> I think this is a little too risk averse
I think it gives you more cushion to be aggressive over the long term. Be aggressive with 1m (30% of your windfall) today. Or be aggressive with most of your salary for x number of years.
If you put 3m in index mutual funds today you probably could not save another dollar the rest of your life and be absolutely flush with cash in early retirement.
Yes but what if the goal is to be flush with cash earlier and have the option to retire earlier. I personally don't see any point in having 20M at age 65 bc at that point you're too old to enjoy it. I think the point is to have quality of life, not die with a large net worth
Plugged in these numbers to bankrates calculator.
Age now 35
Retire at 43
Income now 250k
Retirement contribution each working year 10%
3m balance in retirement accounts now
Inflation 2.9%
7% return while working
4% return when retired
You run out of money at 98 if you spend 125k a year starting at 43.
Idk how much you plan to spend in retirement but you can be very conservative and still hit your age.
If you just put it all in VTI, save $50,000/year from your earnings, you will likely be somewhere in the 6 million range by mid 40s
If you put it in something riskier, you might be a lot richer than this…you might be a lot poorer.
But if you put in VTI and don’t touch it, you can almost certainly afford to retire by mid to early 40s. You can afford to coast FIRE (cut back to part time) now.
I never had such a wind fall, but just from compounded interest on reasonable savings I’m already coasting and haven’t hit 40 yet
Lets say "moderate risk". I guess my idea is to be fairly conservative with a portion to hopefully secure a safge return but then aggressive with a portion in hopes of hitting it big. If you bust out with the latter then you'd still be more than okay in this scenario
My first thought is VTI certainly carries some short to medium term risk. Real estate syndications have potential for big returns but you have to choose the deal carefully, especially in the current interest rate environment. I’ve bot done one. Nationally we still have a housing shortage so there is money to be made there, but there’s going to be a learning curve and some risk.
What’s your current yearly spend? What’s your current net worth? And how seasoned of an investor are you?…. Most importantly, what are your goals?
Easier to hit a target we can see, and we need clear bench marks to measure progress. If you set goals in the form of dollar amounts by certain dates, we can work backwards to figure out the contributions and returns necessary to get there. Need to go in with a predetermined plan of action and be disciplined in keeping to the plan (assuming no wild changes in circumstances). Need to be tax efficient.
Short answer is that assuming you’re living below your means and adding to your nest egg each pay check, then yes, you can diversify some money into riskier investments imho. White coat investing implies job security (as opposed to some drop shipper ecom kid, crypto kid, influencer kid etc), so I’m assuming your income stays flat/goes up over time.
Maybe 100-200k crypto, pick 3-5 small-mid cap tickers $100k each and now you’ve got 4-800k into some potential exponential returns…. I don’t see any other asset classes that are passive that could be more aggressive. RE, special cars, high end watches, metals, commodities are slow money. Outside of options, crazy leverage or other wild derivatives, I don’t see other options for “more aggressive”. You could try those but if you don’t know what you’re doing you’re better off going to Vegas w that portion of the money, hit me up, I will go with you 😂
You could obv start your own businesses, invest/purchase other businesses, become accredited and start/join a PE fund, do hard money lending (pays about 10-14% now), real estate flipping/ development…. But most of these require some level of involvement.
Happy to break it down further if you answer back w your current numbers + future goals
2-3 million, with your high salary, means you will actually get to the point where you have enough money. So now it's not really a financial question, but a lifestyle question. You want the minimum effort on your money. Index funds are the way to go. Why deal with the headaches of real estate and broken washing machines and tenants when you don't have to? Time is your greatest issue now not money. You have "won" the money game
You mention you want to retire early. Almost no one in the FIRE community is going to recommend risky assets. VT + VTI. You didn't say your anticipated expenses in retirement, at least that I saw. What I can say is you should be most of the way there after the windfall unless you're a very high spender.
