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02-06-2009, 12:57 PM
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#1 |
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Registered User
Join Date: Feb 2009
Posts: 2
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Inheritance and this market
I am a new poster and this is my somewhat dull life.
My story is like many I suppose but am in a quandary on what to do short term, mid term and long term. I am 51 years old,married, kids college taken care of , home paid off with 400k equity( in today's market), Vanguard Targeted Retirement - 2025 valued today at $200k , down significantly this year. I have another 9 months of emergency cash that we are using now. We have zero debt. We are inheriting 400k and my wife wants to stick most in long term CD's. I know , I know.. I am also laid off for the first time in my life but expect to be back to work as soon as there is a glimmer of hope in the economy. We will probably be able to save $24,000 per year minimum for the next 15 years now that the kids college and our home is paid off. I would appreciate any advice on how to allocate 400K in this market and these times. Thank you for any help you can give me or even a link to the best articles available. Sincerely, SV |
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02-06-2009, 05:04 PM
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#2 |
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Registered User
Join Date: Dec 2007
Location: Redondo Beach, CA
Posts: 2
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My very dull response to your somewhat dull life...
You did not indicate this, but I'm going to assume that the money will be intended to help fund your retirement. It sounds like you plan to work for the next 15 years, giving you a substantial time horizon. Removing the emotions from the situation, I would suggest that you invest the money in a well diversified portfolio with good exposure to both US and International stocks. I would suggest that a decent allocation to small caps, and value asset classes via ETFs or index funds would be prudent. However, it sounds like your wife is scared of losing any of the money by investing it. I would never invest more aggressively than the wife is comfortable with. There's simply too much to lose, and too little to gain. However, it warrants a conversation. You should sit down together and discuss the reason for her extremely conservative investing desire. Discuss how the money will be used, and how much the two of you will actually need in 15, 20, 30 years or more. The basic principles of the market has not changed. In fact, your risk premium is higher now this it has been in years. Best wishes, ET |
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02-06-2009, 07:50 PM
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#3 |
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Registered User
Join Date: Oct 2001
Posts: 1,586
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SwanValley,
You have been doing things quite well. I like Erictoya's advice in following the wife's lead on investing. Build a CD ladder with that inheiritance. Each year you will have a CD maturing. Invest that into the long term CD, and soon you will have all long term CDs. Just watch the amounts and where they are invested so you do not exceed the FDIC coverage at any one institution. |
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02-07-2009, 01:22 PM
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#4 |
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Registered User
Join Date: Feb 2009
Posts: 2
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Eric and Clyde,
Thank you for the clear advice. We are looking to get set for retirement. My lovely bride is just conservative in nature but after discussing the risks honestly with her she wants to do what I think best. Your comments back up what I am thinking for my basic plan. Here's what we are thinking for the 400k: 1) Ladder Cd's 100k each at 2 regional- local and very strong banks where I know the Presidents and have accounts now. 2) 100k into our Vanguard Target Retirement account to be in the market 3) 60k in a Intermediate Bond Fund, reasonably safe but better return then CD's 4) 40k in CD's to help our kids buy houses in the next 12 to 24 months, should the stimulus plan have very strong provisions for first time home buyers. Appreciate your thoughts on the bond fund idea especially. Thanks Guys |
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02-09-2009, 08:20 PM
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#5 |
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Registered User
Join Date: Dec 2007
Location: Redondo Beach, CA
Posts: 2
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Swan,
It sounds like a reasonable plan. Still far more conservative than I would like, but that's me. The only major amendment that I would consider to the plan would be to the Vanguart Target Retirement fund. Becuase of the length of time before the target date, the fund is still mostly in stocks. However, as the years pass, it will automatically shift to more bonds. Essentially, it works to adjust your asset allocation automatically. But, by placing only 25% of your money in the fund, you are making your own asset allocation decisions. I would continue down this road or controlling your asset allocation. Instead of using a Target Retirement fund, I would use a Total Stock Market fund. In fact, more than 50% of the Target Retirement fund is in the Vanguard Total Stock Market fund. I would split that money 50/50 between the Total Stock Market fund (U.S.) and the International Total Stock Market fund. I have no problem with the Intermediate bond fund. Right now, with the yield curve so flat, you won't see much of a premium (if any) over the CDs, but you should see one over time. Just my thoughts. ET |
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