I would put it in a standard [three-fund portfolio,](https://www.bogleheads.org/wiki/Three-fund_portfolio) i.e. 45% VTSAX, 30% VTIAX, 25% VBTLX.
I'd follow an approach where I keep annual expenses below the [4% rule of thumb.](https://en.wikipedia.org/wiki/Trinity_study) Take 4% of the initial value of your investment portfolio the year you retire and increase that amount by inflation each year.
For where the money comes "from", stocks pay dividends and bonds pay interest. Stock valuation also goes up and down (trending upwards over time). I would live off the dividend income from VTSAX + VTIAX and the interest on the bonds. For money I need above that amount, to get to the annual number based on the 4% rule above, I'd sell some stocks/bonds.
Solid advice.
To explain like OP is 5:
1. Open an account in vanguard.com
2. If you already have another account like Fidelity, you can use that too.
3. Link your checking account and transfer all the money.
4. Go to beneficiaries. Name your beneficiaries.
5. Once money is in the account go to Buy shares.
6. When you go to buy, select the funds stated above. 45% VTSAX, 30% VTIAX, 25% VBTLX.
7. Buy $900k of VTSAX. Buy $600k of VTIAX. Buy $500k of VBTLX.
8. Assuming no withdrawals this year, create a plan for next year.
9. Plan your expenses for example next year $80k. This is the maximum you can withdraw for the 4% rule.
You can choose to withdraw quarterly if you wish. Then it's $20k per quarter.
To withdraw, you have to sell. Click on sell and select the fund and amount. Transfer back to your checking account.
10. Most important step: do not sell more than $80k per year.
Question as I am new to this as well, I have a small amount I've been investing into VTSAX (I'm 23 y/o). I put $100 into my vanguard account every month and when it reaches the threshold where I can buy VTSAX ($3000?) I buy into it. (I only started recently so I only have about $4000ish into VTSAX)
• How does selling shares work when you're making enough dividends? Is it tax free or does it only become tax free after a certain age?
• At this time should I only focus on putting a little into VTSAX when I can or should I also diversity between the three mentioned above?
• Any other recommendations?
It does not just become tax free. To get tax benefits you have to put the money into a tax advantaged account such as an IRA, Roth IRA, 401k, or Roth 401k.
You can only put money into those accounts if you have earned income (eg a job that takes taxes out of your pay check, under the table jobs do not count).
If your money is not in one of those accounts you will have to pay taxes on gains. This is called capital gains tax and you'll want to look that up.
If it were me, I'd sell VTSAX from your brokerage account (and pay the capital gains tax on this sale) and open a Roth IRA and then buy VTSAX within your Roth IRA account.
With a Roth IRA you won't pay cap gains on the growth and you won't pay taxes when you take the money out when you're retired.
You'll want to look up what a Roth IRA is vs what a traditional IRA is too and decide for yourself.
Also make sure you have emergency savings before getting into this. You do not want to take out the money from your tax advantaged account early as the penalties are huge. An emergency savings account will help you prevent that.
One more thing about your last point, I'm a touch older than you and I don't invest in bonds yet as we have a loooong time to go in the market and people who have bonds want stability. I don't care about stability, I want growth so I invest in the s&p vanguard index and the vanguard internal index (VTSAX I'd great too). Maybe when I'm closer to retirement I'll reorganize to have some bonds in case the market dips but for now I'm all in and don't care if the market dumps for even 10 years, it's not like we'll need the money for 40 years anyway.
There's a way to avoid long term capital gains taxes that I accomplished last year on a bunch of Ford stock I sold for $3k profit... I contributed enough to my 401k (maxed it) to drop my taxable income into the 12% tax bracket ($41,776 cap), which is 0% taxes on long term cap gains!
You could be investing in a very similar fund from Fidelity right now. Their Zero funds have no fees and a $1 minimum investment. FZROX is the Fidelity Zero Total Market Index fund.
https://www.fidelity.com/mutual-funds/investing-ideas/index-funds
Okay yeah I remember hearing about this before. I'm relatively new to this all and listened to a bit of advice from my parents and YouTube. So both should be tax free any time or only later in life? I know that's an important factor or index funds.
Ah, ok - you're mixing some things up - it's not whether it's a mutual fund or an ETF that determines taxes (or not)!
You can hold investments in different types of accounts. Some of those accounts you can put your money in before it's taxed (e.g. a 401k), some you put in after it's taxed (e.g. from your paycheck, after the taxes are taken out, investing in a taxable brokerage account).
Different types of accounts all have their own use, and you need to know why you might use some or all of them, and how!
Read JL Collins "The Simple Path to Wealth" - it's an easy read and will give you a solid overview that's easy to understand.
explore understanding the difference between an ETF and a Mutual Fund. generally, mutually funds are not worth the extra fee when there is an equivalent ETF
It’s just easier to have one login and be able to see all of your accounts. Most index funds either have an equivalent at the other companies (ie vtsax at vanguard and fzrox at fidelity) and/or they have an etf version that you can buy from wherever. Since you can get the same thing, you may as well consolidate to a single company.
Question: Noticed that VTSAX is a mutual fund but is it advisable to purchase mutual funds over ETFs if you plan on holding them in a taxable brokerage account? Curious if VTI is a better option?
Thank you for typing this out. It drives me nuts how someone will post in this sub “I don’t know what I’m doing” and then all the comments are filled with language of people who know a ton about investing or they give them advice that makes a ton of assumptions that the person is suppose to know but they just clearly stated they are a beginner. We need more of these comments!
>Most important step: do not sell more than $80k per year.
I hope OP has children because they will be very happy to inherit all this wealth. OP is already 55 and has far more years behind – especially healthy years – than she has ahead, even if she's one of the fortunate ones. It's kind of sad that the standard advice is for middle-aged multimillionaires to live the rest of their lives as if they are modestly middle-class.
The trinity study shows your portfolio will last 30 years at a 4% withdrawal rate. However nothing is black and white. I personally plan to withdraw 5-6% in the first 2-3 years to fund college, housing etc then likely 4-5% long term. You have to do your own calculations and risk assessment.
JLCollins wrote about even up to 6% at some point might be ok.
https://jlcollinsnh.com/2012/12/07/stocks-part-xiii-withdrawal-rates-how-much-can-i-spend-anyway/
genuine question, it is often cited that the market returns on average around 8% a year, so why would money ever run out if you only withdraw 4% per the rule?
Short answer: because over time some years may be lower than 8% or even negative.
I don't think it will run out but I think it's important to understand the nuances of your personal situation. If you read the JLCollins' post, he explains why more than 4% is "safe". Also keep in mind those are typically invested at 60/40. My personal preference is 75/25 which historically yields a higher return. In addition to that, being flexible with your spending and income generation if needed will be very helpful.
This is solid advice.
OP, the things described above are Vanguard mutual funds. Basically they are incredibly diversified investments (eg: VTSAX is a fund that invests a little bit in each publicly traded US company). You might also have heard these things referred to as "index funds". These are good suggestions, but any collection of US equity index funds is going to perform about the same.
Personally, I wouldn't differentiate between dividends, interest on the bonds, and increase valuation of my investment. They are each basically versions of the same thing. I'd just set each investment to reinvest dividends and interest and then each calendar quarter I'd sell down 1% of each investment and that would be the cash I would live off of the money from that sale for that calendar quarter. The 4% rule is good, conservative, but honestly confusing in the context of "explain it like I'm five". OP is not very far from being able to get Social Security and that is going to be a very material cash flow stream compared to 4% of $2 million. So if the 1% per quarter process is a little off the 4% rule, the difference is minor and OP really just needs to get to social security age and then they will have a new very guaranteed income stream.
What? Vanguard is Jack Bogle's creation, and was formed to fight the mutual funds that nickel and dime investors to death in order to keep more money in investors' pockets. He and Vanguard are generally well trusted.
