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  • Where to put proceeds from sale of house

    I have been reading these forums for quite some time but this is my first post. First I want to say thank you because I have learned so much from all of you. Thank you! Anyway - we now have a situation that I could use some advice on. We are a week away from selling our primary residence in the northeast and moving full time to our second home in Florida. We do not have a mortgage and will see a significant amount of money from the sale. We are looking for the best option for the money.
    Some more details - no debt, my husband is 61 and won't take ss until 67, I am almost 60 but have been retired from teaching awhile and get a small pension ($32,000)We have a pretty good amount in retirement accounts but don't want to touch that for at least 5-7 years. Actually once my husband gets ss we probably won't need much of it at all.
    The house proceeds should last that long as well.
    So - should we just get CDs? Treasury notes? (I don't know a lot about these) or should we add some more to our retirement accounts (in the market) Any other ideas?

    Thank you in advance.

  • #2
    It really depends on your appetite for risk.

    CD's or Treasury Bills would be a good option.
    Treasury products will allow you to avoid state and local taxes in some cases. Not sure what the rules are in Florida.

    It would be helpful to see some numbers.
    A picture of your finances would be helpful for others to give advice.
    Brian

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    • #3
      Welcome to the site!

      I'm not clear on the purpose or intent of the house proceeds. It sounds like you are living okay on your husband's income and your pension.

      Do you have a 6-month emergency fund?
      Is the Florida home mortgage-free also?

      If you are totally debt-free and already have sufficient income without the house money, you're in great shape. I would use that money to pad your savings just in case anything happens. While your husband's plan is to not take SS until 67, a lot can happen between 61 and 67 to alter plans.

      If you want to boost your income a bit and be able to spend a little more, I'd put some in a money market like Ally or similar and some in CDs. You can get a little over 2% in a money market and 3% or so in a CD. And if you really don't need the money for anything any time soon, I'd probably invest some of it too. Are you both funding Roth IRAs?
      Steve

      * Despite the high cost of living, it remains very popular.
      * Why should I pay for my daughter's education when she already knows everything?
      * There are no shortcuts to anywhere worth going.

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      • #4
        Does the sale of the home trigger any capital gains tax?

        ensure you keep in mind FDIC limits when deciding where to place the windfall.

        This would be a fun problem to solve but there really arenít enough details.

        You are retired. Is your husband retired?

        the reason I ask is to know whether you can contribute to retirement accounts like a 401k or IRA.

        Where are your investments held - Fidelity, vanguard, other?


        do you have a high yield money market account at Ally or Capital One or other (2%+)?

        Emergency fund?

        etc


        Last edited by Jluke; 07-01-2019, 11:33 AM.

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        • #5
          If you have money in retirement accounts, I assume that means stock market.
          I'd probably put this cash in a CD ladder to keep it pretty readily available and very low risk.

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          • #6
            Sorry if I wasn't clear. My husband has been retired from his full time career for a year or so. It was quite stressful and we thought it was the best option. Prior to his retirement we saved enough money to live on for about 2 years with the plan to sell our house during that time. We have some of that money left but not much. He currently does a little consulting work but doesn't make a ton. Anyway - we will get about 600,000 from the sale.The townhouse in Florida is also mortgage free. We are not big spenders. We like to travel some but nothing extravagant. Our total expenses in our Fl home will be about $30,000. Thats without travel but again - we are pretty budget travelers. Im only clearing about 17,000 from my pension at the moment because both of us are on my health insurance which comes out of it. I will see more of it once my husband is 65 and can go on Medicare.

            So we really won't need that much of the house money. _ maybe 25,000 - 30,000 a year as a guess.
            We also have 1.5 million in retirement accounts that we want to delay touching for as long as possible.
            Should we put the house money all in layered CDs? Or treasury products - is there any risk with that? I am quite hesitant to put much of it into the market because I feel we need more of a safety net if the market tanks.
            Let me know if you need more details. Thanks in advance.

            Comment


            • #7
              We will not have to pay capital gains which is nice. I am aware of the FDIC limits so I know I will have to work with more than 1 institution. I currently have a money market account with my credit union but I need to switch to one with a higher yield. Our retirement accounts are with Pershing.

              Comment


              • #8
                Thanks for sharing those details and great job saving all of that money for retirement and the proceeds from the house.

                My biggest concern (I could be wrong):
                Do you know what fees are being charged with Pershing? If there is an AUM fee or a 12b-1 fee or your funds have high expense ratios, that is costing a lot on 1.5 million. Also if the advisor is churning your account (buy/sell) that is taking money away from you.

                From the 600k, I would probably do 5 years of expenses in CD ladders. So about 150k in CDs laddered however works for you.

                That leaves 450k.

                If you are open to exploring Vanguard for some of your money, they have a few funds that are conservative. Wellesley(VWIAX), LifeStrategy Fixed Income, Balanced Index Fund (VBIAX), one of the target date funds, etc.

