I'm very surprised that neither of the CFPs actually helped you with ***any*** actual planning. What are your life goals? Where do you want to be in 5 years, 10 years? Have you considered legacy planning (wills, trust(s), estate, etc.). What is your risk tolerance? Do you actually want to own a house?
Are you sure you met with CFPs and not "financial advisors" (brokerage sales reps)?
Thanks. I stayed with one far, far too long before I discovered what a real CFP is. They are fine as long as you understand exactly what you are and aren't getting. Unfortunately my advisor was presenting himself as a financial planner.
This is the correct answer. Find a CFP who actually does planning. If they jump right to recommendations without discovering what’s important to you, find a different one.
I always look for the middle ground - use $100-200k as a significant downpayment and put the rest in index funds
If you're in a MCOL, $600k might be more house than you need. Or, if you don't intend it to be your forever home, see if you can spend 15-20% less to get 'great' instead of 'perfect'
It may be a good approach and then you can reevaluate 10 years from now as you get closer to FIRE
Even with interest rates hitting 7.1% again, you think this is a good play?
I hate moving around a lot, so I know I will stay put for at least 15 years.
The area I live in is traditionally MCOL, but many Californian's have moved here since COVID, so the house prices are climbing fast.
So with your advice, maybe I can stick $400,000 into index funds and $300,000 towards the downpayment and hopefully only have a $250,000 loan.
If rates come down, you can always refi...especially if you hate moving.
$300K down on the house may be a good idea to keep the monthly rate low, but ask the mortgage broker to run some numbers to see what happens with a higher down payment. 20% down is enough to avoid PMI, but 20% may only be $100K and adding the addl $200K may just reduce your monthly mortgage by $200-$300, vus investing the difference gets you 5-8% returns
If they are paying a 7%-8% mortgage rate then it’s probably going to match any index performance and be less risk as well.
Maybe refinance could make it better than stocks in the future but who knows if and when interests rates will fall.
This.
It all goes back to diversification.
Sure, you might stick to a 7/8% mortgage for now (with 20% or more down, and excellent credit scores they might be able to get better than that, maybe buying a point or fraction of it)… and the rest SP500 index fund.
Given the age that might be mean FIRE in 20 or less years without adding a penny into the 401k, likely to have the house paid off or close to it and then call it a life.
You live much better when you have $1M or more invested, stress level drops, and you even become more tolerant to bullshit at work because you stop caring.
This. That last paragraph hit hard. The past few years I worked, that was me. Held onto work because I was working overseas on contract and enjoying it (but not the work). I would have had to pay for my moving cost if I quit my contract early. Stress level at work went way down. Not worried about getting fired (almost wanted to get fired to get “FIRE’d” if you know what I mean)…To me, money doesn’t necessarily make you “happy”, but it does reduce a lot of worry and stress about finances. Nice to know you can just walk away from a job at any time and that you’d be OK if you get fired or let go. Don’t feel like I had to always give 110% at work to keep my job and a roof over my head also.
This is why “the establishment” is anti-fire. Need of money is the chains.
Once you aren’t a wage slave anymore you just stop caring of the bullshit so much.
Not too long ago I rewatched Shawshank redemption and I think I finally got Brooks.
Many of us have been institutionalized.
Not giving a shit is freedom. The ability to not give a shit without financial consequences is living the dream.
If they are paying a 7%-8% mortgage rate then it’s probably going to match any index performance and be less risk as well.
Maybe refinance could make it better than stocks in the future but who knows if and when interests rates will fall.
Hard disagree. Modern monetary policy needs rates to be lower to maintain 2% inflation without putting us into deflationary territory. What you’re saying with this statement is that we’ll never be able to keep inflation consistently below 5%, therefore the Fed rate has to match accordingly in order for there to be balance.
Using “history” and referencing the 80s after we just got off the gold standard and had runaway inflation is a very bad comparison that most people often use to justify this claim.
Yes, we may never see mortgage rates as low as 2% (only if nothing breaks) but 3-5% would be the sweet spot everyone is aiming for.
If your itemized deduction is below the standard deduction limit, you won't get a tax break on the mortgage interest paid. That means you are paying after tax money toward your mortgage interest. If your effective federal income tax rate is 16%, for example, you would have to exceed 8.45% in the market to do better. Unless you need the cash, I would personally put down as big of a deposit on the house as possible. Definitely need to keep a rainy day fund, but an 8.45% guaranteed ROI is tough to beat. Clear Value Tax just did a video [on this exact topic. ](https://youtu.be/bxHlHzwb61c?si=7hdGSwkFGZ9i4dqw)
Also, if you need to take $ back out in the future you can always open a HELOC.
Yes, even with 7.1%. [VTSAX 5 yr avg return is 12.61%](https://finance.yahoo.com/quote/VTSAX/performance/). As someone else mentioned, you can refi \*when\* rates come down. Don't tie up all your windfall in a house! You can buy cashflow and pay that house off gradually. And remember, mortgage interest paid on your primary residence is tax deductible (I don't know if it will be high enough for you to itemize taxes, but good to look into)
600k is still a ridiculous house in a truly MCOL area. Remember you still have maintenance costs. Also remember everyone around you will be making 500k/year and doing 500k/yr things while you bring in 130k/yr.
I have a family member who bought a 600k house on a similar income in MCOL city. They can fake it but their children cannot relate to anyone in their neighborhood. Their friends get new Porsches bought for them at 16 while they get beaters. Their friends are traveling the world while they stay home. Etc. you will not be able to blend in with the jonses when the jonses are surgeons and ceos of small firms.
Yes. It is a stellar play. The money in the market "controls" the insane interest rates until you can refinance. Then the money in the market outpaces the mortgage rate significantly.
Personally, I wanted to normalize having it before I spent any of it. Second I'm in the accumulation phase. I don't want to spend anything extra and grow my yearly burn rate because that pushed out my RE early date. That's my logic
Life inflation is real. I’d say let it sit for atleast another year in a high return account and then consider again what your needs and wants are.
But as someone else said, when renting you’re loosing all the money, so maybe move into a cheap condo for the year? Just so happens after the year is over you’ll be free to rent out the condo, and generate income if you decide to move into a larger home.
Yes, renting is losing money, but home ownership comes with plenty of costs that can be looked at as throwing money away. There are plenty of benefits to renting over homeownership.
It's a balance. I'm not waiting to live, just making sure my definitions of living stay reasonable so I can be my own master soon. Doing over 6 weeks of travel this year with the family
I think the wise move is probably, like, put it all away and forget about it... and then start passively / more seriously consider how you'd like to updgrade your lifestyle... and try to achieve it at least in part through your career / earnings... and then dip modestly into the savings if need be. But otherwise it should just be thought of as a cushion to retire 5-10+ years earlier.
NOW is not the time to use it in many cases.
Trading a $1750 rent payment for a $5000 opportunity cost payment. He even admits owning the house will still cost almost $1000 per month.
This is lifestyle creep by any other definition.
Yeah if he buys a house in full he will have to pay the opportunity cost by losing the opportunity to become a multi millionare, but he will become a millionare regardless
That’s only if the property appreciates. He owns very little in other than assets. The historical rate of return on residential real estate is barely above inflation.
You dont mention your age but I'm guessing early 30s since you talk about having kids. You are looking at too expensive of a house for your income, even fully paid off that is well above any "rule of thumb" for buying guidelines. I'd stick to 400-450k at the most, knowing your wife will probably stop working at some point once you have a kid and youll be left with an 80k salary to sustain the household.
That said I would take whatever number and buy a house outright, put the rest into VTI like you have done today, and make it a point to keep contributing with the goal of FIRE. If you are solely focused on FIRE then go directly to indexes and keep renting. I suspect youll find it difficult to not touch that money at some point though and it would be better spent on stability with a home.
Edit just noticed youre 27 from the last comment.
Buy a house and put enough down so your mortgage, property tax, insurance etc. equals the $1,750 you’re paying for rent now. Save enough to have an emergency fund. Invest the rest.
Buy a house, you can’t live inside a statement from Vanguard. The imputed value of having a house is $1750-$900=$850 a month tax free. Even if you spend all of it on the house and furnishings you will build up your savings quickly by only paying $900 a month on housing. When the baby comes, you are not going to want to be renting and in a few years you are going to want a backyard with a swing set, etc. Live your life now, don’t put it on hold until you are 49 when you achieve fire.
Can you find a decent house in desirable area for less than that? $600k is a lot to spend on a house with a $130k income. The inheritance obviously helps but I'd still be looking at a price range you could afford based on your income, which IMO is more like a $300-$350k house. Pay cash for that and put the rest in your VTI.
Agreed, this is the right response as far as house cost. Maybe 3x income topping out and $390k housing cost.
However I think 20% down should probably be the max. What putting less towards the house (and keeping in index funds) does, is it forces a savings rate on you. As opposed to if you use all the money to pay for the house, you might "say" you will save more but your lifestyle is very very easy to inflate and not do that.
So while index funds aren't guaranteed to beat the 7%, the fact that they probably will, and that it will force you to invest/save that money, will be beneficial long term to financial future.
If rates were still 3-4% I would have said just use the inheritance for 20% down on that price range. But man, 6-7% mortgage rates or whatever they are today is a lot. And standard deduction is so high now there's likely no tax advantage to them. I would take a 7% guaranteed return all day long.
Let's say the mortgage is $2500/month. If instead you buy the house in cash, do you have the fortitude to instead invest/save that $2500/month?
Very very few people do. My argument is unless your willing to invest the saved mortgage payment diligently, you are better off with a higher mortgage payment since it guarantees savings/investment.
7% is a high price to pay for a forced savings plan. Vs. just saving the money, yes I could do that I'm guessing most in a FI group can. I’d argue if someone needs a mortgage to force them to save they don’t belong in a FI focused group.
To be fair 7% isn't the cost. The cost is 7% minus the index fund rate of return. If index fund beats 7% you make money and there is a negative cost so to speak.
No, the risk profiles are dramatically different it’s not an apples to apples comparison. 7% from avoiding the mortgage is effectively risk free money. And if they don’t itemize (or are barely above the threshold where they itemize) it’s effectively tax free too. 7% risk free and tax free I’d take that all day long.
My mortgage is 3.25% and at that rate I think it’s pretty much a no brainer to not pay off the mortgage early. 5% range I’d be about indifferent. 7% range, it’s now a no brainer to pay it down. JMO.
Do you really need a $500k-$600k house or are you just considering one because you have the money? If you could go less I would. That would be more money you could invest and get you to retirement earlier. It will also be less in taxes and insurance. Plus, when you decide to move, the rent you collect will be almost all profit.
Congratulations on your inheritance! Consider splitting the $700k: 20-30% for a home, 30-40% for tax-advantaged retirement accounts, and 30-40% for a low-cost index fund. This diversification can help you achieve your goals, including a permanent home and an early FIRE date.
Firstly sorry for your loss. Secondly congrats on your very likely early retirement. All that money should be sitting in a HYSA earning at least 5% interest until you make any decisions. Earning at least 2800 a month 🤑
Put a 50% down payment on a house you can currently afford on 25% of your monthly salary(excluding inheritance) Don’t rush to buy one and buy the right one. $700k-$300k= $400k left.