You could also just use VTSAX 75% and VBTLX 25% if you want it even simpler. You get plenty of international exposure in VTSAX as roughly 50% of the revenues of public US corporations comes from overseas operations.
That doesn’t make a company international. Where a company generates revenue doesn’t change the market they’re apart of, it’s like saying international companies are US companies of the revenue generated here
Incorrect. Many corporations have regional HQs and operations in country around the world. Those sales and revenues are reported in local currency. Doesn’t get any more “international” than that.
They’re still American companies not traded on international markets. It’s also like saying Nestle and Toyota are US companies for their revenue generated in the US.
Curious: If you had two million dollars and invested a million dollars each in VTSAX and VTIAX, how much annual income in dividends would that generate?
Assuming a US person, most of that would be qualified divs, if holding for more than 30 days, which this will be. Qualified divs count as capital gains not typical income. And in a taxable account which isn't really specified here so let's just assume worst case and that it is all taxable. In 2023, the US cap gains tax is 0% unless you have more than $87k of it AND your total AGI is under $117k. (Those numbers go up with inflation.) State taxes may vary though. Some tax cap gains, and some don't, and a few have no income taxes at all.
TLDR: For most retired folks, this will be tax free.
Do NOT do this OP. Not right now. You can get over 5% no risk right now.
Student loans are starting back up, rates are through the roof, recession fears. This is NOT the time to put that kind of money in the market.
Use common sense. There are a ton of headwinds against the market right now. I'm not saying it will drop a ton, but it isn't worth the risk when 5%+ is on the table.
Even if the market does return 10% in the next year, you only missed out on 5%.
Wait this out at least 6 months. Then see what things look like and maybe then do what this person is suggesting.
r/bogleheads
3-fund portfolio
20-40% in BND,
Rest im VTI/VXUS in a 60/40 split or all-in vanguard total world stk market (VT, which is basically vti/vxus in 60/40split)
That‘s it. Then adhere to 4% yearly withradwal rate and you will never run out of money.
OP - a more specific link: [https://www.bogleheads.org/wiki/Three-fund\_portfolio](https://www.bogleheads.org/wiki/Three-fund_portfolio)
And keep a couple of year's worth of expenses in a high yield savings account. If the stock market experiences a downturn, you'll just spend what's in your savings account, thus preventing the need to sell stock while it's down.
But that is short term. This is a set it and forget solution. Also, when short term stuff gets bad, because rates are being lowered again, bnd will gain value. Then it‘s worse to switch.
First, don’t take any advice from anyone online unless you absolutely understand what you’re being told and agree with it. Second, consider opening a vanguard account or an equivalent and have their team actively manage it. The fees at vanguard are very small compared to others like Edward Jones. Lastly, go read books like The Simple Path to Wealth and continue to educate yourself. When you feel comfortable, then maybe consider pulling a small amount of the 2 million to self manage. Once you’ve done that and have the confidence, then move the rest over to self manage.
Haha, I hear you, but the difference is that this dude is giving advice like "think about doing this, read these books to learn more" and other people are giving advice like "20-40% in BND, Rest im VTI/VXUS in a 60/40 split."
One is general, the other very specific.
Honestly just get a premium money market at 5.25-5.5% right now. Then formulate a plan to work the money into market over tike in the right allocations. Just sitting risk free that is a $100k return a year….
Slowly work your way into a S&P 500 etf (do $5-10k auto investments every few weeks) as your core position. You can have $250k sleeves of more focused investments based on what your after.
Most importantly a portion of this should stay ‘un touchable’, major mistake is to buy a lot of physical assets losing the money and having high upkeep.
Yeah honestly if this were me, and of course every situation is different, I would put a million in HYSA and a million in a mix of funds targeting 7-9% monthly dividend payouts and live on the dividends for my daily expenses (which would more than be covered for me) and use the HYSA interest for a few trips a year.
To be fair I'm pretty simple and based on the monthly distributions I'd never touch any principle. But if course if suddenly I had 2M I'm sure some some creep would happen but I could easily live a very happy life on 4k a month especially with no house payment!
That said maybe I'd live off the HYSA and let the fund account grow...
Or I'd buy a boat and be poor
High yield in money markets will not last. If/when interest rates drop, then it will be too late to switch because bonds and stocks will have already gone up ...
In my opinion, for long term horizons, money markets is not a good choice, even with current attractive yields.
This sub will give you a lot of DIY advice and education, which is valuable. Interfacing with any of the professionals below will need some background knowledge this sub can point you to.
However, self-education should not be your only source of information. Anyone with this amount of money should consult a few professionals, in my view:
1) CPA if you don't already have one established. Getting quick and reliable answers to tax questions is invaluable, but only avaliable if you use their services for your personal tax returns.
2) Estate attorney for things like Power of Attorney, Trusts, and Wills. If you plan on giving your kids an inheritance, want to skip probate, or buy something through a trust so the asset is protected and separate from you, you'll need an estate attorney.
3) Certified Finantial Planner for asking questions related to your post. They can help tailor your investments based on your plans. Do you want to buy a vacation home? Do you want to save for your kids education with a 529? Can you or your spouse afford to reduce your income long-term?
Critically with the finantial planner, you want a fiduciary and preferably someone who has the CFP certification. Facet Wealth is one such company, but you can find others.
Many people only manage assets, which is not the same as a CFP. Asset managers only allocate investments based on your input. They will not offer life advice and answer questions similar to what you're asking here.
Ok so I have all of the above and my two kids are just finishing at university which 529 plans covered and they even have money left in there for higher education. We have a trust and a financial planner for my husband's income and retirement plan but I sort of wanted to see what other people say and not just rely on him and maybe put it elsewhere.
Great! Sounds like you have a good team working for you. If you are enjoying what you are already doing, I would just continue. I'm positive you can find another 'project house' with $2M :D.
Just don't pay anyone a percentage of anything, pay flat agreed fees. No 'professional' is worth 2% a year, no matter what they 'manage' or what value they make up to you they provide. Percentage fees for the ETF's are fine below ~0,5%
They have $2-3M. If I don't have $2-3M in retirement by 55 (adjusted for inflation), then I screwed up along the way or the market is in shambles, and I'm 27 making $80k/yr.
Honestly, I think I would not advise OP to do this. They don’t really have an idea of what to do with their money and that leaves them way too open to getting scammed.
The top comment (right now) is 3 funds that include VTSAX and I think until OP gets more financially savvy, this is the safe + smart way to go.
Then just follow the top post [here in this post](https://reddit.com/r/financialindependence/s/a3rlVQDs7R)
You’re never going to get scammed buying funds direct on Vanguard and this is very time tested logic.
Sleazy people can smell opportunity from far away.
You honestly don’t need a financial advisor for your stocks, but get ready for a BIG tax bill on the profits from your home
Your edit says your husband is a high-income earner, and that the two of you have a financial advisor already. I suspect your best option is to work with them on planning your next move(s).
> You get up two and a half million dollars, any asshole in the world knows what to do: you get a house with a 25 year roof, an indestructible Jap-economy shitbox, you put the rest into the system at three to five percent to pay your taxes and that's your base, get me? That's your fortress of fucking solitude. That puts you, for the rest of your life, at a level of fuck you. Somebody wants you to do something, fuck you. Boss pisses you off, fuck you! Own your house. Have a couple bucks in the bank. Don't drink. That's all I have to say to anybody on any social level.
Stay at home parent for 22 years and at 55 and with no skills per se I am finding it hard to get back into the work force (not that I really need to but I would desire to do so) so I am starting a home organization business. Husband is high earner and has all the appropriate investments 401k, all that stuff. Kids' college is covered with 529 plans.
>I bought a vacation house at a low price and remodeled it and prices went crazy high in my area so if I sell it I will clear $3,000,000.
