Investment advice needed for lump sum settlement

[Nonya2012]

I am married, 50 y/o, and my spouse and I both work full-time. Together, we earn approximately $200K/yr. I recently received a net P.I. lump settlement of approximately $130K, so this money will be tax-free. I already max out my 401K and also recently began taking advantage of a Roth IRA thru my employer, but I think I should allocate more into the Roth vs. the 401k based on what I've recently learned. We have approximately $30K in debt I intend to pay off out of the settlement money which will free up a lot of monthly income. I also intend to put $30K into a money market savings account for our emergency fund (to represent apprx 6 months of living expenses.). We owe about $190K on our mortgage which is at 3.5%. My question is what to do with the remaining $70K. My goal is to invest wisely, albeit conservatively considering our age. If this money could conceivably help us to retire a little earlier than the typical 65 y/o, that would be ideal. I am very financially responsible, but not investment savvy, meaning I won't understand a lot of complex investment terms so pls dumb it down for me if possible. I'm brand new to this forum, so TIA for any help.

[greenskeeper]

With a 190k mortgage what are you blowing $5k/month on?

[Nonya2012]

I am funding college education for 2 kids (as my parents did for me.). One of the ways I fund their education is by taking advantage of a couple of 0% interest credit cards and pay at least $1,000/month on each of them so they will always be paid off before the end of the promotional rate. The debt I will be paying off includes a couple credit cards I have a balance on that are not at a low-no interest rate. Paying off all our debt (minus our mortgage) will free up approximately $5K/mo previously made in payments. My mortgage payment is just under $1300/mo (30 year fixed.)

[Captain Save]

definitely more prudent to contribute more to the roth than the 401k ..

Do you have a retirment plan? do you have a goal of what you 're supposed to earn yearly once you retire? if so, are you there yet?

if you don't you should sit with someone who can try to help you with that or do it yourself..

You should ask yourself how to make that lump sum achieve that goal?

[Nonya2012]

Thanks for your reply, Capt. I'm limited to $6,500/year for the Roth, right? And $24K/yr in 401K and a $6K catch-up? I'm planning to contact my HR benefits person soon to find out the details of how I can accomplish the catch-up.

I haven't done anyhing as far as an actual retirement plan, but I know I need to. I plan to call a financial advisor this week to set an appointment. My spouse and I know the lifestyle we want to live in retirement, but are a little lost in determining how much it will cost. We'd like to keep a small place in the Midwest for summers and live in our RV out West in the winters.

I currently have about $500K in 401K and it has been performing well. I would love to retire before 65, but I'm not sure it will be do-able. I need to do some research into how much we should expect to pay for health insurance for the two of us after retirement. Due to some medical issues, having good medical and drug coverage will be a priority.

I'm hoping that a financial advisor can give me some advice about how to invest the lump sum I currently find myself with so that it can help us reach our retirement goal sooner.

I very much appreciate any tips on this forum!

[Jluke]

welcome... I will point you to another finance forum as well given that you are seeking investment guidance.. it is really well-laid out here so take a look.

If you look for a financial advisor be on the lookout for costly fees and complicated investment strategies - it is a smokescreen to make them look important. Remember, rarely do you see the customer's yachts (a favorite quote of mine I discovered not too long ago).

I believe you want a "fee-only" advisor - where you pay them just for their time and advice. 1% may not sound like much but it will really deplete your retirement savings.

You are on the right track: Max 401k, Max Roth, payoff Credit card debt, establish the Emergency Fund, limit credit card spending, etc.

https://www.bogleheads.org/wiki/Managing_a_windfall

https://www.bogleheads.org/wiki/Prioritizing_investments

https://www.bogleheads.org/wiki/Three-fund_portfolio

[feh]

I'm brand new to this forum, so TIA for any help.

If you are maxing your retirement accounts, then consider opening a taxable investment account.

Please read this page; it will start you down the correct path: https://www.bogleheads.org/wiki/Bogl...g_start-up_kit

[Nonya2012]

Thank you everyone for your advice. I will follow up on all your suggestions and links. I appreciate it very much.

[scfr]

Is it your plan to pay 100% of your children's education? How much is left for you to pay? It sounds like they are in college now, yes? You may want to just set aside as much as you are going to need to pay for the rest of their college in savings since the investment window (how long between now and when you will be using the money) on that money is so short. You could check out the Deposit Accounts web site for where you can get the best interest rates on your savings. You may be able to put some in a regular savings account and some in short-term CDs, depending on when tuition bills will come due.

Then going forward, you could put the money from your income that had been going towards college in to retirement savings.

[Captain Save]

Thanks for your reply, Capt. I'm limited to $6,500/year for the Roth, right? And $24K/yr in 401K and a $6K catch-up? I'm planning to contact my HR benefits person soon to find out the details of how I can accomplish the catch-up.

I haven't done anyhing as far as an actual retirement plan, but I know I need to. I plan to call a financial advisor this week to set an appointment. My spouse and I know the lifestyle we want to live in retirement, but are a little lost in determining how much it will cost. We'd like to keep a small place in the Midwest for summers and live in our RV out West in the winters.