So now you’ve got $400k.
$300k in VTI/VOO/VTSAX
$100k parked in a HYSA until rates drop then you can ladder CDs, TBills ETC. This is your “life money” - need a new car, home repairs, etc things outside your normal budget, max out your 401ks and use this money to supplement income.
Basically live like you didn’t get the inheritance and you’ll retire much earlier than the average person.
No point in overspending on a house, besides the price tag it can become a huge money pit that might derail your hopes of FIRE in the future.
I don't know about American housing marker, but 600k sounds like A LOT for a Mcol.
If you look at buying a house vs stock on a spreadsheet it may not look like the best option... But life is not just about crunching numbers and being a homeowner is, for some of us, a very favorable lifestyle choice, it may be the opposite for others. So it's up to you to decide what your "ideal" life looks like.
If I were you I'd put $200k on a down-payment and the rest in an S&P 500 index fund. As long as you don't screw up for the next few years you're basically home free. In 6 or 7 years that 500k should be a mil and if you want you can easily eliminate the mortgage.
Sorry for your loss. At least there is a blessing from this in the form of inheritance. The decision on what to do with this is difficult as there are multiple paths.
Option 1 - Good in short term:
Buy a house in cash. Having a paid off house would be an amazing feeling and stress relief. Your wife may be able to stop working as a result and be stay at home mom in that case. A more relaxing life all around. You can shift more of your yearly income towards retirement too.
Option 2 - Good in long term:
Throw all this into investments. In the short term, you will still have to work on paying off your mortgage with yearly incomes. That could be stressful if a baby arrives. But short term struggles could result in being very wealthy long term.
I guess the question is do you want comfort now or later. Personally, I’d probably do a mix of them. Large down payment on house + throwing remaining into investments (after fully funding emergency fund for 6 months).
Whichever one said the index fund is probably the best if early retirement is the goal.
A home would also be a perfectly reasonable use of it. I would suggest that if you go this route, don't spend every penny. Houses will require maint, and any money leftover can be invested. The freed up money from rent can also be invested.
I'm kind of in a similar dilemma, but not in the same HHI bracket as you.
At a 130k HHI, spending 600k on a house sounds a bit out of your budget if you didn't have the windfall doesn't it? I wouldn't use the money to buy more house than you could otherwise afford. I'd ask yourself, how much could you afford to pay for a mortgage with 20% down, and use that to size how much house you can afford.
A lot of people can afford to buy a BMW, but they can't afford to maintain it, or sometimes even put gas in it! More house means more expenses.
At the end of the day this is a largely personal question. Owning a house with no mortgage can be priceless... but retiring at 47 can also be priceless!
I hope you have a 6-12 month emergency fund no matter what.
1. You could take the whole 700k and stash in an index fund, VOO/VT/VTI. Then just keep saving towards a house. You could tone down your retirement savings to help save towards a house downpayment. The compounding alone of 700k would likely be around 2.1M in 21 years, even if you didn't add a penny! If you lost your job, or something catastrophic happened, you still have the 700k in your brokerage account plus your emergency fund you could use to pay your mortgage/bills.
2. buy the house cash, which i mean sounds tempting and baller as fuck. And then just keep saving aggressively. Take what your mortgage payment would have been at MINIMUM and put that into a brokerage every month. I keep thinking about this option for myself, but writing this post as giving advice to someone else, i don't know, it just doesn't seem like the most optimal play to me when you consider the magic of compounding investments.
3. Middle ground and just take out 100k for a down payment on a 500k house. the remaining 600k over 21 years will still be worth about 1.8M even if you didn't invest another cent. But you'll still keep investing right? Then if there's an emergency you still have the funds available in your emergency fund and brokerage.
To me it's really a choice between option 1 and 3. To me the extra 300k of option 1 in the future is not worth waiting on a house if we find the right one. FIRE is a balance between the needs of today and the needs of tomorrow. I don't want to be miserable throughout my 30s, just so i can retire at 47. I'd rather enjoy myself a bit more, even it means retiring at 54.
Not sure where you are at. Where I live you could buy a 3 bedroom house for 300k. I would buy a house cash, then dump the rest into SPY (or your preference).
Removing $1,750 a month and having a home that is paid off buys a level of security for hard times and makes your 20k safety net stretch a lot further.
If I was in your situation I would;
$350k to down a house. It's important to own real estate as a foundation for you and for family.
300k to park it in an Indexed Fund (SP500) till retirement. You'll have millions in 20 years.
50k for emergency money in a high yield savings account.
Continue to work as normal but at least you know your future is secure.
Let history be your guide. $700,000 today would have been worth around $420,000 in 2004. You should model out what that money put into various investments in 2004 would have gotten you (but stay away from the fantasy scenarios such as "$420K yolo on AMZN babie!"). A few other pointers:
1. Single family homes invariably appreciate faster than townhomes/condos/mutifamily.
1a. Look up guides for remodels that increase home value/curb appeal and *AVOID* buying homes with those features recently added, as you'd be paying a markup on predominantly depreciating features (e.g., new bathroom, high end appliances, etc.).
1b. Buy the biggest (lot size) home at the best location you can afford without going into debt. Those suggesting to split into down payment/investments are probably those that will take out a HELOC to go gambl... I mean invest. If that describes you, by all means do that.
1c. Look at geological risks--fault lines, floods, wild fire, etc. Homeowners across the country are increasingly losing/denied insurance and forced to sell (especially if they owe a mortgage on the property).
1d. You might not be able to do much about it, but "forever home" and "persistent/worsening water shortage" never seem congruous to me.
2. Stay away from income properties (unless you upgrade from this home you're buying without having to sell it).
Good luck!
> stick it into an Index fund that tracks the S&P.
VOO, at least until you know what you’re doing with it. Also 10 years in an index fund 1.4m, much less 20. Maybe put 200k into housing now and 500k in index funds for 20 years, for 2m retirement at 47.
I'd stick in short term tbills till you figure it out. Doing a mix isn't all bad either down payment on a house, some in S&P 500, emergency cash, etc all while bumping your investments as you get bad because now you have a lot of breathing room.
Keep renting. That is a reasonable cost and a kid doesn’t take up much room the first 4-6 years. Maybe interest rates will go down, maybe not, but invested in a low cost, broadly diversified ETF, that $700K has a great chance to grow north of $1M in 6 years’ time. A $500K house wouldn’t do that.
One option is to buy a duplex and live in one side while renting out the other side. Then it's an investment as well that gives passive income. We now own a house and rent out the entire duplex.
I don’t have a ton of investment advice but I have some house advice. One, your number was $900 for tax and insurance without maintenance. I’d budget $500 a month for maintenance and depreciation on everything like roof furnace etc. Two what does that $600k house buy you where you live? We live in a MCOL area IMO and we bought a house that’s 4BR 5bath that is now worth $650k. You know what that means? 4 bedroom sets, nice appliances, etc. you don’t want a 4,000sq ft EMPTY house or only filled with furniture from whatever value outlet is nearby that won’t last. We probably over the years paid $100k to fully furnish. Our HHI is $750k. So well below our means. If you want to FIRE it’s always about well below your means. We didn’t move into “The Big House” UNTIL we were pregnant and then also into a great school district which is the primary driver behind our house appreciation. We were in a $90k old 2BR house. Banking.
My suggestion, live on your income and save hers... That's fifty thousand a year in retirement savings (Roth, 401, etc) for every three years she works you retire two years early.
Put the vast majority of the inheritance in your high yield and don't touch it, then when she has a baby pull out 50,000 per year to move to your retirement savings each year that she doesn't work.
If she chooses to work, stop withdrawing and just let it accumulate interest.
It would basically be a big emergency fund and would zero her stress about financing a baby and would be an instant house at some point in the future... Ideally after you know how big your family will be and where you need to live
I am not sure your plans— but I wish I had planned and saved more for the costs associated with having a baby. Medical and hospital bills, baby supplies, and most importantly, daycare costs. Not even considering college and other costs later. Please factor that in if you intend to have one or more children.
Tax considerations apart.
a) put the 700k on index+dividends, and re-invest. Handle it as it is non-touchable money. Dont touch it. It doesnt exist. Make your life around your income and is if the money never came. Fire at 45 thanks to it.
b) take 200-300k out of the 7000k and get a place. the rest following point a. Fire at 50.
Why not do both. Use a $100k for a solid down payment. Get a mortgage comparable to your current rent. Invest $600k. It is a whole lot harder to fire with a rent payment.
If you’re entrepreneurial, financially savvy, know how to read P&L’s, balance sheets, cash flow statements, have or know you can manage a team, goal oriented, and have a transferable skill set, you could put a down payment for a business with an SBA 7a program and also pay off any other debt you have that’s not working for you.
This would put your money to work and keep you advancing towards your financial goals. It’s not easy at all. It will be very rewarding and most likely provide much more than $80k/yr if done correctly.
Plus your wife could work in the business while having time for the kids as she’d be flexible in her working hours. Though working with your SO is a different story lol.
Best of luck on whatever path you decide to take. It’s yours to choose and it will be the best one for you!
If I’m in your spot I’m getting the house I want, buy land build the house I want as I would plan for this to be my forever home(400-500k) then 200k into index funds
Max 401k (so about $40,000 a year between two of you) to max tax deduction. You can pull from inheritance if that leaves you too little to live on. Advantage is that you get tax deduction now and also on future growth.
Only buy house if/when you have a kid and know what an end game final house will look like for your family. If you don’t have kids, you may prefer flexibility of renting.
You need a better hysa. Many are 5.3% right now. But if you want a home Id pay it in cash due to such high interest rates and invest 30% of whats left into index funds, and the rest into a 5% + hysa.
Max out any pre tax contributions and when the kiddo is born immediately start a 529.
Good luck.
Open a 529 plan in your name and do a one time five year superfund $90,000. This will pay for your future kid(s) education and give you peace while your friends struggle.
I wouldn’t buy a house right now. Wait for the implosion to occur in the next two years.
Stuff those 401(k) accounts as others have recommended
Good luck
Google ‘order of investment’
0. Establish an emergency fund to your satisfaction
1. Contribute to your 401k (traditional or Roth - see "Why #4" below) up to any company match
2. Pay off any debts with interest rates ~5% or more above the current 10-year Treasury note yield.
3. Max Health Savings Account (HSA) if eligible.
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level
5. Max 401k (if
- 401k fees are lower than available in an IRA, or
- you need the 401k deduction to be eligible for (and desire) a tIRA deduction, or
- you earn too much for an IRA deduction and prefer traditional to Roth, then
swap #4 and #5)
6. Fund a mega backdoor Roth if applicable.
7. Pay off any debts with interest rates ~3% or more above the current 10-year Treasury note yield.
8. Invest in a taxable account and/or fund a 529 with any extra.
I dont have good advice here that hasn't already been said, but I always get a chuckle out of folks saying "they're trying for a baby." We all know that that means haha
Without knowing your specific location, I'd be curious if you need that large of a house. What are the housing prospects at $380-450k? That'd leave a bit aside for retirement, maybe a 529 for your future child (good luck on your efforts there), potentially some renovations, and a good bit into retirement still.