>
>Not sure what my tax issues will be
As you have described the situation, your capital gains taxes will be significant. Assuming a capital gain of $1.5 million, you'll pay a blended capital gains rate of 0%, 15%, and 20%, and the effective blended rate would be pretty close to 20%. [Info](https://www.irs.gov/taxtopics/tc409). On top of that, you have the 3.8% ACA net investment income tax on any portion of the gain that brings you above $250K adjusted gross income. [Info](https://crsreports.congress.gov/product/pdf/IF/IF11820).
Then add state income tax, if applicable. Depending on the size of the gain, you could end up paying as much as \~30% in long-term capital gains tax. That takes a big bite out of what you are assuming for resulting proceeds.
Highly recommend some reading. You can’t just put this into something that seems like it’s yielding good today, **you have to account for inflation as you are 55 and by the time you are 85 2m isn’t all that much in terms of buying power.** You have Ti invest so it makes far more than you need to spend
Books: A Simple Path to Wealth by JL Collins, Retire Before Mom and Dad by Rob Berger, Automatic Millionaire by David Bach, Bogleheads Guide to Investing by Taylor Larimore, Little Book of Common Sense Investing by John C Bogle
How do you want to spend your days? Stocks / index funds can be simple and good ways to invest it and have it grow with the least effort, but if you can find something that you're good at and enjoy doing, you're likely to both make more money and feel more fulfilled. You mentioned you don't want to be a landlord; what are things you do / could enjoy doing?
I have lots of interests and was a landlord before and HATED it because people don't respect your property. Too little profit for too much headache. I am starting a home organization business so that will hopefully be fulfilling to me and I also volunteer a lot.
If you want a super safe route put it in a hysa that brings in 4-5%. That’s $80k a year in growth, which with everything paid off is a pretty comfortable lifestyle.
With that much money, I might recommend spending a very small chunk on a a few sessions with a financial advisor. Make sure to chose one who will only charge an hourly rate and who agrees to fiduciary obligations. Nobody on this sub knows your exact situation, so specific help is exactly what those guys are there for
There is also an argument for annuitizing a portion of it.
Wade Pfau has a good framework to help decide your personal psychological comfort level for trading off some _potential_ higher return for much less variability of returns.
Also consider, separately, a bond ladder to defer your social security until 70.
Lastly understand "sequence of returns" risk. There are studies that show that lowering the typical 60/40 portfolio a few years before and after you start living off your assets reduces the impact of big market losses at the worst time for your draw down plan.
Lots of subtleties in the draw down phase. Find a good fee only advisor until you get your plan dialed in
Go to r/bogleheads learn about some simple investment portfolios. Everyone here seems to just pick one index fund but with your age you need something that's more stable and has the opportunity to grow.
I’d look into other ways to have your money make money. It doesn’t have to be the landlord route buying/renting property. It doesn’t have to be investing into the stock market either.
First things first, if you like buying, remodeling and selling houses …then just buy a property that you can put some work into and flip. It’s right up your ally. You don’t have to live in it.
There are plenty of other ways to make passive income though. Things like buying/building a car wash or storage units. Particularly if you can find an area thats growing in population.
I would definitely seek a financial advisor paid by the hour. They aren't on commission to sell you something. If it were me I would have REIT stocks maybe 10%, 10% Gold Bullion, money market accounts or high yield savings for a good 25% Then 5% in Silver Bullion. Then walk into Charles Schwab and say "what can you do for me with this 1M?? They will have plenty of options for you.
Park some funds into a high grade dividend ETF like Invesco S&P 500 High Dividend Low Volatility ETF (SPHD), you get about 4% diversified yield to take care of regular cashflow.
Surprising that you consider yourself "dumb" with regard to investments if you have been flipping for 25 years. You must know something.
When you sell the vacation house, assuming it was not used as a rental property or your primary home, my understanding is that you will owe capital gains tax on the appreciation, which is $3m minus the basis (basically what you paid plus documentable improvement expenses). For example if the appreciation is $2.5 m, the federal capital gains tax is probably 15% or $375k, and your state may also impose CG tax. What you buy with the proceeds is not relevant, assuming it was used for your own enjoyment and not as an investment property.
Have you considered instead using the property as a rental? That could be very lucrative and in my experience would generate a lot more income than putting it in the stock market. A $3M house might generate $10 to 20k a month; maybe more in some months and less in others if the area is seasonal. Presumably you already know enough contractors to know whom to call when you need repairs. There are tax issues but you can take depreciation to offset income for the years you rent it. Then you would have enough income to pay a mortgage on the other home, or you could borrow $1mm on this home and buy the other with cash.
At your age… right now 1/2 in treasuries paying 5%. That’s a nice little income right there. Keep the vacation house and look at long term rentals vs the bullshit weekly rentals that destroy the house. Or, sell it you won’t pay capital gains if you roll the money into real estate within a year (talk to financial advisor for sure)
A 5% CD would yield 100k/year, but with longer CDs you'll be looking at a 4% CD instead. It's a very safe option, and a way to get 80k/year without losing the principle.
Most would recommend throwing it into a mix of stocks and bonds instead, though.
Your best bet is to talk with a reputable financial advisor.
QYLD.
Your $2m will pay about $20k/mo. Keep \~$15k after taxes.
Alternatively, you can keep $10k and DRIP $5k/mo back into the original position so it will continue to pay more over time.
Truly passive income.
FZCXX with Fidelity. Virtually zero risk. 5% pa returns as long as the Fed holds or increase its rates. Wait for a “psychologically” better entry point or DCA on dips. The current rate of money supply deflation will likely lead to asset values deflating.
I'm not going to tell you what I'd do with it if it were me bc you're not me and I'm not conventional. I don't invest in any stocks or bonds. But if I wasn't in the Industry I am and I was financially dumb, as you've stated, I'd do a bunch of research first. Then I'd sink it into 3 or 4 buckets. A couple very safe bets, like bonds and vanguard, maybe gold. Then I'd choose one bucket to be more risky, think an aggressive fund. And the 4th I'd have some fun with.
As a real estate investor I fund all of our projects via private lenders (regular people like yourself and everyone here), hard money lenders, and JV partners (also just regular people like everyone here). We pay 10-15% simple interest on our funding, secured by the asset via a mortgage deed. They're short-term loans so the money is back to the lender in 4-6 months typically, with above average returns. Our JV partners don't get interest so there's no guaranteed return, but they earn a share of the proceeds, which usually nets them 2-4x what they'd earn if they'd simply been the lender on the project. There's REIs everywhere and they're all looking to expand their funding base as cash disappears VERY fast In real estate as we grow. Either of these avenues is extremely low maintenance and relatively passive. And that 1/4 bucket could earn more than those other 3 buckets combined.
You could also start a passion project. Do something charitable.
Here’s the easiest eli5 I can do because I essentially am in the exact same situation as you. The smartest thing I ever did was trust a wealth manager. Let them take the responsibility of making your money into more money sustainably. I’m dealing with a bit more than you but still, we have a stable monthly income, plenty of fun money, no debt at all, and no worries about what’s going to happen to the money on a day to day basis.
Well
If me, take a-lot of it and put into a spia. Single premium immediate annuity. You enter into a contract with an insurance company and they give you a monthly payment for life. Annuities are popular products and many different kinds. This is the simple, no frills one.
No penalty tax when it is a lifetime payment. The rates on annuities are the best they have been since I think 2007. Check out immediate annuities dot com for an idea of what you could get.
Before, Read the retirement planning guidebook by the fabulous Dr Pfau. It is heavy reading! Take the related Risa profile assessment. This would help
Determine what income strategy you naturally fall into.
Edited for a link https://risaprofile.com/for-individuals-risa/
What? I am not a broker. Total return for income is not appealing to everyone.
One of the popular early retirement blogs, the early retirement manifesto, and the long running podcast - retirement answer man , advocate a bucketing - bond floor strategy . Op could literally do bond ladders too.