                Comment


                • #9
                  Thank you for your thoughts. It looks like laddered CDs is the way to go- at least for some of the money. We will give some more thought to putting more into the market and explore Vanguard funds. I know our Pershing accounts have a .75 % fee. but I need to do a more thorough look at the expenses.

                  Comment


                  • #10
                    Originally posted by tra59 View Post
                    I have been reading these forums for quite some time but this is my first post. First I want to say thank you because I have learned so much from all of you. Thank you! Anyway - we now have a situation that I could use some advice on. We are a week away from selling our primary residence in the northeast and moving full time to our second home in Florida. We do not have a mortgage and will see a significant amount of money from the sale. We are looking for the best option for the money.
                    Some more details - no debt, my husband is 61 and won't take ss until 67, I am almost 60 but have been retired from teaching awhile and get a small pension ($32,000)We have a pretty good amount in retirement accounts but don't want to touch that for at least 5-7 years. Actually once my husband gets ss we probably won't need much of it at all.
                    The house proceeds should last that long as well.
                    So - should we just get CDs? Treasury notes? (I don't know a lot about these) or should we add some more to our retirement accounts (in the market) Any other ideas?

                    Thank you in advance.
                    Just go back from vacation, I will read other replies shortly...
                    first, not enough info is here to give advice.

                    If money will be spent, keep it in CDs or savings.
                    If money needs to last 7 years, consider bonds, maybe treasurydirect, a bond fund, or a real estate investment.
                    If money needs to last greater than 7 years, I would advise on a 40-60 stock-bond portfolio or something similar.

                    Comment


                    • #11
                      Originally posted by tra59 View Post
                      Sorry if I wasn't clear. My husband has been retired from his full time career for a year or so. It was quite stressful and we thought it was the best option. Prior to his retirement we saved enough money to live on for about 2 years with the plan to sell our house during that time. We have some of that money left but not much. He currently does a little consulting work but doesn't make a ton. Anyway - we will get about 600,000 from the sale.The townhouse in Florida is also mortgage free. We are not big spenders. We like to travel some but nothing extravagant. Our total expenses in our Fl home will be about $30,000. Thats without travel but again - we are pretty budget travelers. Im only clearing about 17,000 from my pension at the moment because both of us are on my health insurance which comes out of it. I will see more of it once my husband is 65 and can go on Medicare.

                      So we really won't need that much of the house money. _ maybe 25,000 - 30,000 a year as a guess.
                      We also have 1.5 million in retirement accounts that we want to delay touching for as long as possible.
                      Should we put the house money all in layered CDs? Or treasury products - is there any risk with that? I am quite hesitant to put much of it into the market because I feel we need more of a safety net if the market tanks.
                      Let me know if you need more details. Thanks in advance.
                      $600k sale proceeds- a CD is considered a single deposit, so if you do 6 $100k CDs each CD **should** be insured. Double check with bank.

                      I see two macro numbers $600k in assets, $30k in expenses, with pension income of about $32,000.

                      Expenses are covered.

                      I would advise to think that inflation is your largest risk (in 10 years, the purchasing power of your $600k will be $300k).

                      To solve this, look for a conservative stock-bond mix. I suggest using a portfolio of 40% stocks and 60% bonds, and a good example of this is Vanguard Wellesley. VWINX

                      Depending on your comfort level, I would suggest 100% of portfolio in Wellesley, or consider $150k in CDs (5 CDs of 30k, with maturities at 1 year intervals) and $450k in Wellesley. If you are not an experienced investor, I would suggest three $150k investments in Wellesley, adding $150k each year. (year 1 would be $150k in CDs, $300k cash/savings, $150k in Wellesley, then year 2 is $150k CDs, $150k savings/cash, $300k Wellesley, year 3 the savings/cash is zero if your comfort in Wellesley is ready for $450k to get allocated there.

                      If you need a second internet opinion, I strongly suggest using Bogleheads forum. They may change the 40-60 stock bond advice, but the advice would be similar to this I think.



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                      • #12
                        If you do put the money in CDs, make sure to buy "many" smaller CDs. Breaking a single $100K CD just because you need $10K suffers a much larger penalty than if you have five $20K CDs and break one of them.

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                        • #13
                          Originally posted by Nutria View Post
                          If you do put the money in CDs, make sure to buy "many" smaller CDs. Breaking a single $100K CD just because you need $10K suffers a much larger penalty than if you have five $20K CDs and break one of them.
                          That's an excellent point. As long as the interest rate is the same either way, there's no advantage except a bit less paperwork to have multiple smaller CDs instead of one big one.
                          Steve

                          * Despite the high cost of living, it remains very popular.
                          * Why should I pay for my daughter's education when she already knows everything?
                          * There are no shortcuts to anywhere worth going.

                          Comment

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