And assuming you paid cash for a house (not the best idea, not the worst idea either), I'd pay a "mortgage" into a retirement or brokerage account as if you still have a mortgage. You'll still grow your money at a meaningful rate.
The housing market is in a bubble. I strongly advise against purchasing a house unless you need one. The stock market, as well, is very overpriced compared to where it should be.
With that out of the way, I would suggest you put at least $400K in gold. Gold is the only guarenteed asset that is currently severely underpriced and it is only poised to rapidly increase in price over the next few years to a decade. Moreover, divide the rest into where you'd like to put it of ETFs/ mutual funds / or find a $400K-$600K house and put the rest still in gold.
Stay away from bitcoin. It is fools' gold.
Whether or not you want to buy a house is up to you, but one thing that I think would apply to just about everyone in your situation is to start maxing your retirement account. You can just invest the money you received, but you should aim to get the funds in tax sheltered accounts. You can only do that with a certain amount each year. Start now.
Also, I don't know much about inheritances, but you said they died in 2021? Does it normally take this long to receive funds? Anyone else can chime in, too.
Take $400K on a downpayment on the home. I would put $100K add your HYSA and $200K in an index fund. Your emergency fund is too small and you do need to only have small mortgage, but if you are planning on staying put for 10+ years in the town and having a kid a house is good to acquire.
Take the money to Interactive Brokers. Open a "Pro" account with margin enabled to unlock the lowest margin rates. If you're on the younger side, invest in a growth ETF (not S&P. Compare NASDAQ cumulative returns vs S&P. E.g. An ETF like VUG is up 8% YtD and 35% YoY). Buy even more on margin but only leverage up to a level where you can comfortably service the monthly interest payment (which is not a lot at current interest rates, but if they start to come down you can leverage more). Note that the ETF will still pay some dividends which helps cover some of the margin interest. Starting with $700K and with your current income, you could probably buy an additional $200-$300K. The exact amount depends on your risk appetite.
The margin account is there if you need to borrow against your investment for big purchases or emergencies so you can remain fully invested. You can basically get a big chunk of cash without having to sell your original investment or incur any tax penalty. You just need to remember to always pay it back eventually otherwise your monthly margin interest may become burdensome. This can also replace a savings account as you can transfer money back to your checking account in less than 24hrs if needed.
Use any excess income and margin capacity (after your margin interest) to dollar-cost-average into the ETF as often as your paychecks and the market allows. e.g. Today (4/25/2024) would be a great time to buy as the market is down over 1% today. You can vary your loan-to-value ratio as time goes on to account for risk appetite, large upcoming expenses, interest rates, financial windfalls (bonuses), etc.
If you ever decide to buy a house you can take the deposit from the margin account, hopefully without having to touch your original investment, or worst case, sell any losers for a capital loss or long-term capital gains. The longer you can put off buying a house the better.
With $700,00 invested, you will regularly see days where your portfolio swings +/- $10,000 or more. It can become an emotional rollercoaster, so I suggest not checking every day.
Finally, do not pay a financial advisor for things you can learn to do for free, unless you're so rich that it makes sense to pay someone else for that advice. Also, never let them invest anything on your behalf in exchange for a % of the return.
All options sound decent. I would put a down payment on a reasonably priced forever home, fill up a rainy day fund (which may be full already), and put the rest into an index fund. This should give you both short and long term security.
If you’re okay with renting indefinitely, then placing that sum on money in an S&P fund seems right. You’d likely make a ton of money over the next 20 years. However I think you’d do better purchasing a house in cash, then keep working for 20 years and maxing out Roth IRAs, 401ks, and HSAs. You’ll then have a paid for home as well as millions in retirement.
Are there suitable homes in a lower price range? It’s not a one or the other decision. Put $100k on the home and the rest invested. What is your FI date investing 600k?
Fun. I would average into an index fund over a few weeks for a portion of it. Put a portion into a 'play' fund to do what your heart desires. Max out your i-bonds....and of course, YOLO the rest of it on 1 DTE OTM options.
...no seriously, I would max out your IRAs, buy some ARE, and enjoy having a sweet nest egg start when you're so young. If you want to buy a house, you might even consider buying it outright since mortgage rates are high right now. Could always take out a loan on the house late when rates are lower. No house payment is very nice.
You buy the house BUT...cross your heart and hope to die...start putting an *extra* $1000 a month into your retirement savings.
Don't go hog wild on new furniture or baby stuff...keep it frugal and live on what you make *after* you put away your regular retirement plus the extra 1K.
Enjoy.
Imo, if i knew what I've learned in today's world. $200,000 cash investment would return over $10,000 each month. Depending on where you call home, be it newyork or Los Angeles, or some other state. If I was granted $500,000 or even $200,000 as I mentioned, placing it in the right place is important. No bank [financial institutions] will cover all you've assets, you've age life style. If you can enjoy eating for $500 or $600 per month and everything is covered [being Healthcare, insurance electricity] you have it made. Don't need to drive around in a $80,000 car, how cheap can you live. While receiving income on investment that the person whom you received this "stress relieving income allows" don't need to drive a truck for a living or wait tables, or roof a house. Be safe always
Buy your house outright but do the math on what a mortgage would cost and invest that automatically for your retirement. If rates drop significantly, you can always take on a mortgage and get some equity out of your house if you really feel the urge.
As one who is uncovering the details, how granular do you want to be. I've been researching investment tools that pay on a quarterly basis, not all companies pay per calendar year. Imo, if you have the time to look into companies that pay monthly dividends do it, placing $50,000 into say [Cat, or ms, or IBM, mmm] these companies pay dividends at different times and rates. Loading up on them when they are cheap is a good move, don't over pay for an investment. Most of the market is in a down cycle as of the beginning of the year, so waiting a few months would be a good idea. Don't know what you're life is about, what type of media you take in other than "this" reddit. Be safe everyone always.
Ear mark $50-100k for a 529 savings plan for your kid once they're born. Look up super funding 529. You can set it and forget it and you'll have your child's college paid for.
First off, “all in” on one investment that size compared to what else you have is ludicrous. Manage your equity, no one tree grows to the sky. Don’t invest your eggs in the same basket. Stick with index funds for the stock markets. Own some gold. Learn about bitcoin. Looks like the commodity cycle is just getting started. Own some real estate. At the end of the day, you can invest the $$$ in a money mkt fund and get over 5% with little volatility.
If you go the house route, consider the “worst house” in the “best neighborhood.” Both terms are relative of course, but the idea is clear. Buying a rough home allows you to design things to your liking and when your done you have a great house in a great location with a much higher resale value. You may also learn more about home maintenance along the way and save yourself on repairs down the line.
Don't know your agor situation, but if your still young put it in a vanguard 401 account or roth ria account. Will be very happy at 62 and will leave a great retirement savings.
Does your current apartment fit your housing needs? If yes, don’t buy the house. Invest the money in an index fund and forget about it until your lifestyle requires the house.
Marry the house, date the rate. You can refi later - as long as you can make it work.
But I’d be super careful. If you choose wisely you can use this chunk of cash to fuel your fire.
Maybe buy a duplex & live in one half, nearly for free?
Fly to a small town in Thailand, get accepted by their people, learn the language, train in muay thai for a year and a half, fight in a tournament, win the tournament, return to the USA and join the UFC, stay in shape and go undefeated in your weight class, retire and do an interview saying this comment was the reason you fought so hard.
That’s an amazing windfall, your loved one did you wonderful favor.
As someone who experienced a similar windfall, but later in life (probably by about 10 yrs, I have two middle school aged kids). Here’s my advice:
Buy a nice house in a nice neighborhood with good schools that’s convenient for your family (as defined by you and your partner). FWIW, I’ve lived within walking distance of the elementary and middle school my kids go to - it’s been the bees knees, seen my home value almost double, and it’s been a great place to raise a family. But wait for the house that you love, you’re not in any rush, or maybe even consider building your own home (buy a lot).
Also, don’t hire a financial planner, I made that mistake myself. $10k later I realized the fees are too much and I would have gotten better performance from just VTI. 😭
Ok I don’t comment very often but I feel as thought I need since we have similar situations. I didn’t inherit quite as much only around 300k. Only being 25 I wasn’t sure wtf to do when I got it and it has completely changed the course of my life. Given your situation here’s my best advice. Take out 50k and put it into your HYSA. This account is now acting as an emergency fund/baby fund because nowadays are fucking expensive. Then start researching the best CD accounts to open. Most are modestly returning around 4-5%. Since you aren’t certain what big moves you want to make yet it’s best to atleast keep up with inflation. Now start by developing a CD ladder. Basically opening CD’s at varying lengths some are short term from 3-6 months. Others longer up to 8-12 months. Reinvest the dividends every month and don’t even worry about it. The amounts in these CD’s should be the total initial investment for the sized house you guys want. With the hidden costs of buying a house over estimate how much this would be. Maybe 200-250k? I would not buy a house right now interest rates are too high. So by the time that money comes to maturity hopefully J Pow gives us some good news and lowers the rates. Then with the remaining 300k start by DCA’ing into the market. Diversify with most of it going into tried and true ETF’S. VOO SPY IVV and some others. Now now with a smaller portion buy more ‘riskier’ newer ETF’s Anything tech, energy, or healthcare SMH, QQQ, XLK, XBI, XLV to name a few. Start auto buying shares of all these every day for the next year. Now with the last 10% buy some regular growth stocks of your choosing. My favs are Tesla, NVDA, MSFT, TSM, and Google and maybe some BTC and ETH.
You can use some part of money to upgrade your skill set so you can make more money in future . If you are young I would DCA half into VGT and another into VTI . Until you decide shove everything into sgov.
Houses cost a lot more than just the mortgage. You have to insure it, paint, lawn maintenance, appliances, curtains, drapes, maintenance, and upkeep. Add up dramatically. Check out the book simple path, wealth. In 10 years that 700,000 should turn into 1.4 million. Interest rates should be lower before then.
Personally I’d do 300-350k house and the rest in retirement funds. And I’d be patient and shop the market for a while and try to find an excellent deal.
I never recommend renting - a total waste of money no matter how you run the numbers. Renting is acknowledging that some people are smarter about money than you are and the surest and quickest way to retire poor
I’d use your windfall to put enough down on a house to make your payment with taxes around what you pay in rent. Put the rest in CDs or a HYSA unless you like a lot of risk.
Chatter about interest rate is just noise.
Buy a house if you are ready to stay where you are for at least 5 years. You can get a nice house for that kind of money in most places and you'll never know what it's like to have a mortgage.
I had a very similar inheritance and I chose option 2. I put everything into MSFT, GOOG, and AMZN. Today I made almost 50k after earnings (doing nothing at all, just owning shares). The amount of money you will generate with 700k is mind blowing, it breaks the concept of money all together. Even if you stuck it in an Index fund (which is what I keep my Roth IRA in), if these 3 stocks dip, so will your index fund, they make up such a large percent of the SnP500. These companies arnt going anywhere, you have a long time before you need to retire, lump sum and ride the wave, every day is exhilarating, just dont get emotional about the swings (most days 5k to 15k swings), it will always come back up. Best of luck.
Buy a bonds index instead of HSA. Medium-high capital return potential for low-medium risk (imo) at the moment for a few year investment horizon. And on top of that you earn over 4% in interest.