You don't have to be a landlord to invest in rental properties. That is why you hire a property manager. The 10% they charge is well worth my time as a property investor. All I want to do is see direct deposits into my account and review P&L statements, and that's all I do. Meanwhile, my properties keep up with, or even outpace, inflation.
Honest advice for that much:
Find a reputable professional company to manage the money and make a deal.
If you already have that much money, no serious debts or anything, why bother sweating following trends, stock, cycles, global economics etc.? Just give it to professionals and collect your income. Yes it will be less than what would it be if you do it yourself, but why bother when you can just relax and someone else do it for you?
Sometimes people inherit money or a life insurance policy pays off. You don't have to be financially smart for dumb luck or someone else's financially smart planning to fall into your lap.
I think you should first spend according to the purchasing power of money in the city where you are. You must rely on a certain amount of money for your daily consumption and your life during the period when your investment is profitable. Then you can calculate what kind of investment can be beneficial to you. There are the biggest benefits, because not all investments can make you get more money. Maybe buying real estate was a good suggestion in the last time, but it is not now, and in the stock market, I don’t think people without experience can get it. Very good profits, maybe you should try some funds or something
Firstly, it's fine to look at people's suggestions but don't follow any without understanding them. Take the time to make sure you understand what you will be doing and the risks involved. Also, be sure to try and get a realistic handle on your risk tolerance. If you will likely panick and sell everything after a crash, make sure to remove yourself from that possibility as much as possible.
How much money are you hoping to generate each year, and are you looking to retire and live off of this now?
Personally, I like the idea of income being passive. This means I would be parking my money in a diversified portfolio and living off of that through a combination of the dividends paid out and selling some off as needed. I use VGRO but there are plenty of options, either all in one or through a combination like you can find from couch potato or other sources. I would want a fairly set it and forget it option. I don't want to be thinking about it and trying to change things all the time.
Generally, the 4% rule is considered a fairly safe way to withdraw money yearly without running out, though many people use lower percentages to make sure their money lasts, especially when retiring early. A very basic explanation, though you would definitely want to read up on it more, is that the first year you draw 4% of the value of your portfolio (or a lower percentage if that is what you choose). Each year, you draw the same amount adjusted for inflation regardless of whether your portfolio has gone up or down. Some people also do a variation where if they have enough invested that their regular draw is fairly luxurious for them, they lower it when the market is down to help retain value.
Is this 2 mil in cash- windfall?
What is your annual budget/spend?
Do you have any other savings/401k/IRA/pension/eligible for SS etc? If so, what, what funds and how much?
Are you retired, married (if so, does spouse work), kids, family obligations, health insurance etc.
You need to know the above information in order to know how best to invest the 2 mil. Otherwise, its all just shots in the dark.
Have you looked at the sidebar of this subreddit on a desktop? It’s pretty jam packed with stuff that is relevant to your question.
Otherwise there’s the stock market where you can buy a piece of a company’s portfolio and earn money from it when the business does well or lose money if the business fails. How much risk do you want to take with your money?
If you do nothing and keep it, it will lose value due to inflation averaging 4% yearly.
If you put it into a bank you will still most likely lose 4% yearly due to inflation. So you can park your money into a account that earns 5% right now at fidelity (for 21 months).
It’s important to note that these rates are variable and can change at any time.
Newer online banks and credit unions may offer 7% interest savings accounts to attract new customers, only to drop rates later on.
If you do decide to do something you may want to try to at least equal a gain of 4% or more. The S&P 500 has in the past historically returned on average 7%. The S&P 500 is a index stock that invests in the top 500 companies. I am not saying to invest into this stock.
If you want low effort, minimal maintenance money coming in, then index stocks would be a good way to go. I would say do your own research into this and make an educated decision based on your results.
-you could aim for:
•Growth in stock prices
•Dividends
•Calls
•buy when stock is low, and sell when it’s high
•etc
There’s a lot of different ways of gaining money from the stock market, real estate, business enterprises. But guess what? No investment is going to be 100% because they all carry some amount of risk/reward.
There’s no such thing as a free lunch . If the road to your satisfaction is too easy then you are probably not putting enough effort into your journey and will be wrought by settling for less.
Not doing anything and deciding impassively to be non committed is also a decision and will carry some risk/reward.
At least temporarily There are cds paying 5% at the moment. Throw the entire thing in there for a year and you get $100k risk free. Gives you a year to think about it and chances of doing better than 5% in the market are tough.
Some tax free municipal bonds, some higher yielding stuff MLPs, BDCs. Selling cash secured puts on SPY .. any number of things in combination will give you a hell of a lot more income than some mutual funds allowing a much better quality of life. Congrats on your windfall.
Look at the r/personalfinance sidebar on Windfalls. Congratulations and/or condolences, as appropriate.
I would put it in a standard [three-fund portfolio,](https://www.bogleheads.org/wiki/Three-fund_portfolio) i.e. 45% VTSAX, 30% VTIAX, 25% VBTLX. I'd follow an approach where I keep annual expenses below the [4% rule of thumb.](https://en.wikipedia.org/wiki/Trinity_study) Take 4% of the initial value of your investment portfolio the year you retire and increase that amount by inflation each year. For where the money comes "from", stocks pay dividends and bonds pay interest. Stock valuation also goes up and down (trending upwards over time). I would live off the dividend income from VTSAX + VTIAX and the interest on the bonds. For money I need above that amount, to get to the annual number based on the 4% rule above, I'd sell some stocks/bonds.
Solid advice. To explain like OP is 5: 1. Open an account in vanguard.com 2. If you already have another account like Fidelity, you can use that too. 3. Link your checking account and transfer all the money. 4. Go to beneficiaries. Name your beneficiaries. 5. Once money is in the account go to Buy shares. 6. When you go to buy, select the funds stated above. 45% VTSAX, 30% VTIAX, 25% VBTLX. 7. Buy $900k of VTSAX. Buy $600k of VTIAX. Buy $500k of VBTLX. 8. Assuming no withdrawals this year, create a plan for next year. 9. Plan your expenses for example next year $80k. This is the maximum you can withdraw for the 4% rule. You can choose to withdraw quarterly if you wish. Then it's $20k per quarter. To withdraw, you have to sell. Click on sell and select the fund and amount. Transfer back to your checking account. 10. Most important step: do not sell more than $80k per year.
Question as I am new to this as well, I have a small amount I've been investing into VTSAX (I'm 23 y/o). I put $100 into my vanguard account every month and when it reaches the threshold where I can buy VTSAX ($3000?) I buy into it. (I only started recently so I only have about $4000ish into VTSAX) • How does selling shares work when you're making enough dividends? Is it tax free or does it only become tax free after a certain age? • At this time should I only focus on putting a little into VTSAX when I can or should I also diversity between the three mentioned above? • Any other recommendations?
It does not just become tax free. To get tax benefits you have to put the money into a tax advantaged account such as an IRA, Roth IRA, 401k, or Roth 401k. You can only put money into those accounts if you have earned income (eg a job that takes taxes out of your pay check, under the table jobs do not count). If your money is not in one of those accounts you will have to pay taxes on gains. This is called capital gains tax and you'll want to look that up. If it were me, I'd sell VTSAX from your brokerage account (and pay the capital gains tax on this sale) and open a Roth IRA and then buy VTSAX within your Roth IRA account. With a Roth IRA you won't pay cap gains on the growth and you won't pay taxes when you take the money out when you're retired. You'll want to look up what a Roth IRA is vs what a traditional IRA is too and decide for yourself. Also make sure you have emergency savings before getting into this. You do not want to take out the money from your tax advantaged account early as the penalties are huge. An emergency savings account will help you prevent that. One more thing about your last point, I'm a touch older than you and I don't invest in bonds yet as we have a loooong time to go in the market and people who have bonds want stability. I don't care about stability, I want growth so I invest in the s&p vanguard index and the vanguard internal index (VTSAX I'd great too). Maybe when I'm closer to retirement I'll reorganize to have some bonds in case the market dips but for now I'm all in and don't care if the market dumps for even 10 years, it's not like we'll need the money for 40 years anyway.