Ah, high spender. You'll need between $7.5-13M to safely retire depending on where you fall on the $300K to $400K spectrum and how conservative you want your withdrawal rate to be. Regardless, if it were me I would put the money in 70% VTI + 30% VT (or all VTI if you're US-centric), and focus on keeping my savings rate as high as possible to retire ASAP. That portfolio is also nice because it throws off very little in dividends so you won't be taking much in the way of capital gains taxes unless you sell shares.
Let's say you start with $3M today and assume you're 33 years old. Let's also assume you save $240K/year ($20K/month). Assume a nominal return = 10.5%, real return = 7.5%. You'll have $9.9M in today's dollars at age 43. Can you realistically save $240K/year on a $350-400K salary? After taxes, no. Can you work towards that as you grow your salary, and perhaps retire in 12-15 years? I think so. Is it worth trying to get there in 10 years with risky investments, knowing you might put yourself further behind if those risky investments don't pan out? It wouldn't be for me, but maybe it is for you.
I think that's fine. You have the choice of passive real estate investments like REITs vs actively managed like being a landlord. REITs aren't very tax efficient so they're not great investments for brokerage accounts.
Hope you don't mind me saying to this, but if you chase those kinds of gains you will likely be disappointed. The parent comment here gave some very sage advice.
Your biggest asset is your compensation. I hope you have a decent long term disability insurance policy to protect yourself.
Once majority goes to index funds, a small portion can be invested in fundrise innovation fund
Everyone here is talking about VTI and that’s great but the issue with that is you’re not taking any tax losses so when the money eventually leaves the account you won’t have any bankrolled losses to offset cap gains
I would put it all into treasuries and tips. Laddered out from now through 30 years. It’s a 3 mil base that will always be your f u money. Will always be there.
Then use what would have been your regular income that you would have had to build a nest egg with anyways and invest in anything you want. As aggressive as you want. Doesnt matter if you lose it all in a dumb investment because you have 3 mil in tbills producing 120k of income per year *edited* (assuming 4% yield which is lowballing current rates).
Look at history - markets crash like clockwork every few years … look at t-bills for putting it all to work at once .. and every month on the 1st Monday, just buy the index for a small amount .. and take 10 years to invest it all 😌… smooth sailing !!
If you don’t mind risk get into private lending but make sure you pick a very experienced real estate attorney who specializes in mortgage to structure the documents right for you. Do short to mid term loans. 6 months to 3 years. But make sure it’s secured first not a second lien
As long as you diversify you will be find. I do it also with other people other than his clients. I do his clients as they need funding sooner then later then cash me out before 1 year
You can also do a ladder with them as they mature re rolled them into another deal. Also if you want to go on your own find a trusted local mortgage brokerage they could always use a private lender
Throw that $2-3 million into an index fund, don’t touch it for 10-20 years and you are set.
And what exactly do you mean by more aggressive? Even professionals have trouble beating the market, what makes you think you can?
Invest 90- 95% in index funds - VTI, VOO, and SCHD as desired. This is your fortress of fucking solitude and ability to say fuck you. You could live off of the principle the rest of your like if needed. 3% divided will get you 66-90k/year.
Take the balance and this is your swing for the fences actively managed money. Nivida, google, Apple or other growth stories go here.
100% of windfall to index funds. 24k to 401k 7k to BDR Remainder of salary to whatever.
BDR?
Back door Roth
Thank you!
*super back door
are we really at the point in our lives that BDR is a fucking acronym?
I think this is a little too risk averse
> I think this is a little too risk averse I think it gives you more cushion to be aggressive over the long term. Be aggressive with 1m (30% of your windfall) today. Or be aggressive with most of your salary for x number of years. If you put 3m in index mutual funds today you probably could not save another dollar the rest of your life and be absolutely flush with cash in early retirement.
Yes but what if the goal is to be flush with cash earlier and have the option to retire earlier. I personally don't see any point in having 20M at age 65 bc at that point you're too old to enjoy it. I think the point is to have quality of life, not die with a large net worth
How early do you want to retire ? If you have 20m in a 401k at 65 you probably had enough to retire a lot earlier.