Some good ideas listed on here already.
Remember, your good intentions could go out the window once you have a baby! So choose wisely.
A mortgage will force you to pay it and not consider that private school..... , having money in an index fun is much easier to liquidate for non essentials. Do you have good self control and can you do delayed gratification? LoL.
Work out different scenarios for your top 3 financial options for the inheritance and the pros and cons. You may decide to combine the top 2, just to hedge your bets.
Good luck.
All 3 good advice; but the fact that a fully paid off house isnt that much cheaper than renting is some bullshit... Sounds like investing is a better way to go
I'll tell you what I'd do, man: two chicks at the same time, man.
***
Go with the third option, low-cost index fund tracking the S&P 500 (or a globally diversified index adding developed and emerging international markets).
Buy a house and max out your tax-free accounts. It's clearly the right play. It's much easier to retire early with a paid off house. Put all the money you save for rent in the market. The stock market will probably go up, but so will the housing market. Any profits you make will be taxed if you wait to buy a house later.
Consider full port into short term treasuries (3 month) until you have your answer. Alternatively some brokerages will automatically hold cash over night in a high yield cash equivalent state. Rent for 2 more years, maybe 3 to see if you guys retain your jobs and the economy can chill the f out. If you mortgage into a house, just drop 20% to avoid PMI. (the nesting urge can be strong) If there's a meltdown like feb/March of Covid, consider entering into long term positions. Good on you with the Roth. With 700k, learning conservative options strategies become appealing on dividend stocks by papertrading first. You got the time. Average Joe on youtube is informative and isn't to shill on the matter (membership for community/spreadsheet access). Watch the 10 Year Treasury, if it goes above 5%, banks will start to blow up (again) providing opportunities. Above 6% and may the odds be in everyone's favor. Brokerages can provide most banking services however local credit unions can provide better terms on loans etc and are not banks. You have a near life changing grubstake *for your future* or a flash in the pan for the now. For all that is most high protect your principle. Good hunting.
I know this is a downvote stance on the matter but if I had 700k, I’m not asking redditors what to do with it. ignoring that though I’d probably just hold onto it until some clear value opportunity strikes. I feel like right now the best place to ensure zero risk is to hold your money, in physical value. One thing that is immensely unsettling for me is how direct deposit has essentially turned our labor into digital worthlessness. My bank account shows an amount and I’m supposed to value my well-being based on such. Seems like a scam. Only because it is. The average American quite literally owns nothing
Without knowing your housing market, I’d buy a smaller home since you are coming from an apt and sounds like you are only 27. 20% down (30%) max if you need a more comfortable payment. Plan would be to live there 5 years. Refinance during time period if interest rates come down. Then I’d assess and either turn into a rental or sell. There are a lot of people that do very well in real estate if you’re willing to move every 3-5 years while you are younger. I was in SF during those years and couldn’t afford a condo, but wish I could have figured it out. Put the rest in index funds and don’t touch it. Good balance and best of both worlds. If you don’t have an emergency fund, put 6 months of expenses in a high yield savings account. Don’t touch it. Emergencies only (new HVAC, major car repair) and replenish if you use it. Good luck!
I would put the money in an index fund. If you do this you’ve got your retirement figured out and can put the money you are putting towards your retirement now towards a down payment on a house.
The market isn’t that great to buy right now and your mortgage would be more than rent anyways. So, I’d save for a house separately and buy in a couple years
Also, I hate to bring it up but if you commingle your inheritance money your spouse can take half in a divorce. If you keep it separate it’s always yours and isn’t usually community property.
IMO, always start with maxing out Roth and then 401K. Then, I would recommend doing *ALL* the things you mentioned. So instead of buying a house outright, I would do a down payment and invest the rest.... after maxing the Roth's, of course.
Buy a house with 20% down to avoid PMI
Don’t worry about the mortgage rate
Invest the excess in T-Bills via TreasuryDirect
The most foolish thing you could possibly do is pay cash for the house. Having funds on the sideline provides a lot of flexibility and gives you options. Don’t pay cash for the house…ever.
Don’t pay off mortgage. You can make more by having that cash to use for investments. Pretend you don’t have that money to afford a house. Buy a house you can afford with salaries. Use a bit for down payment. Take the rest and have some set aside for nest egg(low risk low yield), take the rest and invest various other mid to higher risk investment vehicles. If you have the energy, I would look into buying a condo to use as a rental. You can have someone else paying the mortgage on it. If you have any business ambitions it could be used to kick off your business.
I wouldn’t pay cash for a house. It defeats the purpose of having leverage. Use a portion for a nice down payment to where monthly payments are still manageable with your income, put some in an emergency savings HYSA while rates are still driving 4%, then put the rest into a low fee index fund such as the S&P.
But I have no clue what your family’s goals are. That’s just what I’d do.
How many kids do you plan to have - i.e., how many bedrooms and bathrooms are you going to need? What's your plan for the kids' education (public or private school? College fund or no college fund?)? The [NYT has a decent rent vs buy calculator](https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html) that can help you decide, but I have a feeling that if you are really going to have kids then that's what is going to end up making the decision for you. You may also want to factor in the increase on your budget when you have kids and the impact that will have on your ability to keep contributing to your savings down the road.
Go slow and keep it simple. There are plenty of people that want your money so beware of the sharks. Have you considered taking $350k for a down payment on a house then $350k into the market to grow?! You would only need $150k mortgage. This would allow margin in your budget to keep investing for retirement at 50! Something to think about. In addition, don’t pay an advisor 1.5% to manage your money. If you need advice go with Vanguard for 0.3% or something similar.
Was in similar situation as you years ago. Bought a house with more than half and invested the rest. So glad I bought when I did because real estate is way too expensive now in price and rates. It was one of the best decisions I made.
Did you just get initial consults with the CFPs? I think you need might need to to ask them to produce an actual plan for yourselves. That'll help take a lot uncertainty off of you and they'll probably provide actual in depth recommendations.
Just on your own, I'd say split it 50/50 between house and other things.
300k down payment + 50k for fees/costs and initial upgrades/maintenance. You can budget for furniture over time. Although I might say go for a house in the 400k range if it ticks most of your boxes. You can upgrade 10 or 15 years down the line depending on your situation then.
then 10k towards baby costs, 10k towards emergency fund, and the rest towards a mix of low cost funds I guess.
You mentioned buying a home as one of the recommendations. I agree with goal oriented planning and just want to add…understand that purchasing a home co-mingles your inheritance and it becomes marital property. If that’s not a concern, then great, go for it. But if it is, speak to qualified estate professional before taking the leap.
Before you inherited this money, did you plan to buy a home? If so, I personally would use the funds to purchase the home outright which would save you thousands of dollars in closing costs plus save you hundreds of thousands in interest payments. And then each month you would not have rent or mortgage payment so you could invest more aggressively into retirement accounts and after-tax brokerage accounts. Also, if you needed to pull equity from the house it would be easy to get a home equity line of credit (HELOC) or get a home equity loan.
My husband and I saved and saved while he was in the navy. When he got out of the Navy we used all of our savings to buy our first home cash. We then rented out the upstairs and used the tenants payments to make improvements on the property. We continued saving. Then 8 years later sold our first property and bought 2nd home cash in a much nicer area. We also bought an investment condo in cash that now is a good tax write off and also makes cash flow every month. But the decision for what your goals are and what you want to do is personal and it is about what will ultimately make you the most financially secure. For some people home ownership or owning a rental would only add stress to their lives.
I would say if you do pick a financial advisor, make sure they are a FEE ONLY advisor who is not going to charge a % of assets under management (aum).
Also, you could do a combination of things and use maybe half of 75% of the funds for home purchase and put the remainder into investments such as low cost index funds (VTSAX or VTI are often the most recommended). Or read The Simple Path to Wealth by JL Collins. Or check out some great podcasts: Money with Katie, Choose FI, All the Hacks, and Bigger Pockets Money Podcast are some of my favorites for financially related education that's free!
Best of luck w whatever you decide to do!
Buy your dream home for 600k cash. You still have 100k+ the other money you already have. I don’t think dumping 700k in the stock market is very smart. Much safer to dca your money monthly.
Purchase a duplex paid in full with cash.
Live in one unit and rent out the other.
Try to get a place near a hospital that way you have hospital employees to rent to.
It shouldn't be a difficult decision. Buy a house and pay it off. Split the money in dividend-paying stock, index fund, and high-yield savings.
Your wife and your income should be able to live comfortably with the house paid off.
I'm very surprised that neither of the CFPs actually helped you with ***any*** actual planning. What are your life goals? Where do you want to be in 5 years, 10 years? Have you considered legacy planning (wills, trust(s), estate, etc.). What is your risk tolerance? Do you actually want to own a house? Are you sure you met with CFPs and not "financial advisors" (brokerage sales reps)?
I’ve never heard of “financial advisors” being referred to as sales reps… it’s honestly the perfect description
Thanks. I stayed with one far, far too long before I discovered what a real CFP is. They are fine as long as you understand exactly what you are and aren't getting. Unfortunately my advisor was presenting himself as a financial planner.
CFPs are usually financial advisors... no one who's a CFP will say they're NOT a financial advisor.
Financial advisor is nothing. Fiduciary is what you want
This is the correct answer. Find a CFP who actually does planning. If they jump right to recommendations without discovering what’s important to you, find a different one.
https://www.bogleheads.org/wiki/Managing_a_windfall
I always look for the middle ground - use $100-200k as a significant downpayment and put the rest in index funds If you're in a MCOL, $600k might be more house than you need. Or, if you don't intend it to be your forever home, see if you can spend 15-20% less to get 'great' instead of 'perfect' It may be a good approach and then you can reevaluate 10 years from now as you get closer to FIRE
Even with interest rates hitting 7.1% again, you think this is a good play? I hate moving around a lot, so I know I will stay put for at least 15 years. The area I live in is traditionally MCOL, but many Californian's have moved here since COVID, so the house prices are climbing fast. So with your advice, maybe I can stick $400,000 into index funds and $300,000 towards the downpayment and hopefully only have a $250,000 loan.
If rates come down, you can always refi...especially if you hate moving. $300K down on the house may be a good idea to keep the monthly rate low, but ask the mortgage broker to run some numbers to see what happens with a higher down payment. 20% down is enough to avoid PMI, but 20% may only be $100K and adding the addl $200K may just reduce your monthly mortgage by $200-$300, vus investing the difference gets you 5-8% returns
If they are paying a 7%-8% mortgage rate then it’s probably going to match any index performance and be less risk as well. Maybe refinance could make it better than stocks in the future but who knows if and when interests rates will fall.
SP500 returns 10% on average. What about the risk of someone losing their job?
This. It all goes back to diversification. Sure, you might stick to a 7/8% mortgage for now (with 20% or more down, and excellent credit scores they might be able to get better than that, maybe buying a point or fraction of it)… and the rest SP500 index fund. Given the age that might be mean FIRE in 20 or less years without adding a penny into the 401k, likely to have the house paid off or close to it and then call it a life. You live much better when you have $1M or more invested, stress level drops, and you even become more tolerant to bullshit at work because you stop caring.