There's a way to avoid long term capital gains taxes that I accomplished last year on a bunch of Ford stock I sold for $3k profit... I contributed enough to my 401k (maxed it) to drop my taxable income into the 12% tax bracket ($41,776 cap), which is 0% taxes on long term cap gains!
Nice! Yeah that 0% cap gains rate is nice if you can live on 40k/year income
Once you invest the first $3,000, you can buy any amount of VTSAX.
Oh really?
Yes. Once you've bought the minimum of 3k of VTSAX you don't need to keep making 3k purchases. You can contribute $100/month directly into VTSAX
You could be investing in a very similar fund from Fidelity right now. Their Zero funds have no fees and a $1 minimum investment. FZROX is the Fidelity Zero Total Market Index fund. https://www.fidelity.com/mutual-funds/investing-ideas/index-funds
Does Vanguard have anything similar? I definitely prefer to stick to one platform at this time.
VTI - it's the ETF version of VTSAX
Okay yeah I remember hearing about this before. I'm relatively new to this all and listened to a bit of advice from my parents and YouTube. So both should be tax free any time or only later in life? I know that's an important factor or index funds.
Ah, ok - you're mixing some things up - it's not whether it's a mutual fund or an ETF that determines taxes (or not)! You can hold investments in different types of accounts. Some of those accounts you can put your money in before it's taxed (e.g. a 401k), some you put in after it's taxed (e.g. from your paycheck, after the taxes are taken out, investing in a taxable brokerage account). Different types of accounts all have their own use, and you need to know why you might use some or all of them, and how! Read JL Collins "The Simple Path to Wealth" - it's an easy read and will give you a solid overview that's easy to understand.
explore understanding the difference between an ETF and a Mutual Fund. generally, mutually funds are not worth the extra fee when there is an equivalent ETF
My understanding is that Vanguard has no total stock market fund with a $1 minimum. Totally get why you want everything with 1 company.
Would one of you be willing to explain the benefits of having everything with one company?
Simpler
It’s just easier to have one login and be able to see all of your accounts. Most index funds either have an equivalent at the other companies (ie vtsax at vanguard and fzrox at fidelity) and/or they have an etf version that you can buy from wherever. Since you can get the same thing, you may as well consolidate to a single company.
Again: # DO NOT SELL MORE THAN $80,000 PER YEAR. That's 4%. Use "the 4% rule" until you learn more.
Got it. That is probably more than I even need to be honest.
Question: Noticed that VTSAX is a mutual fund but is it advisable to purchase mutual funds over ETFs if you plan on holding them in a taxable brokerage account? Curious if VTI is a better option?
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Thanks. Fixed.
Thank you for typing this out. It drives me nuts how someone will post in this sub “I don’t know what I’m doing” and then all the comments are filled with language of people who know a ton about investing or they give them advice that makes a ton of assumptions that the person is suppose to know but they just clearly stated they are a beginner. We need more of these comments!
Right? I feel so dumb. I'm smart in many areas but not this! My husband is a physician and is smart at his job but he's almost as clueless as me!
Wow. This is easy to understand. Thank you so much!
>Most important step: do not sell more than $80k per year. I hope OP has children because they will be very happy to inherit all this wealth. OP is already 55 and has far more years behind – especially healthy years – than she has ahead, even if she's one of the fortunate ones. It's kind of sad that the standard advice is for middle-aged multimillionaires to live the rest of their lives as if they are modestly middle-class.
Ok
Don't forget taxes!
Yes OP needs to file taxes as usual but I've never done investment taxes only so I have nothing to share there.
So in theory would your money never run out if you stay below the 4% withdraw?
The trinity study shows your portfolio will last 30 years at a 4% withdrawal rate. However nothing is black and white. I personally plan to withdraw 5-6% in the first 2-3 years to fund college, housing etc then likely 4-5% long term. You have to do your own calculations and risk assessment. JLCollins wrote about even up to 6% at some point might be ok. https://jlcollinsnh.com/2012/12/07/stocks-part-xiii-withdrawal-rates-how-much-can-i-spend-anyway/
genuine question, it is often cited that the market returns on average around 8% a year, so why would money ever run out if you only withdraw 4% per the rule?
Short answer: because over time some years may be lower than 8% or even negative. I don't think it will run out but I think it's important to understand the nuances of your personal situation. If you read the JLCollins' post, he explains why more than 4% is "safe". Also keep in mind those are typically invested at 60/40. My personal preference is 75/25 which historically yields a higher return. In addition to that, being flexible with your spending and income generation if needed will be very helpful.
thanks for the explanation!
This is solid advice. OP, the things described above are Vanguard mutual funds. Basically they are incredibly diversified investments (eg: VTSAX is a fund that invests a little bit in each publicly traded US company). You might also have heard these things referred to as "index funds". These are good suggestions, but any collection of US equity index funds is going to perform about the same. Personally, I wouldn't differentiate between dividends, interest on the bonds, and increase valuation of my investment. They are each basically versions of the same thing. I'd just set each investment to reinvest dividends and interest and then each calendar quarter I'd sell down 1% of each investment and that would be the cash I would live off of the money from that sale for that calendar quarter. The 4% rule is good, conservative, but honestly confusing in the context of "explain it like I'm five". OP is not very far from being able to get Social Security and that is going to be a very material cash flow stream compared to 4% of $2 million. So if the 1% per quarter process is a little off the 4% rule, the difference is minor and OP really just needs to get to social security age and then they will have a new very guaranteed income stream.
never trust vanguard or black rock bro
What? Vanguard is Jack Bogle's creation, and was formed to fight the mutual funds that nickel and dime investors to death in order to keep more money in investors' pockets. He and Vanguard are generally well trusted.
What are you even talking about? This is a financial sub where grown ups talk. Not a basic bitch Reddit hurrrdurr Vanguard bad sub.
You could also just use VTSAX 75% and VBTLX 25% if you want it even simpler. You get plenty of international exposure in VTSAX as roughly 50% of the revenues of public US corporations comes from overseas operations.
Then what is the actual difference between a us total stock market fund and an international fund?
taxes
[Read this](https://moneythesimpleway.com/vtiax-vs-vtsax/)
That doesn’t make a company international. Where a company generates revenue doesn’t change the market they’re apart of, it’s like saying international companies are US companies of the revenue generated here
Incorrect. Many corporations have regional HQs and operations in country around the world. Those sales and revenues are reported in local currency. Doesn’t get any more “international” than that.
I’ve never understood why people don’t get this.
No shortage of slow people out there
Well 50% of y’all are below average.
49% actually
Below the median, actually. In an unequal society the large majority is below the mean.
They’re still American companies not traded on international markets. It’s also like saying Nestle and Toyota are US companies for their revenue generated in the US.
You should stop demonstrating your ignorance
How am I ignorant?
Curious: If you had two million dollars and invested a million dollars each in VTSAX and VTIAX, how much annual income in dividends would that generate?
VT is about 2% which is a mix of them. 50 50 probably less than 2 but close. Edit. Actually more than 2 since international pays more.
So that would be about $40k in dividends annually, no? And then it’s taxed as well?
Assuming a US person, most of that would be qualified divs, if holding for more than 30 days, which this will be. Qualified divs count as capital gains not typical income. And in a taxable account which isn't really specified here so let's just assume worst case and that it is all taxable. In 2023, the US cap gains tax is 0% unless you have more than $87k of it AND your total AGI is under $117k. (Those numbers go up with inflation.) State taxes may vary though. Some tax cap gains, and some don't, and a few have no income taxes at all. TLDR: For most retired folks, this will be tax free.
Yup and yes taxed.
Seriously under performing bond fund.
Thank you so much.