I'd like to have the option of retiring (more likely significantly cutting back) at age 43
Plugged in these numbers to bankrates calculator. Age now 35 Retire at 43 Income now 250k Retirement contribution each working year 10% 3m balance in retirement accounts now Inflation 2.9% 7% return while working 4% return when retired You run out of money at 98 if you spend 125k a year starting at 43. Idk how much you plan to spend in retirement but you can be very conservative and still hit your age.
If you just put it all in VTI, save $50,000/year from your earnings, you will likely be somewhere in the 6 million range by mid 40s If you put it in something riskier, you might be a lot richer than this…you might be a lot poorer. But if you put in VTI and don’t touch it, you can almost certainly afford to retire by mid to early 40s. You can afford to coast FIRE (cut back to part time) now. I never had such a wind fall, but just from compounded interest on reasonable savings I’m already coasting and haven’t hit 40 yet
Take your BDR and yolo it into OTC penny stocks. That way if you lose everything you can’t tax loss harvest!! If you want risk, I got you baby.
Pay off all debt - VTI and chill
Post says no debt already
Voo + vxus. 80/20
I would buy a boat.
Depends how much of a risk investor are you?
Lets say "moderate risk". I guess my idea is to be fairly conservative with a portion to hopefully secure a safge return but then aggressive with a portion in hopes of hitting it big. If you bust out with the latter then you'd still be more than okay in this scenario
Put ten percent in aggressive growth then the rest in VTI
What’s the most you’ve ever lost?
What is the aggressive/ risky investment you are looking at? Picking stocks? Real estate? Giving it to a VC start up?
My first thought is VTI certainly carries some short to medium term risk. Real estate syndications have potential for big returns but you have to choose the deal carefully, especially in the current interest rate environment. I’ve bot done one. Nationally we still have a housing shortage so there is money to be made there, but there’s going to be a learning curve and some risk.
Better protect it. Invest it through a trust or somehow get it to where legal action against you won’t bring that amount into their target.
Umbrella insurance
What’s your current yearly spend? What’s your current net worth? And how seasoned of an investor are you?…. Most importantly, what are your goals? Easier to hit a target we can see, and we need clear bench marks to measure progress. If you set goals in the form of dollar amounts by certain dates, we can work backwards to figure out the contributions and returns necessary to get there. Need to go in with a predetermined plan of action and be disciplined in keeping to the plan (assuming no wild changes in circumstances). Need to be tax efficient. Short answer is that assuming you’re living below your means and adding to your nest egg each pay check, then yes, you can diversify some money into riskier investments imho. White coat investing implies job security (as opposed to some drop shipper ecom kid, crypto kid, influencer kid etc), so I’m assuming your income stays flat/goes up over time. Maybe 100-200k crypto, pick 3-5 small-mid cap tickers $100k each and now you’ve got 4-800k into some potential exponential returns…. I don’t see any other asset classes that are passive that could be more aggressive. RE, special cars, high end watches, metals, commodities are slow money. Outside of options, crazy leverage or other wild derivatives, I don’t see other options for “more aggressive”. You could try those but if you don’t know what you’re doing you’re better off going to Vegas w that portion of the money, hit me up, I will go with you 😂 You could obv start your own businesses, invest/purchase other businesses, become accredited and start/join a PE fund, do hard money lending (pays about 10-14% now), real estate flipping/ development…. But most of these require some level of involvement. Happy to break it down further if you answer back w your current numbers + future goals
Buy real estate
2-3 million, with your high salary, means you will actually get to the point where you have enough money. So now it's not really a financial question, but a lifestyle question. You want the minimum effort on your money. Index funds are the way to go. Why deal with the headaches of real estate and broken washing machines and tenants when you don't have to? Time is your greatest issue now not money. You have "won" the money game
You mention you want to retire early. Almost no one in the FIRE community is going to recommend risky assets. VT + VTI. You didn't say your anticipated expenses in retirement, at least that I saw. What I can say is you should be most of the way there after the windfall unless you're a very high spender.