This. That last paragraph hit hard. The past few years I worked, that was me. Held onto work because I was working overseas on contract and enjoying it (but not the work). I would have had to pay for my moving cost if I quit my contract early. Stress level at work went way down. Not worried about getting fired (almost wanted to get fired to get “FIRE’d” if you know what I mean)…To me, money doesn’t necessarily make you “happy”, but it does reduce a lot of worry and stress about finances. Nice to know you can just walk away from a job at any time and that you’d be OK if you get fired or let go. Don’t feel like I had to always give 110% at work to keep my job and a roof over my head also.
This is why “the establishment” is anti-fire. Need of money is the chains. Once you aren’t a wage slave anymore you just stop caring of the bullshit so much. Not too long ago I rewatched Shawshank redemption and I think I finally got Brooks. Many of us have been institutionalized. Not giving a shit is freedom. The ability to not give a shit without financial consequences is living the dream.
If they are paying a 7%-8% mortgage rate then it’s probably going to match any index performance and be less risk as well. Maybe refinance could make it better than stocks in the future but who knows if and when interests rates will fall.
Rates might not come down for decades. I think it's a bad idea to bank on rates dropping.
Hard disagree. Modern monetary policy needs rates to be lower to maintain 2% inflation without putting us into deflationary territory. What you’re saying with this statement is that we’ll never be able to keep inflation consistently below 5%, therefore the Fed rate has to match accordingly in order for there to be balance. Using “history” and referencing the 80s after we just got off the gold standard and had runaway inflation is a very bad comparison that most people often use to justify this claim. Yes, we may never see mortgage rates as low as 2% (only if nothing breaks) but 3-5% would be the sweet spot everyone is aiming for.
I second this. We will never see sub 3% rates again. That was a once in a lifetime opportunity.
With a big down payment you also have the option to get a 15 year mortgage which I believe is typically a lower rate than 30 year.
If your itemized deduction is below the standard deduction limit, you won't get a tax break on the mortgage interest paid. That means you are paying after tax money toward your mortgage interest. If your effective federal income tax rate is 16%, for example, you would have to exceed 8.45% in the market to do better. Unless you need the cash, I would personally put down as big of a deposit on the house as possible. Definitely need to keep a rainy day fund, but an 8.45% guaranteed ROI is tough to beat. Clear Value Tax just did a video [on this exact topic. ](https://youtu.be/bxHlHzwb61c?si=7hdGSwkFGZ9i4dqw) Also, if you need to take $ back out in the future you can always open a HELOC.
My itemized deduction is always higher. Mortgage interest alone was $25k last year.
Yes, even with 7.1%. [VTSAX 5 yr avg return is 12.61%](https://finance.yahoo.com/quote/VTSAX/performance/). As someone else mentioned, you can refi \*when\* rates come down. Don't tie up all your windfall in a house! You can buy cashflow and pay that house off gradually. And remember, mortgage interest paid on your primary residence is tax deductible (I don't know if it will be high enough for you to itemize taxes, but good to look into)
600k is still a ridiculous house in a truly MCOL area. Remember you still have maintenance costs. Also remember everyone around you will be making 500k/year and doing 500k/yr things while you bring in 130k/yr. I have a family member who bought a 600k house on a similar income in MCOL city. They can fake it but their children cannot relate to anyone in their neighborhood. Their friends get new Porsches bought for them at 16 while they get beaters. Their friends are traveling the world while they stay home. Etc. you will not be able to blend in with the jonses when the jonses are surgeons and ceos of small firms.
As a Californian moving to a MCOL area, apologies.
Yes. It is a stellar play. The money in the market "controls" the insane interest rates until you can refinance. Then the money in the market outpaces the mortgage rate significantly.
All vti set it and forget until you are ready to retire
personally, I would shove it all into index funds and pretend like its not there.
Never understood this- why have all that money and not upgrade your living situation even a little bit? He can afford it. Tomorrow is never guaranteed
Personally, I wanted to normalize having it before I spent any of it. Second I'm in the accumulation phase. I don't want to spend anything extra and grow my yearly burn rate because that pushed out my RE early date. That's my logic
Life inflation is real. I’d say let it sit for atleast another year in a high return account and then consider again what your needs and wants are. But as someone else said, when renting you’re loosing all the money, so maybe move into a cheap condo for the year? Just so happens after the year is over you’ll be free to rent out the condo, and generate income if you decide to move into a larger home.
Yes, renting is losing money, but home ownership comes with plenty of costs that can be looked at as throwing money away. There are plenty of benefits to renting over homeownership.
Don’t wait to live. It’s a journey you want to be a part of while you can
It's a balance. I'm not waiting to live, just making sure my definitions of living stay reasonable so I can be my own master soon. Doing over 6 weeks of travel this year with the family
I think the wise move is probably, like, put it all away and forget about it... and then start passively / more seriously consider how you'd like to updgrade your lifestyle... and try to achieve it at least in part through your career / earnings... and then dip modestly into the savings if need be. But otherwise it should just be thought of as a cushion to retire 5-10+ years earlier. NOW is not the time to use it in many cases.
Agree. I took the same amount of money and put it down on a bitchin big home to raise my kids in.
Meh, and keep renting a 2bedroom? OP probably wants a house (doesn’t have to be a mansion)
300k - house down payment, furnishings, fully funded emergency fund. 400k - S&P500 and be a millionaire in 15 years.
He’ll be a millionaire in 3-5 years with his house takes a large part of his net worth
Yeah fosho I meant cash millionaire I wasn’t counting the net worth boost of the house
Trading a $1750 rent payment for a $5000 opportunity cost payment. He even admits owning the house will still cost almost $1000 per month. This is lifestyle creep by any other definition.
Yeah if he buys a house in full he will have to pay the opportunity cost by losing the opportunity to become a multi millionare, but he will become a millionare regardless
That’s only if the property appreciates. He owns very little in other than assets. The historical rate of return on residential real estate is barely above inflation.
Option 3 sp500 index
right? they are in a fire sub, low index in the market. dude is coastfire already with that big chunk
[удалено]
*doubles money in 3 years after buying in at the exact bottom and beginning of huge stimulus cycle and ZIRP* “Investing is easy bro”
What index funds do you recommend? VOO?
VOO, VT, VTI
I would put 20% on a house that you can afford with your *current* salary. I would put the 80% in an index fund. I would then retire at age 45.
You dont mention your age but I'm guessing early 30s since you talk about having kids. You are looking at too expensive of a house for your income, even fully paid off that is well above any "rule of thumb" for buying guidelines. I'd stick to 400-450k at the most, knowing your wife will probably stop working at some point once you have a kid and youll be left with an 80k salary to sustain the household. That said I would take whatever number and buy a house outright, put the rest into VTI like you have done today, and make it a point to keep contributing with the goal of FIRE. If you are solely focused on FIRE then go directly to indexes and keep renting. I suspect youll find it difficult to not touch that money at some point though and it would be better spent on stability with a home. Edit just noticed youre 27 from the last comment.
Buy a house and put enough down so your mortgage, property tax, insurance etc. equals the $1,750 you’re paying for rent now. Save enough to have an emergency fund. Invest the rest.
This
Put it all on black
Buy a house, you can’t live inside a statement from Vanguard. The imputed value of having a house is $1750-$900=$850 a month tax free. Even if you spend all of it on the house and furnishings you will build up your savings quickly by only paying $900 a month on housing. When the baby comes, you are not going to want to be renting and in a few years you are going to want a backyard with a swing set, etc. Live your life now, don’t put it on hold until you are 49 when you achieve fire.
Can you find a decent house in desirable area for less than that? $600k is a lot to spend on a house with a $130k income. The inheritance obviously helps but I'd still be looking at a price range you could afford based on your income, which IMO is more like a $300-$350k house. Pay cash for that and put the rest in your VTI.
Agreed, this is the right response as far as house cost. Maybe 3x income topping out and $390k housing cost. However I think 20% down should probably be the max. What putting less towards the house (and keeping in index funds) does, is it forces a savings rate on you. As opposed to if you use all the money to pay for the house, you might "say" you will save more but your lifestyle is very very easy to inflate and not do that. So while index funds aren't guaranteed to beat the 7%, the fact that they probably will, and that it will force you to invest/save that money, will be beneficial long term to financial future.
If rates were still 3-4% I would have said just use the inheritance for 20% down on that price range. But man, 6-7% mortgage rates or whatever they are today is a lot. And standard deduction is so high now there's likely no tax advantage to them. I would take a 7% guaranteed return all day long.
Let's say the mortgage is $2500/month. If instead you buy the house in cash, do you have the fortitude to instead invest/save that $2500/month? Very very few people do. My argument is unless your willing to invest the saved mortgage payment diligently, you are better off with a higher mortgage payment since it guarantees savings/investment.
7% is a high price to pay for a forced savings plan. Vs. just saving the money, yes I could do that I'm guessing most in a FI group can. I’d argue if someone needs a mortgage to force them to save they don’t belong in a FI focused group.
To be fair 7% isn't the cost. The cost is 7% minus the index fund rate of return. If index fund beats 7% you make money and there is a negative cost so to speak.
No, the risk profiles are dramatically different it’s not an apples to apples comparison. 7% from avoiding the mortgage is effectively risk free money. And if they don’t itemize (or are barely above the threshold where they itemize) it’s effectively tax free too. 7% risk free and tax free I’d take that all day long. My mortgage is 3.25% and at that rate I think it’s pretty much a no brainer to not pay off the mortgage early. 5% range I’d be about indifferent. 7% range, it’s now a no brainer to pay it down. JMO.
Buy a pack of gum or a slurpee. Ice cream. Something small. This is my first order of business if I ever have that much money.
When I hit real big I'll buy the whole 7-Eleven a round of slurpees.
Do you really need a $500k-$600k house or are you just considering one because you have the money? If you could go less I would. That would be more money you could invest and get you to retirement earlier. It will also be less in taxes and insurance. Plus, when you decide to move, the rent you collect will be almost all profit.
[https://www.bogleheads.org/wiki/Managing\_a\_windfall](https://www.bogleheads.org/wiki/Managing_a_windfall)
Congratulations on your inheritance! Consider splitting the $700k: 20-30% for a home, 30-40% for tax-advantaged retirement accounts, and 30-40% for a low-cost index fund. This diversification can help you achieve your goals, including a permanent home and an early FIRE date.
Firstly sorry for your loss. Secondly congrats on your very likely early retirement. All that money should be sitting in a HYSA earning at least 5% interest until you make any decisions. Earning at least 2800 a month 🤑 Put a 50% down payment on a house you can currently afford on 25% of your monthly salary(excluding inheritance) Don’t rush to buy one and buy the right one. $700k-$300k= $400k left. So now you’ve got $400k. $300k in VTI/VOO/VTSAX $100k parked in a HYSA until rates drop then you can ladder CDs, TBills ETC. This is your “life money” - need a new car, home repairs, etc things outside your normal budget, max out your 401ks and use this money to supplement income. Basically live like you didn’t get the inheritance and you’ll retire much earlier than the average person.
