, I recommend investing it all at once at your current asset allocation targets.

 

[pb4uski]

What is your target asset allocation (AA) and are you currently close to yout target? You have probably "won the game" and could safely have either a very aggressive or very conservative AA.

You're in your mid 50s and plan to rent for the remainder of your days? Why is that?

Like you, I'm leery of the market tight now but have been for quite a while and Mr. Market keeps surprising me. If you're going to average in you could look into value averaging as its a little better than dollar cost averaging.

 

[RetiredHappy]

I will add to the question, why rent instead of continuing to own a home since you don't need the money to generate income for your retirement? Real estate is another form of diversification of investments. When we had the 2000 market crash, what saved me were my 2 properties overseas and my home here in the US because silly me, I lost most of my money in the stock market due to margin loans. Between the 2.5 properties, I was still worth about $2M even though my brokerage account went to almost nothing.

 

[EastWest Gal]

Don't forget you'll be paying some capital gains tax...

 

[Kings over Queens]

I don't see any advantage to DCA the money over several years. Get it invested sooner than later. It's what I would do.

 

[COcheesehead]

Markets go up more than they go down. DCA minimizes regret, but also likely returns.

 

[pb4uski]

Don't forget you'll be paying some capital gains tax...

It depends on what their cost basis and gain is. May not be any tax at all since it was their principal residence.

 

[pb4uski]

Markets go up more than they go down. DCA minimizes regret, but also likely returns.

I agree on the first part in general, but the key question is will that be true for the period that the OP will DCA? With current valuations if reversion to the mean is a thing then it might not be true.

 

[COcheesehead]

I agree on the first part in general, but the key question is will that be true for the period that the OP will DCA? With current valuations if reversion to the mean is a thing then it might not be true.

The markets have fooled a lot of people the last few years. No one knows, but in the OP’s case I would think there is a highly likely chance that in 4 years the market is higher than today. DCA doesn’t guarantee you better returns.
Personally if it were me, I’d wait for a VIX over 30 time period and put it all in.

 

[OldShooter]

I'm a TIPS guy. Particularly in this crazy geopolitical environment I think serious inflation is the biggest risk to our retirement portfolio. So almost 100% of our FI tranche went into TIPS, actually yesterday.

 

[Love This Community]

I would've said diversify into RE but, you're selling your RE so my recommendation would be to invest all at once per your AA and forget (since all your short term bases are covered). Another option would be to maybe add more cushion to your cash / cash like bucket to give additional time for portfolio to withstand market gyrations.

 

[TripleLindy]

Investing it all vs. averaging is a coin flip, IMO, so use your instincts. They have gotten you to this point and have obviously been good!

You're in your mid 50s and plan to rent for the remainder of your days? Why is that?

This is what I’m curious about, too. Unless you plan to relocate frequently, I’d love hear your reasons for going this route. If it’s a property maintenance concern, there are plenty of low to no maintenance options that include ownership.

 

[RunningBum]

If you were fully invested today, would you take the equities part of $900K out of the market and trickle it back in? If not, why would you keep that money out today?

The fixed income part of your asset allocation is your (and my) protection against a market downturn at any time, not just today.

Then again, it's not my money, so do whatever you need to do to sleep well at night.

 

[pb4uski]

I would've said diversify into RE but, you're selling your RE so my recommendation would be to invest all at once per your AA and forget (since all your short term bases are covered). Another option would be to maybe add more cushion to your cash / cash like bucket to give additional time for portfolio to withstand market gyrations.

Or perhaps consider putting some of it into O.

 

[38Chevy454]

I look at any money that is for 5 or more years out as being long term. Long term for me means invested in the market as equities. But then I am pretty risk tolerant and keep higher equity allocation than many. My suggestion is put it all in, nit DCAing, and since it's after tax money consider something like a Nasdaq ETF to minimize cap gain distributions affecting taxes. Or something widely diversified, maybe 2-3 ETFs like Nasdaq, Total Market, and Global Market.
Put it in and forget about it. Maybe do some Roth conversion and use some for the tax due.

 

[Souschef]

Our home was not that expensive, we netted about over $200K. Since we (thank goodness) have more than enough for our needs, we divided up the proceeds among our four sons.
Because my wife and I sent it to our sons, and their wives, the gift tax exemption was $76K

 

[PointBreeze]

There is research out there that shows that going all in has higher yields over time than DCA does. If you don't need the money for a long time, go all in. If you are going to need some of it in the next 5 years, put that portion into a CD or bond ladder, and put the rest all in.

 

[mrfeh]

There is research out there that shows that going all has higher yields over time than DCA does. If you don't need the money for a long time, go all in.

+1

Lump sum. Try to put your emotions aside.

 

[Koolau]

My temptation would be to DCA but most things I've seen comparing DCA vs "all in" seem to favor the latter. I suppose if it feels better to DCA then that's worth the price you might pay for the slower, more deliberate investing.

Probably more important to feel safe - at least that's been my experience and YMMV.

 

[freedomatlast]

Given your age and financial profile, I'd dump it all into VTSAX at once. Maybe keep 5 or10% and blow it on something you always wanted, or wanted to do. My suggestions will generally not be as conservative as most here.

 

[copyright1997reloaded]

I'm a TIPS guy. Particularly in this crazy geopolitical environment I think serious inflation is the biggest risk to our retirement portfolio. So almost 100% of our FI tranche went into TIPS, actually yesterday.

I'm with OldShooter on this - if you are going to rent you will even more exposed to inflation in housing. Best to understand what asset allocation you want and hedge (some of) the fixed with inflation protected fixed.

 

[target2019]

Vanguard article about DCA vs. Lump Sum is linked below.

https://corporate.vanguard.com/content/dam/corp/research/pdf/cost_averaging_invest_now_or_temporarily_hold_your_cash.pdf

Some have the temperament for DCA, but there are pitfalls especially when the schedule grows long.

There is also research from other institutions that show less of an advantage than VG shows.

I think I'd look for a large buy of state muni fund as one of my options.

 

[Diogenes]

I'm with OldShooter on this - if you are going to rent you will even more exposed to inflation in housing. Best to understand what asset allocation you want and hedge (some of) the fixed with inflation protected fixed.

The rent vs. buy dilemma is interminable. There's no comprehensively "best" solution. Let's see what the OP reports on his situation. I'm genuinely curious about his decision to sell, at a comparatively young age (mid 50s), without buying another house. There are of course manifestly good reasons for doing this... but without context, it's hard to advance the discussion.