Where to park it?

[W2R]

Suppose you had the good fortune of inheriting a million dollars.

Common sense would dictate that you wouldn't want to invest it right off the bat. You'd be well advised to wait at least a month or two until you had time to weigh your options and figure out what you want to do with it.

So what would you do with it, in the meantime? Where would you consider to be a very safe place to park it? The FDIC insurance limit on your savings account is a measly $100K.

Opening 10 bank accounts to get it all insured seems kind of silly.

Taking the risk of leaving it in your bank uninsured for a couple of months seems a little unsettling.

Another uninsured option would be to put it someplace like Vanguard Prime Money Market, where you would at least make more interest. Some people might not want to "put all their eggs in one basket" like that, though.

So, what would YOU do?

 

[mickeyd]

PMMF, where else?

 

[thefed]

i'd park it in something like vanguard's mmf .... i'd be willing to take that chance

next bet would be 10 accts....there are some ways to be able to hold higher amounts at a bank and still be fdic insured.... i think i read somehwere it has to do with benficiaries, or other authorized people on the account or something like that

 

[LOL!]

Vanguard Tax-Exempt MMF where my paltry emergency fund is. If you were in a low tax bracket, then why bother with FDIC accounts? Go with a US Treasury MMF.

 

[barbarus]

Or actual 3-month T-bills. If these go bad, you'd be in a barbaric environment where just basic day-to-day survival would be dicey.
Almost more chance of being struck by a meteorite.

I like to play with these completely unrealistic ( por moi) scenarios occasionally too.

 

[Goonie]

next bet would be 10 accts....there are some ways to be able to hold higher amounts at a bank and still be fdic insured.... i think i read somehwere it has to do with benficiaries, or other authorized people on the account or something like that

The FDIC has a brochure in PDF format titled "Your Insured Deposits". It explains how to legally work around the $100,000 insured limit. Namely joint, POD, revocable trusts, and non-revocable trusts.

I found it earlier today, because my Mom had some concerns about keeping too much money in any one bank. She has a couple of fair sized CDs maturing this week at a couple of banks, but the interest rates are better at the bank where she has several other accounts. She was relieved to find out about a higher limit for joint accounts.

 

[Spanky]

T-Bill
Vanguard Money Market
CD (in multiple accounts if default is of major worry)

 

[chinaco]

One of the VG Federal Backed MM accounts... Treasuries.

 

[Dawg52]

Congrats if this is not a hypothetical question! I would put it in my Fidelity MM account. I currently maintain a 50/50 allocation model so i would eventually move it all in that direction. Probably DCA over a 12-18 months. Of course I might hold a little back for a new toy.

 

[Rich_by_the_Bay]

Depends on a bunch of variables you didn't include, but if you wanted to live off it and be sure it would never lose purchasing power, TIPs sound pretty good to me. Sometimes boring is OK.

 

[W2R]

Congrats if this is not a hypothetical question! I would put it in my Fidelity MM account. I currently maintain a 50/50 allocation model so i would eventually move it all in that direction. Probably DCA over a 12-18 months. Of course I might hold a little back for a new toy.

It's hypothetical, at the moment. One never knows what the future might bring. I suspect that there are many of us who might some day come into an unexpected inheritance that hasn't been part of our retirement planning. There is no sense in counting on something like that, so in a sense most inheritances have an unexpected aspect. Since finding a place to "park it" would be the first step, I thought this might be an interesting topic.

I feel that we should all have at least a vague idea of what we would do, in this type of circumstance, since people have been known to make bad decisions in times of grief. Maybe remembering this thread will help one of us, or even a lurker or two.

Thanks, everyone for your ideas!

 

[Moemg]

I've inherited money a few times( nowhere near a million ) and I always skim a little off the top for fun then put the rest in Vanguard money market while I pick my investments .

 

[audreyh1]

Yep - large lump sum went into Fidelity money markets to be averaged into mutual funds. Never worried a second about somehow having the money "disappear" while at Fidelity.

Audrey

 

[W2R]

Yep - large lump sum went into Fidelity money markets to be averaged into mutual funds. Never worried a second about somehow having the money "disappear" while at Fidelity.

Audrey

That's encouraging.

Looking over the responses on this thread, it seems like Vanguard or Fidelity money markets are the preferred place to park a huge chunk of money while figuring out what to do. I am a little surprised (even though I don't expect either to fail) since they aren't FDIC insured.

 

[FinanceDude]

That's encouraging.

Looking over the responses on this thread, it seems like Vanguard or Fidelity money markets are the preferred place to park a huge chunk of money while figuring out what to do. I am a little surprised (even though I don't expect either to fail) since they aren't FDIC insured.

Well, that's due to the unwritten "don't break a buck" rule that MF managers use...........

 

[Dawg52]

That's encouraging.

Looking over the responses on this thread, it seems like Vanguard or Fidelity money markets are the preferred place to park a huge chunk of money while figuring out what to do. I am a little surprised (even though I don't expect either to fail) since they aren't FDIC insured.

Well if your worried about no FDIC insurance, better go the cd or t-bill route. I just feel that VG and Fido have little risk barring a great depression.

 

[audreyh1]

CDs are cumbersome especially since you have to deal with scheduling/time frames and divvying up. MM funds are much more flexible - i.e. highly liquid. When you buy into a MM fund, you are buying commercial paper spread across thousands of companies, you are not buying the credibility/solvency of a single bank. A brokerage house like Fidelity or Vanguard is simply the middle man and by law, everything you own in your account is kept registered and separate from the brokerage's own "house" money. Also these huge companies have a major reputation to protect, which is why "breaking the buck" has only occurred once in the 70+ year history of money market funds.

This is a completely different situation from a bank which has depositors and borrowers and has to reconcile the two.

Plus these brokerage houses do carry SIPC insurance - for much higher limits than FDIC. It doesn't protect you from market losses (you takes your chances!), but it protects you from the brokerage failing and/or a broker stealing your securities. Brokerages can elect to cover you for more than the minimum $500K. I believe with Fidelity it's in the millions.

Heck, companies like Fidelity are even willing to make you whole if you are the victim of computer hacking, etc.

Audrey

 

[CuppaJoe]

Seems like it wouldn't be too much trouble to ask the payor to split it 12 ways and send the proceeds to 12 banks. It might be fun to set up a ladder of 12 CDs and play with them as they come due. Ten CDs would be so tedious! And those ten $100,000 CDs would soon be worth $100,001, wouldn't want a buck to go uninsured! I'm thinking it over.

 

[d]

Common sense would dictate that you wouldn't want to invest it right off the bat.

i'm not so sure about that ... common sense might suggest that you put some portion (25-50%) in a well diversified fund (Vangard Total Market or Fidelity 4 in 1 come to mind) ... of course the trouble with common sense is that it's not so common.

 

[Culture]

I will answer this question non-hypothetically. I just sold a commercial property for near this amount and have parked the money in the vanguard admiral treasury MM account until I decide what to do with it (there is much disturbance in the force, like 1M ARM holders received foreclosure notices all at once). Much lower cost than fidelity, even the fidelity spartan MM account.

 

[Culture]

I did use some of the proceeds to re-balance my accounts.

 

[dgalbraith100]

I would "park" it into my current asset allocation values X% in SPY, Y% in Bonds, Z% in Reits, V% in Foreign... blah blah blah... no point in waiting..

So in a sense, I wouldn't "park" it. I'd use it immediatly.

Laters,
-d.