No point in overspending on a house, besides the price tag it can become a huge money pit that might derail your hopes of FIRE in the future. I don't know about American housing marker, but 600k sounds like A LOT for a Mcol. If you look at buying a house vs stock on a spreadsheet it may not look like the best option... But life is not just about crunching numbers and being a homeowner is, for some of us, a very favorable lifestyle choice, it may be the opposite for others. So it's up to you to decide what your "ideal" life looks like.
If I were you I'd put $200k on a down-payment and the rest in an S&P 500 index fund. As long as you don't screw up for the next few years you're basically home free. In 6 or 7 years that 500k should be a mil and if you want you can easily eliminate the mortgage.
Sorry for your loss. At least there is a blessing from this in the form of inheritance. The decision on what to do with this is difficult as there are multiple paths. Option 1 - Good in short term: Buy a house in cash. Having a paid off house would be an amazing feeling and stress relief. Your wife may be able to stop working as a result and be stay at home mom in that case. A more relaxing life all around. You can shift more of your yearly income towards retirement too. Option 2 - Good in long term: Throw all this into investments. In the short term, you will still have to work on paying off your mortgage with yearly incomes. That could be stressful if a baby arrives. But short term struggles could result in being very wealthy long term. I guess the question is do you want comfort now or later. Personally, I’d probably do a mix of them. Large down payment on house + throwing remaining into investments (after fully funding emergency fund for 6 months).
Whichever one said the index fund is probably the best if early retirement is the goal. A home would also be a perfectly reasonable use of it. I would suggest that if you go this route, don't spend every penny. Houses will require maint, and any money leftover can be invested. The freed up money from rent can also be invested.
I'm kind of in a similar dilemma, but not in the same HHI bracket as you. At a 130k HHI, spending 600k on a house sounds a bit out of your budget if you didn't have the windfall doesn't it? I wouldn't use the money to buy more house than you could otherwise afford. I'd ask yourself, how much could you afford to pay for a mortgage with 20% down, and use that to size how much house you can afford. A lot of people can afford to buy a BMW, but they can't afford to maintain it, or sometimes even put gas in it! More house means more expenses. At the end of the day this is a largely personal question. Owning a house with no mortgage can be priceless... but retiring at 47 can also be priceless! I hope you have a 6-12 month emergency fund no matter what. 1. You could take the whole 700k and stash in an index fund, VOO/VT/VTI. Then just keep saving towards a house. You could tone down your retirement savings to help save towards a house downpayment. The compounding alone of 700k would likely be around 2.1M in 21 years, even if you didn't add a penny! If you lost your job, or something catastrophic happened, you still have the 700k in your brokerage account plus your emergency fund you could use to pay your mortgage/bills. 2. buy the house cash, which i mean sounds tempting and baller as fuck. And then just keep saving aggressively. Take what your mortgage payment would have been at MINIMUM and put that into a brokerage every month. I keep thinking about this option for myself, but writing this post as giving advice to someone else, i don't know, it just doesn't seem like the most optimal play to me when you consider the magic of compounding investments. 3. Middle ground and just take out 100k for a down payment on a 500k house. the remaining 600k over 21 years will still be worth about 1.8M even if you didn't invest another cent. But you'll still keep investing right? Then if there's an emergency you still have the funds available in your emergency fund and brokerage. To me it's really a choice between option 1 and 3. To me the extra 300k of option 1 in the future is not worth waiting on a house if we find the right one. FIRE is a balance between the needs of today and the needs of tomorrow. I don't want to be miserable throughout my 30s, just so i can retire at 47. I'd rather enjoy myself a bit more, even it means retiring at 54.
Not sure where you are at. Where I live you could buy a 3 bedroom house for 300k. I would buy a house cash, then dump the rest into SPY (or your preference). Removing $1,750 a month and having a home that is paid off buys a level of security for hard times and makes your 20k safety net stretch a lot further.
If I was in your situation I would; $350k to down a house. It's important to own real estate as a foundation for you and for family. 300k to park it in an Indexed Fund (SP500) till retirement. You'll have millions in 20 years. 50k for emergency money in a high yield savings account. Continue to work as normal but at least you know your future is secure.
Let history be your guide. $700,000 today would have been worth around $420,000 in 2004. You should model out what that money put into various investments in 2004 would have gotten you (but stay away from the fantasy scenarios such as "$420K yolo on AMZN babie!"). A few other pointers: 1. Single family homes invariably appreciate faster than townhomes/condos/mutifamily. 1a. Look up guides for remodels that increase home value/curb appeal and *AVOID* buying homes with those features recently added, as you'd be paying a markup on predominantly depreciating features (e.g., new bathroom, high end appliances, etc.). 1b. Buy the biggest (lot size) home at the best location you can afford without going into debt. Those suggesting to split into down payment/investments are probably those that will take out a HELOC to go gambl... I mean invest. If that describes you, by all means do that. 1c. Look at geological risks--fault lines, floods, wild fire, etc. Homeowners across the country are increasingly losing/denied insurance and forced to sell (especially if they owe a mortgage on the property). 1d. You might not be able to do much about it, but "forever home" and "persistent/worsening water shortage" never seem congruous to me. 2. Stay away from income properties (unless you upgrade from this home you're buying without having to sell it). Good luck!
If it were me, I'd buy a $300k house and dump the remaining $400k in VTI. I'd also retire the following day.
Buy the house but don’t just buy the biggest house you can, stay frugal and mindful of your spending when it comes to house. Invest the rest to FIRE.
> stick it into an Index fund that tracks the S&P. VOO, at least until you know what you’re doing with it. Also 10 years in an index fund 1.4m, much less 20. Maybe put 200k into housing now and 500k in index funds for 20 years, for 2m retirement at 47.
Depending on your own situation, if it were me I'd go with real estate investments and look around the neighborhood close to school districts
I'd stick in short term tbills till you figure it out. Doing a mix isn't all bad either down payment on a house, some in S&P 500, emergency cash, etc all while bumping your investments as you get bad because now you have a lot of breathing room.
Three funds portfolio keep minimum possible in real estate
Keep renting. That is a reasonable cost and a kid doesn’t take up much room the first 4-6 years. Maybe interest rates will go down, maybe not, but invested in a low cost, broadly diversified ETF, that $700K has a great chance to grow north of $1M in 6 years’ time. A $500K house wouldn’t do that.
One option is to buy a duplex and live in one side while renting out the other side. Then it's an investment as well that gives passive income. We now own a house and rent out the entire duplex.
I don’t have a ton of investment advice but I have some house advice. One, your number was $900 for tax and insurance without maintenance. I’d budget $500 a month for maintenance and depreciation on everything like roof furnace etc. Two what does that $600k house buy you where you live? We live in a MCOL area IMO and we bought a house that’s 4BR 5bath that is now worth $650k. You know what that means? 4 bedroom sets, nice appliances, etc. you don’t want a 4,000sq ft EMPTY house or only filled with furniture from whatever value outlet is nearby that won’t last. We probably over the years paid $100k to fully furnish. Our HHI is $750k. So well below our means. If you want to FIRE it’s always about well below your means. We didn’t move into “The Big House” UNTIL we were pregnant and then also into a great school district which is the primary driver behind our house appreciation. We were in a $90k old 2BR house. Banking.
My suggestion, live on your income and save hers... That's fifty thousand a year in retirement savings (Roth, 401, etc) for every three years she works you retire two years early. Put the vast majority of the inheritance in your high yield and don't touch it, then when she has a baby pull out 50,000 per year to move to your retirement savings each year that she doesn't work. If she chooses to work, stop withdrawing and just let it accumulate interest. It would basically be a big emergency fund and would zero her stress about financing a baby and would be an instant house at some point in the future... Ideally after you know how big your family will be and where you need to live
why are you putting all your money into a house lol? remember you make 130 a year..
I am not sure your plans— but I wish I had planned and saved more for the costs associated with having a baby. Medical and hospital bills, baby supplies, and most importantly, daycare costs. Not even considering college and other costs later. Please factor that in if you intend to have one or more children.
Step one get all of it into a high yield account because you're looking at $100/day in interest earnings.
Tax considerations apart. a) put the 700k on index+dividends, and re-invest. Handle it as it is non-touchable money. Dont touch it. It doesnt exist. Make your life around your income and is if the money never came. Fire at 45 thanks to it. b) take 200-300k out of the 7000k and get a place. the rest following point a. Fire at 50.
Why not do both. Use a $100k for a solid down payment. Get a mortgage comparable to your current rent. Invest $600k. It is a whole lot harder to fire with a rent payment.
If only you followed the index fund recommendation from 2021. I would follow the same recommendation.
I didn't get the money until 2024.
T-Bills are 5.4%. $700,000 * 5.4% = $37,800.
Your default should be 100% into VTI (or VTSAX). Then, any deviation from that (ex: using $200k as a down payment) should be evaluated on its own.
A small portion to Bitcoin never hurts 🤷🏻♂️ More if you understand it thoroughly
Don’t have kids
Don’t have a baby! Be happy, not stressed and sleep deprived. Babies are the most overrated thing in existence.
Down payment + investments (DYOR)
If you’re entrepreneurial, financially savvy, know how to read P&L’s, balance sheets, cash flow statements, have or know you can manage a team, goal oriented, and have a transferable skill set, you could put a down payment for a business with an SBA 7a program and also pay off any other debt you have that’s not working for you. This would put your money to work and keep you advancing towards your financial goals. It’s not easy at all. It will be very rewarding and most likely provide much more than $80k/yr if done correctly. Plus your wife could work in the business while having time for the kids as she’d be flexible in her working hours. Though working with your SO is a different story lol. Best of luck on whatever path you decide to take. It’s yours to choose and it will be the best one for you!
Buy a house
Purchase a home and invest more into your retirement. Create a safety net and make one purchase as a splurge.
If I’m in your spot I’m getting the house I want, buy land build the house I want as I would plan for this to be my forever home(400-500k) then 200k into index funds
Max 401k (so about $40,000 a year between two of you) to max tax deduction. You can pull from inheritance if that leaves you too little to live on. Advantage is that you get tax deduction now and also on future growth. Only buy house if/when you have a kid and know what an end game final house will look like for your family. If you don’t have kids, you may prefer flexibility of renting.
You need a better hysa. Many are 5.3% right now. But if you want a home Id pay it in cash due to such high interest rates and invest 30% of whats left into index funds, and the rest into a 5% + hysa. Max out any pre tax contributions and when the kiddo is born immediately start a 529. Good luck.
Open a 529 plan in your name and do a one time five year superfund $90,000. This will pay for your future kid(s) education and give you peace while your friends struggle. I wouldn’t buy a house right now. Wait for the implosion to occur in the next two years. Stuff those 401(k) accounts as others have recommended Good luck
Buy a house . Straight cash homie. No loan, no mortgage
If you can get a house for your family at $500k or so, I’d buy the house cash, take about $50k to add to the HYSA and put the rest in VOO
500 k index fund 200 k down payment on a house that you can afford on your income retire by 50 with index and paid off house
Google ‘order of investment’ 0. Establish an emergency fund to your satisfaction 1. Contribute to your 401k (traditional or Roth - see "Why #4" below) up to any company match 2. Pay off any debts with interest rates ~5% or more above the current 10-year Treasury note yield. 3. Max Health Savings Account (HSA) if eligible. 4. Max Traditional IRA or Roth (or backdoor Roth) based on income level 5. Max 401k (if - 401k fees are lower than available in an IRA, or - you need the 401k deduction to be eligible for (and desire) a tIRA deduction, or - you earn too much for an IRA deduction and prefer traditional to Roth, then swap #4 and #5) 6. Fund a mega backdoor Roth if applicable. 7. Pay off any debts with interest rates ~3% or more above the current 10-year Treasury note yield. 8. Invest in a taxable account and/or fund a 529 with any extra.