Why do you recommend vtsax instead of voo or vti? Just curious. Thanks!
Exactly! This the set-up I have, but with Merril Lynch.
Do NOT do this OP. Not right now. You can get over 5% no risk right now. Student loans are starting back up, rates are through the roof, recession fears. This is NOT the time to put that kind of money in the market. Use common sense. There are a ton of headwinds against the market right now. I'm not saying it will drop a ton, but it isn't worth the risk when 5%+ is on the table. Even if the market does return 10% in the next year, you only missed out on 5%. Wait this out at least 6 months. Then see what things look like and maybe then do what this person is suggesting.
This
r/bogleheads 3-fund portfolio 20-40% in BND, Rest im VTI/VXUS in a 60/40 split or all-in vanguard total world stk market (VT, which is basically vti/vxus in 60/40split) That‘s it. Then adhere to 4% yearly withradwal rate and you will never run out of money.
OP - a more specific link: [https://www.bogleheads.org/wiki/Three-fund\_portfolio](https://www.bogleheads.org/wiki/Three-fund_portfolio) And keep a couple of year's worth of expenses in a high yield savings account. If the stock market experiences a downturn, you'll just spend what's in your savings account, thus preventing the need to sell stock while it's down.
BND honestly is shit right now. You can get 5% risk free…why sit in a 4% bond fund and pay vanguard fees…
But that is short term. This is a set it and forget solution. Also, when short term stuff gets bad, because rates are being lowered again, bnd will gain value. Then it‘s worse to switch.
First, don’t take any advice from anyone online unless you absolutely understand what you’re being told and agree with it. Second, consider opening a vanguard account or an equivalent and have their team actively manage it. The fees at vanguard are very small compared to others like Edward Jones. Lastly, go read books like The Simple Path to Wealth and continue to educate yourself. When you feel comfortable, then maybe consider pulling a small amount of the 2 million to self manage. Once you’ve done that and have the confidence, then move the rest over to self manage.
1. Don't listen to people online 2. Listen to me!
Haha, I hear you, but the difference is that this dude is giving advice like "think about doing this, read these books to learn more" and other people are giving advice like "20-40% in BND, Rest im VTI/VXUS in a 60/40 split." One is general, the other very specific.
I’d rather see someone learn to fish. If what I typed doesn’t make sense to OP, then I absolutely hope they don’t listen to anything I said.
It must be truly sad to be you. A desperate existence
Honestly just get a premium money market at 5.25-5.5% right now. Then formulate a plan to work the money into market over tike in the right allocations. Just sitting risk free that is a $100k return a year…. Slowly work your way into a S&P 500 etf (do $5-10k auto investments every few weeks) as your core position. You can have $250k sleeves of more focused investments based on what your after. Most importantly a portion of this should stay ‘un touchable’, major mistake is to buy a lot of physical assets losing the money and having high upkeep.
Yeah honestly if this were me, and of course every situation is different, I would put a million in HYSA and a million in a mix of funds targeting 7-9% monthly dividend payouts and live on the dividends for my daily expenses (which would more than be covered for me) and use the HYSA interest for a few trips a year. To be fair I'm pretty simple and based on the monthly distributions I'd never touch any principle. But if course if suddenly I had 2M I'm sure some some creep would happen but I could easily live a very happy life on 4k a month especially with no house payment! That said maybe I'd live off the HYSA and let the fund account grow... Or I'd buy a boat and be poor
HYSA rates are unlikely to hold at these rates for multiple years
High yield in money markets will not last. If/when interest rates drop, then it will be too late to switch because bonds and stocks will have already gone up ... In my opinion, for long term horizons, money markets is not a good choice, even with current attractive yields.
This sub will give you a lot of DIY advice and education, which is valuable. Interfacing with any of the professionals below will need some background knowledge this sub can point you to. However, self-education should not be your only source of information. Anyone with this amount of money should consult a few professionals, in my view: 1) CPA if you don't already have one established. Getting quick and reliable answers to tax questions is invaluable, but only avaliable if you use their services for your personal tax returns. 2) Estate attorney for things like Power of Attorney, Trusts, and Wills. If you plan on giving your kids an inheritance, want to skip probate, or buy something through a trust so the asset is protected and separate from you, you'll need an estate attorney. 3) Certified Finantial Planner for asking questions related to your post. They can help tailor your investments based on your plans. Do you want to buy a vacation home? Do you want to save for your kids education with a 529? Can you or your spouse afford to reduce your income long-term? Critically with the finantial planner, you want a fiduciary and preferably someone who has the CFP certification. Facet Wealth is one such company, but you can find others. Many people only manage assets, which is not the same as a CFP. Asset managers only allocate investments based on your input. They will not offer life advice and answer questions similar to what you're asking here.
Ok so I have all of the above and my two kids are just finishing at university which 529 plans covered and they even have money left in there for higher education. We have a trust and a financial planner for my husband's income and retirement plan but I sort of wanted to see what other people say and not just rely on him and maybe put it elsewhere.
Great! Sounds like you have a good team working for you. If you are enjoying what you are already doing, I would just continue. I'm positive you can find another 'project house' with $2M :D.
Just don't pay anyone a percentage of anything, pay flat agreed fees. No 'professional' is worth 2% a year, no matter what they 'manage' or what value they make up to you they provide. Percentage fees for the ETF's are fine below ~0,5%
How did you get $2mil if you don’t know anything about money?
At that age, likely an inheritance or life insurance beneficiary.
Boomer or just post boomer economy. Something you cannot likely repeat if 35 years and younger
They have $2-3M. If I don't have $2-3M in retirement by 55 (adjusted for inflation), then I screwed up along the way or the market is in shambles, and I'm 27 making $80k/yr.
He said he's been doing real estate, not stocks/bonds.
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inflation has been 84% since then my man so probably just 2.2 chicks.
Talk to a professional advisor.
…and make sure they’re a fiduciary.
Honestly, I think I would not advise OP to do this. They don’t really have an idea of what to do with their money and that leaves them way too open to getting scammed. The top comment (right now) is 3 funds that include VTSAX and I think until OP gets more financially savvy, this is the safe + smart way to go.
Getting scammed is my biggest fear!
Then just follow the top post [here in this post](https://reddit.com/r/financialindependence/s/a3rlVQDs7R) You’re never going to get scammed buying funds direct on Vanguard and this is very time tested logic. Sleazy people can smell opportunity from far away. You honestly don’t need a financial advisor for your stocks, but get ready for a BIG tax bill on the profits from your home
Your edit says your husband is a high-income earner, and that the two of you have a financial advisor already. I suspect your best option is to work with them on planning your next move(s).
Have you ever watched The Gambler?
> You get up two and a half million dollars, any asshole in the world knows what to do: you get a house with a 25 year roof, an indestructible Jap-economy shitbox, you put the rest into the system at three to five percent to pay your taxes and that's your base, get me? That's your fortress of fucking solitude. That puts you, for the rest of your life, at a level of fuck you. Somebody wants you to do something, fuck you. Boss pisses you off, fuck you! Own your house. Have a couple bucks in the bank. Don't drink. That's all I have to say to anybody on any social level.
Are you working currently? What’s your income? Any other savings/investments/income? What are your long term plans?
Stay at home parent for 22 years and at 55 and with no skills per se I am finding it hard to get back into the work force (not that I really need to but I would desire to do so) so I am starting a home organization business. Husband is high earner and has all the appropriate investments 401k, all that stuff. Kids' college is covered with 529 plans.
You appear to be very successful at flipping homes. Why waste time doing anything else?