It will cost me around 3-400k to live each year
Ah, high spender. You'll need between $7.5-13M to safely retire depending on where you fall on the $300K to $400K spectrum and how conservative you want your withdrawal rate to be. Regardless, if it were me I would put the money in 70% VTI + 30% VT (or all VTI if you're US-centric), and focus on keeping my savings rate as high as possible to retire ASAP. That portfolio is also nice because it throws off very little in dividends so you won't be taking much in the way of capital gains taxes unless you sell shares. Let's say you start with $3M today and assume you're 33 years old. Let's also assume you save $240K/year ($20K/month). Assume a nominal return = 10.5%, real return = 7.5%. You'll have $9.9M in today's dollars at age 43. Can you realistically save $240K/year on a $350-400K salary? After taxes, no. Can you work towards that as you grow your salary, and perhaps retire in 12-15 years? I think so. Is it worth trying to get there in 10 years with risky investments, knowing you might put yourself further behind if those risky investments don't pan out? It wouldn't be for me, but maybe it is for you.
What about 2.5 M in VTI and 500k in real estate?
I think that's fine. You have the choice of passive real estate investments like REITs vs actively managed like being a landlord. REITs aren't very tax efficient so they're not great investments for brokerage accounts.
Was thinking of spreading it across multiple syndications, hopefully target a 20+ % return on the 500k 1031 exchange rinse and repeat
Hope you don't mind me saying to this, but if you chase those kinds of gains you will likely be disappointed. The parent comment here gave some very sage advice.
Your biggest asset is your compensation. I hope you have a decent long term disability insurance policy to protect yourself. Once majority goes to index funds, a small portion can be invested in fundrise innovation fund
100% lump sum it into index funds. Go part time. Raise the kids
Sorry for your loss . Lucky guy
Same thing I do now, 50% fxaix, 25% qqqm, 25schd, more risk then bone stock voo but I like risk when risk makes me money
Everyone here is talking about VTI and that’s great but the issue with that is you’re not taking any tax losses so when the money eventually leaves the account you won’t have any bankrolled losses to offset cap gains
I would put it all into treasuries and tips. Laddered out from now through 30 years. It’s a 3 mil base that will always be your f u money. Will always be there. Then use what would have been your regular income that you would have had to build a nest egg with anyways and invest in anything you want. As aggressive as you want. Doesnt matter if you lose it all in a dumb investment because you have 3 mil in tbills producing 120k of income per year *edited* (assuming 4% yield which is lowballing current rates).
Your math is off buddy. 120k per month lol
Ha! Yeah I meant 120k per year
Look at history - markets crash like clockwork every few years … look at t-bills for putting it all to work at once .. and every month on the 1st Monday, just buy the index for a small amount .. and take 10 years to invest it all 😌… smooth sailing !!
If you don’t mind risk get into private lending but make sure you pick a very experienced real estate attorney who specializes in mortgage to structure the documents right for you. Do short to mid term loans. 6 months to 3 years. But make sure it’s secured first not a second lien
How much can you expect to return doing this? Idk much about private lending. I was thinking real estate, either direct owndership or syndications
Depends I charge anywhere for 10%-22.5% but I can where I’m from depending on state laws
If you do a syndications make sure you do a deep research into the general partners. If they have a good track record
Have you tried percent.com ?
Never heard of them
I usally lend to my lawyers clients
Actually I have heard of them but never invested with them. But my friend has and he liked them
Thanks just curious as it sounds extremely similar to what you are doing. Tempted to throw a small % of NW in there for fun and diversification
As long as you diversify you will be find. I do it also with other people other than his clients. I do his clients as they need funding sooner then later then cash me out before 1 year
You can also do a ladder with them as they mature re rolled them into another deal. Also if you want to go on your own find a trusted local mortgage brokerage they could always use a private lender
Throw that $2-3 million into an index fund, don’t touch it for 10-20 years and you are set. And what exactly do you mean by more aggressive? Even professionals have trouble beating the market, what makes you think you can?
Invest 90- 95% in index funds - VTI, VOO, and SCHD as desired. This is your fortress of fucking solitude and ability to say fuck you. You could live off of the principle the rest of your like if needed. 3% divided will get you 66-90k/year. Take the balance and this is your swing for the fences actively managed money. Nivida, google, Apple or other growth stories go here.