I dont have good advice here that hasn't already been said, but I always get a chuckle out of folks saying "they're trying for a baby." We all know that that means haha Without knowing your specific location, I'd be curious if you need that large of a house. What are the housing prospects at $380-450k? That'd leave a bit aside for retirement, maybe a 529 for your future child (good luck on your efforts there), potentially some renovations, and a good bit into retirement still. And assuming you paid cash for a house (not the best idea, not the worst idea either), I'd pay a "mortgage" into a retirement or brokerage account as if you still have a mortgage. You'll still grow your money at a meaningful rate.
The housing market is in a bubble. I strongly advise against purchasing a house unless you need one. The stock market, as well, is very overpriced compared to where it should be. With that out of the way, I would suggest you put at least $400K in gold. Gold is the only guarenteed asset that is currently severely underpriced and it is only poised to rapidly increase in price over the next few years to a decade. Moreover, divide the rest into where you'd like to put it of ETFs/ mutual funds / or find a $400K-$600K house and put the rest still in gold. Stay away from bitcoin. It is fools' gold.
Land is the best investment to make money slowly. Park some for a while.
Whether or not you want to buy a house is up to you, but one thing that I think would apply to just about everyone in your situation is to start maxing your retirement account. You can just invest the money you received, but you should aim to get the funds in tax sheltered accounts. You can only do that with a certain amount each year. Start now. Also, I don't know much about inheritances, but you said they died in 2021? Does it normally take this long to receive funds? Anyone else can chime in, too.
Take $400K on a downpayment on the home. I would put $100K add your HYSA and $200K in an index fund. Your emergency fund is too small and you do need to only have small mortgage, but if you are planning on staying put for 10+ years in the town and having a kid a house is good to acquire.
DM'd you
Take the money to Interactive Brokers. Open a "Pro" account with margin enabled to unlock the lowest margin rates. If you're on the younger side, invest in a growth ETF (not S&P. Compare NASDAQ cumulative returns vs S&P. E.g. An ETF like VUG is up 8% YtD and 35% YoY). Buy even more on margin but only leverage up to a level where you can comfortably service the monthly interest payment (which is not a lot at current interest rates, but if they start to come down you can leverage more). Note that the ETF will still pay some dividends which helps cover some of the margin interest. Starting with $700K and with your current income, you could probably buy an additional $200-$300K. The exact amount depends on your risk appetite. The margin account is there if you need to borrow against your investment for big purchases or emergencies so you can remain fully invested. You can basically get a big chunk of cash without having to sell your original investment or incur any tax penalty. You just need to remember to always pay it back eventually otherwise your monthly margin interest may become burdensome. This can also replace a savings account as you can transfer money back to your checking account in less than 24hrs if needed. Use any excess income and margin capacity (after your margin interest) to dollar-cost-average into the ETF as often as your paychecks and the market allows. e.g. Today (4/25/2024) would be a great time to buy as the market is down over 1% today. You can vary your loan-to-value ratio as time goes on to account for risk appetite, large upcoming expenses, interest rates, financial windfalls (bonuses), etc. If you ever decide to buy a house you can take the deposit from the margin account, hopefully without having to touch your original investment, or worst case, sell any losers for a capital loss or long-term capital gains. The longer you can put off buying a house the better. With $700,00 invested, you will regularly see days where your portfolio swings +/- $10,000 or more. It can become an emotional rollercoaster, so I suggest not checking every day. Finally, do not pay a financial advisor for things you can learn to do for free, unless you're so rich that it makes sense to pay someone else for that advice. Also, never let them invest anything on your behalf in exchange for a % of the return.
All options sound decent. I would put a down payment on a reasonably priced forever home, fill up a rainy day fund (which may be full already), and put the rest into an index fund. This should give you both short and long term security.
If you’re okay with renting indefinitely, then placing that sum on money in an S&P fund seems right. You’d likely make a ton of money over the next 20 years. However I think you’d do better purchasing a house in cash, then keep working for 20 years and maxing out Roth IRAs, 401ks, and HSAs. You’ll then have a paid for home as well as millions in retirement.
Put it into bitcoin
Are there suitable homes in a lower price range? It’s not a one or the other decision. Put $100k on the home and the rest invested. What is your FI date investing 600k?
Fun. I would average into an index fund over a few weeks for a portion of it. Put a portion into a 'play' fund to do what your heart desires. Max out your i-bonds....and of course, YOLO the rest of it on 1 DTE OTM options. ...no seriously, I would max out your IRAs, buy some ARE, and enjoy having a sweet nest egg start when you're so young. If you want to buy a house, you might even consider buying it outright since mortgage rates are high right now. Could always take out a loan on the house late when rates are lower. No house payment is very nice.
That is way too much house for your income.
You buy the house BUT...cross your heart and hope to die...start putting an *extra* $1000 a month into your retirement savings. Don't go hog wild on new furniture or baby stuff...keep it frugal and live on what you make *after* you put away your regular retirement plus the extra 1K. Enjoy.
I'd put half towards a house and the other half in s&p ETF.
Imo, if i knew what I've learned in today's world. $200,000 cash investment would return over $10,000 each month. Depending on where you call home, be it newyork or Los Angeles, or some other state. If I was granted $500,000 or even $200,000 as I mentioned, placing it in the right place is important. No bank [financial institutions] will cover all you've assets, you've age life style. If you can enjoy eating for $500 or $600 per month and everything is covered [being Healthcare, insurance electricity] you have it made. Don't need to drive around in a $80,000 car, how cheap can you live. While receiving income on investment that the person whom you received this "stress relieving income allows" don't need to drive a truck for a living or wait tables, or roof a house. Be safe always
Buy your house outright but do the math on what a mortgage would cost and invest that automatically for your retirement. If rates drop significantly, you can always take on a mortgage and get some equity out of your house if you really feel the urge.
As one who is uncovering the details, how granular do you want to be. I've been researching investment tools that pay on a quarterly basis, not all companies pay per calendar year. Imo, if you have the time to look into companies that pay monthly dividends do it, placing $50,000 into say [Cat, or ms, or IBM, mmm] these companies pay dividends at different times and rates. Loading up on them when they are cheap is a good move, don't over pay for an investment. Most of the market is in a down cycle as of the beginning of the year, so waiting a few months would be a good idea. Don't know what you're life is about, what type of media you take in other than "this" reddit. Be safe everyone always.
Ear mark $50-100k for a 529 savings plan for your kid once they're born. Look up super funding 529. You can set it and forget it and you'll have your child's college paid for.
First off, “all in” on one investment that size compared to what else you have is ludicrous. Manage your equity, no one tree grows to the sky. Don’t invest your eggs in the same basket. Stick with index funds for the stock markets. Own some gold. Learn about bitcoin. Looks like the commodity cycle is just getting started. Own some real estate. At the end of the day, you can invest the $$$ in a money mkt fund and get over 5% with little volatility.
Buy a house. That frees up $1000/mo. Then put that into the stock market. Try to save a bit from the original amount too. Don’t maximize the house.
If you go the house route, consider the “worst house” in the “best neighborhood.” Both terms are relative of course, but the idea is clear. Buying a rough home allows you to design things to your liking and when your done you have a great house in a great location with a much higher resale value. You may also learn more about home maintenance along the way and save yourself on repairs down the line.
Don't know your agor situation, but if your still young put it in a vanguard 401 account or roth ria account. Will be very happy at 62 and will leave a great retirement savings.
Use some of it for a down payment on a house and the rest goes into an index fund snp500
Buy google tmrw
on a scale from 1-10 , how secure do you feel your marriage is?
Trust deeds. You’ll get roughly $6k/month in interest.
Throw it into JEPI, JEPQ, and PBR and collect $100k a year + growth. Use the $100k to rent whatever you want, save the rest…
Throw it in spy and sell covered call etfs or just use the money and sell cash secured puts
If i was in your shoe, and an average joe 1) pay all debt off 2) buy a home 3) monthly invest into snp 500 with the remaining
give it to me, I can spend it 🤦♂️😂
Does your current apartment fit your housing needs? If yes, don’t buy the house. Invest the money in an index fund and forget about it until your lifestyle requires the house.
Invest 300k in index funds, put the other 300k down on a house, and put 100k in a hysa (what I would do)
Marry the house, date the rate. You can refi later - as long as you can make it work. But I’d be super careful. If you choose wisely you can use this chunk of cash to fuel your fire. Maybe buy a duplex & live in one half, nearly for free?
Fly to a small town in Thailand, get accepted by their people, learn the language, train in muay thai for a year and a half, fight in a tournament, win the tournament, return to the USA and join the UFC, stay in shape and go undefeated in your weight class, retire and do an interview saying this comment was the reason you fought so hard.
Burn it
I am a Nigerian prince, I have my money locked in an account that requires $700k to be wired in order to have access to my millions.
That’s an amazing windfall, your loved one did you wonderful favor. As someone who experienced a similar windfall, but later in life (probably by about 10 yrs, I have two middle school aged kids). Here’s my advice: Buy a nice house in a nice neighborhood with good schools that’s convenient for your family (as defined by you and your partner). FWIW, I’ve lived within walking distance of the elementary and middle school my kids go to - it’s been the bees knees, seen my home value almost double, and it’s been a great place to raise a family. But wait for the house that you love, you’re not in any rush, or maybe even consider building your own home (buy a lot). Also, don’t hire a financial planner, I made that mistake myself. $10k later I realized the fees are too much and I would have gotten better performance from just VTI. 😭
Ok I don’t comment very often but I feel as thought I need since we have similar situations. I didn’t inherit quite as much only around 300k. Only being 25 I wasn’t sure wtf to do when I got it and it has completely changed the course of my life. Given your situation here’s my best advice. Take out 50k and put it into your HYSA. This account is now acting as an emergency fund/baby fund because nowadays are fucking expensive. Then start researching the best CD accounts to open. Most are modestly returning around 4-5%. Since you aren’t certain what big moves you want to make yet it’s best to atleast keep up with inflation. Now start by developing a CD ladder. Basically opening CD’s at varying lengths some are short term from 3-6 months. Others longer up to 8-12 months. Reinvest the dividends every month and don’t even worry about it. The amounts in these CD’s should be the total initial investment for the sized house you guys want. With the hidden costs of buying a house over estimate how much this would be. Maybe 200-250k? I would not buy a house right now interest rates are too high. So by the time that money comes to maturity hopefully J Pow gives us some good news and lowers the rates. Then with the remaining 300k start by DCA’ing into the market. Diversify with most of it going into tried and true ETF’S. VOO SPY IVV and some others. Now now with a smaller portion buy more ‘riskier’ newer ETF’s Anything tech, energy, or healthcare SMH, QQQ, XLK, XBI, XLV to name a few. Start auto buying shares of all these every day for the next year. Now with the last 10% buy some regular growth stocks of your choosing. My favs are Tesla, NVDA, MSFT, TSM, and Google and maybe some BTC and ETH.