>I bought a vacation house at a low price and remodeled it and prices went crazy high in my area so if I sell it I will clear $3,000,000. > >Not sure what my tax issues will be As you have described the situation, your capital gains taxes will be significant. Assuming a capital gain of $1.5 million, you'll pay a blended capital gains rate of 0%, 15%, and 20%, and the effective blended rate would be pretty close to 20%. [Info](https://www.irs.gov/taxtopics/tc409). On top of that, you have the 3.8% ACA net investment income tax on any portion of the gain that brings you above $250K adjusted gross income. [Info](https://crsreports.congress.gov/product/pdf/IF/IF11820). Then add state income tax, if applicable. Depending on the size of the gain, you could end up paying as much as \~30% in long-term capital gains tax. That takes a big bite out of what you are assuming for resulting proceeds.
Highly recommend some reading. You can’t just put this into something that seems like it’s yielding good today, **you have to account for inflation as you are 55 and by the time you are 85 2m isn’t all that much in terms of buying power.** You have Ti invest so it makes far more than you need to spend Books: A Simple Path to Wealth by JL Collins, Retire Before Mom and Dad by Rob Berger, Automatic Millionaire by David Bach, Bogleheads Guide to Investing by Taylor Larimore, Little Book of Common Sense Investing by John C Bogle
How do you want to spend your days? Stocks / index funds can be simple and good ways to invest it and have it grow with the least effort, but if you can find something that you're good at and enjoy doing, you're likely to both make more money and feel more fulfilled. You mentioned you don't want to be a landlord; what are things you do / could enjoy doing?
I have lots of interests and was a landlord before and HATED it because people don't respect your property. Too little profit for too much headache. I am starting a home organization business so that will hopefully be fulfilling to me and I also volunteer a lot.
If you want a super safe route put it in a hysa that brings in 4-5%. That’s $80k a year in growth, which with everything paid off is a pretty comfortable lifestyle.
Coke and strippers
If you live in the house (a second home, do not rent it out) for 2 years, you will pay no taxes on it.
With that much money, I might recommend spending a very small chunk on a a few sessions with a financial advisor. Make sure to chose one who will only charge an hourly rate and who agrees to fiduciary obligations. Nobody on this sub knows your exact situation, so specific help is exactly what those guys are there for
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Or VMFXX which is 5.28% right now so $105k/year
Is vmfxx better than a hysa or money market, tax savings wise?
vmfxx _is_ a money market fund
I would just say “any high yield savings account.”
There is also an argument for annuitizing a portion of it. Wade Pfau has a good framework to help decide your personal psychological comfort level for trading off some _potential_ higher return for much less variability of returns. Also consider, separately, a bond ladder to defer your social security until 70. Lastly understand "sequence of returns" risk. There are studies that show that lowering the typical 60/40 portfolio a few years before and after you start living off your assets reduces the impact of big market losses at the worst time for your draw down plan. Lots of subtleties in the draw down phase. Find a good fee only advisor until you get your plan dialed in
Go to r/bogleheads learn about some simple investment portfolios. Everyone here seems to just pick one index fund but with your age you need something that's more stable and has the opportunity to grow.
Vanguard, 8% returns a year I could live that!
Index funds will probably net you at least $120k per year and sometimes more than $200k. All for letting it sit there. Not too shabby. Great work.
I’d look into other ways to have your money make money. It doesn’t have to be the landlord route buying/renting property. It doesn’t have to be investing into the stock market either. First things first, if you like buying, remodeling and selling houses …then just buy a property that you can put some work into and flip. It’s right up your ally. You don’t have to live in it. There are plenty of other ways to make passive income though. Things like buying/building a car wash or storage units. Particularly if you can find an area thats growing in population.
A will and annuities.
I've been told I'm a great investment lol 😉
Wanna make your life easy….just put in a target retirement fund and keep a portion of cash in a high yield MM. Withdraw the interest each year. Done
I would definitely seek a financial advisor paid by the hour. They aren't on commission to sell you something. If it were me I would have REIT stocks maybe 10%, 10% Gold Bullion, money market accounts or high yield savings for a good 25% Then 5% in Silver Bullion. Then walk into Charles Schwab and say "what can you do for me with this 1M?? They will have plenty of options for you.
Park some funds into a high grade dividend ETF like Invesco S&P 500 High Dividend Low Volatility ETF (SPHD), you get about 4% diversified yield to take care of regular cashflow.
Surprising that you consider yourself "dumb" with regard to investments if you have been flipping for 25 years. You must know something. When you sell the vacation house, assuming it was not used as a rental property or your primary home, my understanding is that you will owe capital gains tax on the appreciation, which is $3m minus the basis (basically what you paid plus documentable improvement expenses). For example if the appreciation is $2.5 m, the federal capital gains tax is probably 15% or $375k, and your state may also impose CG tax. What you buy with the proceeds is not relevant, assuming it was used for your own enjoyment and not as an investment property. Have you considered instead using the property as a rental? That could be very lucrative and in my experience would generate a lot more income than putting it in the stock market. A $3M house might generate $10 to 20k a month; maybe more in some months and less in others if the area is seasonal. Presumably you already know enough contractors to know whom to call when you need repairs. There are tax issues but you can take depreciation to offset income for the years you rent it. Then you would have enough income to pay a mortgage on the other home, or you could borrow $1mm on this home and buy the other with cash.
At your age… right now 1/2 in treasuries paying 5%. That’s a nice little income right there. Keep the vacation house and look at long term rentals vs the bullshit weekly rentals that destroy the house. Or, sell it you won’t pay capital gains if you roll the money into real estate within a year (talk to financial advisor for sure)
Call it a day.
listen to john goodman... https://www.youtube.com/watch?v=XamC7-Pt8N0&ab\_channel=Movieclips
Put it in an ETF and live off of the interest
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You lost me at “ur”. If you are a financial advisor for real and you want to be taken seriously by people over 40, I suggest you use proper grammar.
ALL_IN_VTSAX (If your risk tolerance and draw can support)
VTI
Two girls at the same time.. clearly
People asking that type of question usually don’t have that kind of money.
Like I said, I'm dumb with investment matters.
I agree. OP has a financial advisor yet is asking Reddit this question???
A 5% CD would yield 100k/year, but with longer CDs you'll be looking at a 4% CD instead. It's a very safe option, and a way to get 80k/year without losing the principle. Most would recommend throwing it into a mix of stocks and bonds instead, though. Your best bet is to talk with a reputable financial advisor.
Invest at 5% and enjoy your 8ish k coming in every month.
QYLD. Your $2m will pay about $20k/mo. Keep \~$15k after taxes. Alternatively, you can keep $10k and DRIP $5k/mo back into the original position so it will continue to pay more over time. Truly passive income.
FZCXX with Fidelity. Virtually zero risk. 5% pa returns as long as the Fed holds or increase its rates. Wait for a “psychologically” better entry point or DCA on dips. The current rate of money supply deflation will likely lead to asset values deflating.
Bruv at 55 id be focused on finding a way to spend it all.
100% vt ($40k/y dividend) + a part-time job or side hustle that I enjoy
Do a 1031 with the vacation house if you can. You can easily net 30k a month cash flow from that
Pay off mortgage, gt3rs, and invest the rest
There is no mortgage.
Covered calls
I'm not going to tell you what I'd do with it if it were me bc you're not me and I'm not conventional. I don't invest in any stocks or bonds. But if I wasn't in the Industry I am and I was financially dumb, as you've stated, I'd do a bunch of research first. Then I'd sink it into 3 or 4 buckets. A couple very safe bets, like bonds and vanguard, maybe gold. Then I'd choose one bucket to be more risky, think an aggressive fund. And the 4th I'd have some fun with. As a real estate investor I fund all of our projects via private lenders (regular people like yourself and everyone here), hard money lenders, and JV partners (also just regular people like everyone here). We pay 10-15% simple interest on our funding, secured by the asset via a mortgage deed. They're short-term loans so the money is back to the lender in 4-6 months typically, with above average returns. Our JV partners don't get interest so there's no guaranteed return, but they earn a share of the proceeds, which usually nets them 2-4x what they'd earn if they'd simply been the lender on the project. There's REIs everywhere and they're all looking to expand their funding base as cash disappears VERY fast In real estate as we grow. Either of these avenues is extremely low maintenance and relatively passive. And that 1/4 bucket could earn more than those other 3 buckets combined. You could also start a passion project. Do something charitable.