I currently have about $500K in 401K and it has been performing well. I would love to retire before 65, but I'm not sure it will be do-able. I need to do some research into how much we should expect to pay for health insurance for the two of us after retirement. Due to some medical issues, having good medical and drug coverage will be a priority.

I'm hoping that a financial advisor can give me some advice about how to invest the lump sum I currently find myself with so that it can help us reach our retirement goal sooner.

I very much appreciate any tips on this forum!

A word of caution for most financial advisors.. .most are trained on how helping you accumulate wealth .. (mostly via equities) .. however few are trained on retirement planning.. they call your 401k or IRA a retirement plan.. it is not.. it's just a vehicle to accumulate wealth to eventually use during retirement...

A good retirement advisor will start by asking your questions about

1. how much income you need come the day you retire
2. plan around social security.. helping you maximize the SS payout and minimize social security tax.
3. minimizing risk when you're getting close and especially during the early years of retirement
4 your lifestyle.. how and where do you plan to live during retirement..
5. how to protect your assets when you get sick or pass away
6. if he's really good he can plan around medicare/medicaid as well.. cause your health might be your biggest risk in retirement

also figure out which type of advisor he is .. if he makes money via asset under management .. he'd be reluctant to recommend an annuity..

if he makes money mostly by selling annuities.. the more lump sum you use for annuities .. the more he gets paid..

both types can give great recommendation but it's important to know what their agenda might be so you can sniff an advisor pushing a certain product..


Also since you want to save money conservatively ... if you're doing it in a lump sum fashion.. a Modified Endowment contract could conservatively double in 15 years ... however your gains will be taxable.. but IMO it's worth it if you're health and have a lump sum. and you still have access to the cash if you need it.

a modified endowment contract is a life insurance policy that doesn't qualify as a true life insurance policy because it has too much cash ... if it were a life insurance policy it would not be taxable.. so you lose that advantage..

[Nonya2012]

Is it your plan to pay 100% of your children's education? How much is left for you to pay? It sounds like they are in college now, yes? You may want to just set aside as much as you are going to need to pay for the rest of their college in savings since the investment window (how long between now and when you will be using the money) on that money is so short. You could check out the Deposit Accounts web site for where you can get the best interest rates on your savings. You may be able to put some in a regular savings account and some in short-term CDs, depending on when tuition bills will come due.

Then going forward, you could put the money from your income that had been going towards college in to retirement savings.

I do intend to pay 100% of their Bachelor Degree (actually 50% because my ex and I are each paying half.) My oldest only has one more semester left and then will be going off to grad school to get a PhD and she's on her own then. My youngest is a sophomore and only intends to get a Bachelors Degree so another 2 1/2 years or so there depending on how long it takes her.

I like the idea of setting aside the money for tuition and then increasing my 401K and Roth contributions but I'm already maxing them out now.

Everyone on here is so nice and has such great ideas! I really appreciate the insight and am very glad a joined this site.

[Petunia 100]

Thanks for your reply, Capt. I'm limited to $6,500/year for the Roth, right? And $24K/yr in 401K and a $6K catch-up? I'm planning to contact my HR benefits person soon to find out the details of how I can accomplish the catch-up.

I haven't done anyhing as far as an actual retirement plan, but I know I need to. I plan to call a financial advisor this week to set an appointment. My spouse and I know the lifestyle we want to live in retirement, but are a little lost in determining how much it will cost. We'd like to keep a small place in the Midwest for summers and live in our RV out West in the winters.

I currently have about $500K in 401K and it has been performing well. I would love to retire before 65, but I'm not sure it will be do-able. I need to do some research into how much we should expect to pay for health insurance for the two of us after retirement. Due to some medical issues, having good medical and drug coverage will be a priority.

I'm hoping that a financial advisor can give me some advice about how to invest the lump sum I currently find myself with so that it can help us reach our retirement goal sooner.

I very much appreciate any tips on this forum!

Your spouse can also contribute to a Roth IRA.

If it were me, I would skip the salesperson and put the rest into an s & p 500 index fund, such as this one: https://personal.vanguard.com/us/fun...FundIntExt=INT

[LivingAlmostLarge]

How much is left for funding college? Sounds like you are in the midst of 1 semester left and 2.5 years. Maybe you should just earmark that $70k for that and call it a day. I assume you are on the hook for 50% for college per divorce decree?

[Nonya2012]

How much is left for funding college? Sounds like you are in the midst of 1 semester left and 2.5 years. Maybe you should just earmark that $70k for that and call it a day. I assume you are on the hook for 50% for college per divorce decree?

Yes, that's correct. But even if I set aside that money, since I'm only paying 50% (I have an informal agreement with my ex and so far it has been honored.). That would mean I probably only need $40K at the most to finish that up. I made an appointment to meet with a retirement planner next week so once I tell him how/when we'd like to retire, our current investments and assets, etc, he will be able to help us with some suggestions. I just didn't want to go into the appointment "blind," without also getting advice from the ppl like yourself on this site. It will certainly help me in knowing the right questions to ask.