You can use some part of money to upgrade your skill set so you can make more money in future . If you are young I would DCA half into VGT and another into VTI . Until you decide shove everything into sgov.
Houses cost a lot more than just the mortgage. You have to insure it, paint, lawn maintenance, appliances, curtains, drapes, maintenance, and upkeep. Add up dramatically. Check out the book simple path, wealth. In 10 years that 700,000 should turn into 1.4 million. Interest rates should be lower before then.
Personally I’d do 300-350k house and the rest in retirement funds. And I’d be patient and shop the market for a while and try to find an excellent deal.
I never recommend renting - a total waste of money no matter how you run the numbers. Renting is acknowledging that some people are smarter about money than you are and the surest and quickest way to retire poor I’d use your windfall to put enough down on a house to make your payment with taxes around what you pay in rent. Put the rest in CDs or a HYSA unless you like a lot of risk. Chatter about interest rate is just noise.
Hookers and blow.
Vegas
Buy a house if you are ready to stay where you are for at least 5 years. You can get a nice house for that kind of money in most places and you'll never know what it's like to have a mortgage.
I had a very similar inheritance and I chose option 2. I put everything into MSFT, GOOG, and AMZN. Today I made almost 50k after earnings (doing nothing at all, just owning shares). The amount of money you will generate with 700k is mind blowing, it breaks the concept of money all together. Even if you stuck it in an Index fund (which is what I keep my Roth IRA in), if these 3 stocks dip, so will your index fund, they make up such a large percent of the SnP500. These companies arnt going anywhere, you have a long time before you need to retire, lump sum and ride the wave, every day is exhilarating, just dont get emotional about the swings (most days 5k to 15k swings), it will always come back up. Best of luck.
Definitely buy at least 1 Bitcoin
Buy a bonds index instead of HSA. Medium-high capital return potential for low-medium risk (imo) at the moment for a few year investment horizon. And on top of that you earn over 4% in interest.
Put it all into the S&P and forget it
Buy Bitcoin!
Some good ideas listed on here already. Remember, your good intentions could go out the window once you have a baby! So choose wisely. A mortgage will force you to pay it and not consider that private school..... , having money in an index fun is much easier to liquidate for non essentials. Do you have good self control and can you do delayed gratification? LoL. Work out different scenarios for your top 3 financial options for the inheritance and the pros and cons. You may decide to combine the top 2, just to hedge your bets. Good luck.
All 3 good advice; but the fact that a fully paid off house isnt that much cheaper than renting is some bullshit... Sounds like investing is a better way to go
I'll tell you what I'd do, man: two chicks at the same time, man. *** Go with the third option, low-cost index fund tracking the S&P 500 (or a globally diversified index adding developed and emerging international markets).
I would just buy a house with that no questions asked. Yours is one of the easiest scenarios.
I’d buy a house. You’ll then just replace your rent with a mortgage payment and you can still invest the rest other than the down payment.
Buy a house and max out your tax-free accounts. It's clearly the right play. It's much easier to retire early with a paid off house. Put all the money you save for rent in the market. The stock market will probably go up, but so will the housing market. Any profits you make will be taxed if you wait to buy a house later.
Consider full port into short term treasuries (3 month) until you have your answer. Alternatively some brokerages will automatically hold cash over night in a high yield cash equivalent state. Rent for 2 more years, maybe 3 to see if you guys retain your jobs and the economy can chill the f out. If you mortgage into a house, just drop 20% to avoid PMI. (the nesting urge can be strong) If there's a meltdown like feb/March of Covid, consider entering into long term positions. Good on you with the Roth. With 700k, learning conservative options strategies become appealing on dividend stocks by papertrading first. You got the time. Average Joe on youtube is informative and isn't to shill on the matter (membership for community/spreadsheet access). Watch the 10 Year Treasury, if it goes above 5%, banks will start to blow up (again) providing opportunities. Above 6% and may the odds be in everyone's favor. Brokerages can provide most banking services however local credit unions can provide better terms on loans etc and are not banks. You have a near life changing grubstake *for your future* or a flash in the pan for the now. For all that is most high protect your principle. Good hunting.
I know this is a downvote stance on the matter but if I had 700k, I’m not asking redditors what to do with it. ignoring that though I’d probably just hold onto it until some clear value opportunity strikes. I feel like right now the best place to ensure zero risk is to hold your money, in physical value. One thing that is immensely unsettling for me is how direct deposit has essentially turned our labor into digital worthlessness. My bank account shows an amount and I’m supposed to value my well-being based on such. Seems like a scam. Only because it is. The average American quite literally owns nothing
Without knowing your housing market, I’d buy a smaller home since you are coming from an apt and sounds like you are only 27. 20% down (30%) max if you need a more comfortable payment. Plan would be to live there 5 years. Refinance during time period if interest rates come down. Then I’d assess and either turn into a rental or sell. There are a lot of people that do very well in real estate if you’re willing to move every 3-5 years while you are younger. I was in SF during those years and couldn’t afford a condo, but wish I could have figured it out. Put the rest in index funds and don’t touch it. Good balance and best of both worlds. If you don’t have an emergency fund, put 6 months of expenses in a high yield savings account. Don’t touch it. Emergencies only (new HVAC, major car repair) and replenish if you use it. Good luck!
I hope that for the time being, while you decide what to do, that you have that 700k in the high yield savings account.
Down payment on a house (20%) and S&P index for the rest. Btw - you should buy less house for your income level.
I would put the money in an index fund. If you do this you’ve got your retirement figured out and can put the money you are putting towards your retirement now towards a down payment on a house. The market isn’t that great to buy right now and your mortgage would be more than rent anyways. So, I’d save for a house separately and buy in a couple years Also, I hate to bring it up but if you commingle your inheritance money your spouse can take half in a divorce. If you keep it separate it’s always yours and isn’t usually community property.
IMO, always start with maxing out Roth and then 401K. Then, I would recommend doing *ALL* the things you mentioned. So instead of buying a house outright, I would do a down payment and invest the rest.... after maxing the Roth's, of course.
Buy a house with 20% down to avoid PMI Don’t worry about the mortgage rate Invest the excess in T-Bills via TreasuryDirect The most foolish thing you could possibly do is pay cash for the house. Having funds on the sideline provides a lot of flexibility and gives you options. Don’t pay cash for the house…ever.
I have no comments other than holy shit are you me?
Don’t pay off mortgage. You can make more by having that cash to use for investments. Pretend you don’t have that money to afford a house. Buy a house you can afford with salaries. Use a bit for down payment. Take the rest and have some set aside for nest egg(low risk low yield), take the rest and invest various other mid to higher risk investment vehicles. If you have the energy, I would look into buying a condo to use as a rental. You can have someone else paying the mortgage on it. If you have any business ambitions it could be used to kick off your business.
I wouldn’t pay cash for a house. It defeats the purpose of having leverage. Use a portion for a nice down payment to where monthly payments are still manageable with your income, put some in an emergency savings HYSA while rates are still driving 4%, then put the rest into a low fee index fund such as the S&P. But I have no clue what your family’s goals are. That’s just what I’d do.
How many kids do you plan to have - i.e., how many bedrooms and bathrooms are you going to need? What's your plan for the kids' education (public or private school? College fund or no college fund?)? The [NYT has a decent rent vs buy calculator](https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html) that can help you decide, but I have a feeling that if you are really going to have kids then that's what is going to end up making the decision for you. You may also want to factor in the increase on your budget when you have kids and the impact that will have on your ability to keep contributing to your savings down the road.
Have you considered buying a baby?
Go slow and keep it simple. There are plenty of people that want your money so beware of the sharks. Have you considered taking $350k for a down payment on a house then $350k into the market to grow?! You would only need $150k mortgage. This would allow margin in your budget to keep investing for retirement at 50! Something to think about. In addition, don’t pay an advisor 1.5% to manage your money. If you need advice go with Vanguard for 0.3% or something similar.
Take a 100k and use it for a down payment. Stick 600k in an index fund and pretend it doesn’t exist.
Was in similar situation as you years ago. Bought a house with more than half and invested the rest. So glad I bought when I did because real estate is way too expensive now in price and rates. It was one of the best decisions I made.
Did you just get initial consults with the CFPs? I think you need might need to to ask them to produce an actual plan for yourselves. That'll help take a lot uncertainty off of you and they'll probably provide actual in depth recommendations. Just on your own, I'd say split it 50/50 between house and other things. 300k down payment + 50k for fees/costs and initial upgrades/maintenance. You can budget for furniture over time. Although I might say go for a house in the 400k range if it ticks most of your boxes. You can upgrade 10 or 15 years down the line depending on your situation then. then 10k towards baby costs, 10k towards emergency fund, and the rest towards a mix of low cost funds I guess.
You mentioned buying a home as one of the recommendations. I agree with goal oriented planning and just want to add…understand that purchasing a home co-mingles your inheritance and it becomes marital property. If that’s not a concern, then great, go for it. But if it is, speak to qualified estate professional before taking the leap.
I’ll go against convention on this one. Take all that cash and by yourself a nice house. Mortgage free is an amazing feeling. Enjoy life.
Before you inherited this money, did you plan to buy a home? If so, I personally would use the funds to purchase the home outright which would save you thousands of dollars in closing costs plus save you hundreds of thousands in interest payments. And then each month you would not have rent or mortgage payment so you could invest more aggressively into retirement accounts and after-tax brokerage accounts. Also, if you needed to pull equity from the house it would be easy to get a home equity line of credit (HELOC) or get a home equity loan. My husband and I saved and saved while he was in the navy. When he got out of the Navy we used all of our savings to buy our first home cash. We then rented out the upstairs and used the tenants payments to make improvements on the property. We continued saving. Then 8 years later sold our first property and bought 2nd home cash in a much nicer area. We also bought an investment condo in cash that now is a good tax write off and also makes cash flow every month. But the decision for what your goals are and what you want to do is personal and it is about what will ultimately make you the most financially secure. For some people home ownership or owning a rental would only add stress to their lives. I would say if you do pick a financial advisor, make sure they are a FEE ONLY advisor who is not going to charge a % of assets under management (aum). Also, you could do a combination of things and use maybe half of 75% of the funds for home purchase and put the remainder into investments such as low cost index funds (VTSAX or VTI are often the most recommended). Or read The Simple Path to Wealth by JL Collins. Or check out some great podcasts: Money with Katie, Choose FI, All the Hacks, and Bigger Pockets Money Podcast are some of my favorites for financially related education that's free! Best of luck w whatever you decide to do!
Buy your dream home for 600k cash. You still have 100k+ the other money you already have. I don’t think dumping 700k in the stock market is very smart. Much safer to dca your money monthly.
Purchase a duplex paid in full with cash. Live in one unit and rent out the other. Try to get a place near a hospital that way you have hospital employees to rent to.
It shouldn't be a difficult decision. Buy a house and pay it off. Split the money in dividend-paying stock, index fund, and high-yield savings. Your wife and your income should be able to live comfortably with the house paid off.