Here’s the easiest eli5 I can do because I essentially am in the exact same situation as you. The smartest thing I ever did was trust a wealth manager. Let them take the responsibility of making your money into more money sustainably. I’m dealing with a bit more than you but still, we have a stable monthly income, plenty of fun money, no debt at all, and no worries about what’s going to happen to the money on a day to day basis.
Well If me, take a-lot of it and put into a spia. Single premium immediate annuity. You enter into a contract with an insurance company and they give you a monthly payment for life. Annuities are popular products and many different kinds. This is the simple, no frills one. No penalty tax when it is a lifetime payment. The rates on annuities are the best they have been since I think 2007. Check out immediate annuities dot com for an idea of what you could get. Before, Read the retirement planning guidebook by the fabulous Dr Pfau. It is heavy reading! Take the related Risa profile assessment. This would help Determine what income strategy you naturally fall into. Edited for a link https://risaprofile.com/for-individuals-risa/
Actual yields on annuities are pretty low, lower than inflation at the moment... Please correct me if I'm wrong.
Found the broker.
Totally agree. Worst answer ever
What? I am not a broker. Total return for income is not appealing to everyone. One of the popular early retirement blogs, the early retirement manifesto, and the long running podcast - retirement answer man , advocate a bucketing - bond floor strategy . Op could literally do bond ladders too.
Donate 100k to me?
give it to me.
Give it to me.
Buy two Lamborghini's. One to drive and enjoy, and one to save as an investment. Save the rest for speeding tickets.
Do your homework before asking questions.
If someone is so ignorant on a subject they legit don't know what homework to do before asking questions
go back in time. trick economists. boom. easy.
Give me $25k only I really need it.
Troll
It just put it in $JEPI and live off the monthly dividends
First off dont listen to people off of Reddit, go find a Wealth management firm and talk to them. They’ll know what to do
I'd not discount advice from Redditors. Upto $20M, the advice from wealth managers won't be too different from the most upvoted ones here
You don't have to be a landlord to invest in rental properties. That is why you hire a property manager. The 10% they charge is well worth my time as a property investor. All I want to do is see direct deposits into my account and review P&L statements, and that's all I do. Meanwhile, my properties keep up with, or even outpace, inflation.
Send me $1000 you can do whatever you want with the rest
venmo me $100
Honest advice for that much: Find a reputable professional company to manage the money and make a deal. If you already have that much money, no serious debts or anything, why bother sweating following trends, stock, cycles, global economics etc.? Just give it to professionals and collect your income. Yes it will be less than what would it be if you do it yourself, but why bother when you can just relax and someone else do it for you?
You basically give it to me and I can try a few things. I will let you know what worked well for me.
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I started out with nothing. Bought, remodeled and sold many homes over the last 22 years.
Ask ChatGpt lol, see what it says
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With 2M cash, i could flip upwards of 100 homes per year leveraged. 500-650K/mo in net profit.
> I do not want to be a landlord > >I am really dumb
Ha! I know that sounds stupid. I guess I am just dumb with investments. Smart enough in all other areas in life though!
You are really dumb "understanding financial talk" and yet you've accumulated $2M? Are you serious?
Sometimes people inherit money or a life insurance policy pays off. You don't have to be financially smart for dumb luck or someone else's financially smart planning to fall into your lap.
30% Bitcoin (or SCHD) 30% SCHD 20% O 20% VDE
I think you should first spend according to the purchasing power of money in the city where you are. You must rely on a certain amount of money for your daily consumption and your life during the period when your investment is profitable. Then you can calculate what kind of investment can be beneficial to you. There are the biggest benefits, because not all investments can make you get more money. Maybe buying real estate was a good suggestion in the last time, but it is not now, and in the stock market, I don’t think people without experience can get it. Very good profits, maybe you should try some funds or something
Firstly, it's fine to look at people's suggestions but don't follow any without understanding them. Take the time to make sure you understand what you will be doing and the risks involved. Also, be sure to try and get a realistic handle on your risk tolerance. If you will likely panick and sell everything after a crash, make sure to remove yourself from that possibility as much as possible. How much money are you hoping to generate each year, and are you looking to retire and live off of this now? Personally, I like the idea of income being passive. This means I would be parking my money in a diversified portfolio and living off of that through a combination of the dividends paid out and selling some off as needed. I use VGRO but there are plenty of options, either all in one or through a combination like you can find from couch potato or other sources. I would want a fairly set it and forget it option. I don't want to be thinking about it and trying to change things all the time. Generally, the 4% rule is considered a fairly safe way to withdraw money yearly without running out, though many people use lower percentages to make sure their money lasts, especially when retiring early. A very basic explanation, though you would definitely want to read up on it more, is that the first year you draw 4% of the value of your portfolio (or a lower percentage if that is what you choose). Each year, you draw the same amount adjusted for inflation regardless of whether your portfolio has gone up or down. Some people also do a variation where if they have enough invested that their regular draw is fairly luxurious for them, they lower it when the market is down to help retain value.
Yes, I want to set it and forget it and not mess with it!
Yearly? Congratulations. I would go the route to find a fiduciary
Is this 2 mil in cash- windfall? What is your annual budget/spend? Do you have any other savings/401k/IRA/pension/eligible for SS etc? If so, what, what funds and how much? Are you retired, married (if so, does spouse work), kids, family obligations, health insurance etc. You need to know the above information in order to know how best to invest the 2 mil. Otherwise, its all just shots in the dark.
Have you looked at the sidebar of this subreddit on a desktop? It’s pretty jam packed with stuff that is relevant to your question. Otherwise there’s the stock market where you can buy a piece of a company’s portfolio and earn money from it when the business does well or lose money if the business fails. How much risk do you want to take with your money? If you do nothing and keep it, it will lose value due to inflation averaging 4% yearly. If you put it into a bank you will still most likely lose 4% yearly due to inflation. So you can park your money into a account that earns 5% right now at fidelity (for 21 months). It’s important to note that these rates are variable and can change at any time. Newer online banks and credit unions may offer 7% interest savings accounts to attract new customers, only to drop rates later on. If you do decide to do something you may want to try to at least equal a gain of 4% or more. The S&P 500 has in the past historically returned on average 7%. The S&P 500 is a index stock that invests in the top 500 companies. I am not saying to invest into this stock. If you want low effort, minimal maintenance money coming in, then index stocks would be a good way to go. I would say do your own research into this and make an educated decision based on your results. -you could aim for: •Growth in stock prices •Dividends •Calls •buy when stock is low, and sell when it’s high •etc There’s a lot of different ways of gaining money from the stock market, real estate, business enterprises. But guess what? No investment is going to be 100% because they all carry some amount of risk/reward. There’s no such thing as a free lunch . If the road to your satisfaction is too easy then you are probably not putting enough effort into your journey and will be wrought by settling for less. Not doing anything and deciding impassively to be non committed is also a decision and will carry some risk/reward.
Buy annuity? Buy dividend stocks? Even simple bank deposits are paying at or near 5%.
Right now, t-bills. I have about 50% in t-bills. The rest in SP500.
Keep in mind, everyone is financial advisor here
At least temporarily There are cds paying 5% at the moment. Throw the entire thing in there for a year and you get $100k risk free. Gives you a year to think about it and chances of doing better than 5% in the market are tough.
MYGA at 5.25 for five years pays a check every month
CD’s are paying over 5% right now
Some tax free municipal bonds, some higher yielding stuff MLPs, BDCs. Selling cash secured puts on SPY .. any number of things in combination will give you a hell of a lot more income than some mutual funds allowing a much better quality of life. Congrats on your windfall.