Advice needed - What to do with this cash?

[Rambo28]

I have $8000 from a Life insurance plan I am cashing out. Where should I invest this money into next week!? I already have a Roth IRA doing well and a SIMPLE IRA through employer doing well both using index funds through American Funds. I also am invested in Fundrise. Should I add to one of these or do something different? Many thanks!

[HPstache]

Here's an investment order put together by this group that you may find helpful.  Do you have any debts at 7% or higher?

https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153

[Another Reader]

Where is your IRA (what broker or investment manager) and why is it invested in American Funds?  Typically, American Funds have loads (sales commissions) and higher expense ratios than other funds.  Often they are sold by investment advisers that are not looking out for your best interest.

[Rambo28]

SIMPLE IRA is through Wells fargo with 40K in it and has done well. ANWPX and DWGAX are the holdings in that account. Fees are low and that gets a 3% match through my employer.

The american funds Roth IRA is through Northwestern Mutual (probably a problem) I have put in $5175 and have gained $1832 for a total of $7012 since 2014. I only put in $75 a month as this is a side account for me. Fees have only been $70 lifetime.


And for the above question yes I do have debt. I have 140K left on my mortgage and 20K left on my truck. Plan on paying the truck off this year with quarterly bonus throughout the year.

[Another Reader]

SIMPLE IRA is through Wells fargo with 40K in it and has done well. ANWPX and DWGAX are the holdings in that account. Fees are low and that gets a 3% match through my employer.

The american funds Roth IRA is through Northwestern Mutual (probably a problem) I have put in $5175 and have gained $1832 for a total of $7012 since 2014. I only put in $75 a month as this is a side account for me. Fees have only been $70 lifetime.


And for the above question yes I do have debt. I have 140K left on my mortgage and 20K left on my truck. Plan on paying the truck off this year with quarterly bonus throughout the year.

What kind of account do you have at the life insurance company?  Is there some type of annuity involved?

In your shoes, I would open an account at Fridelity or Vanguard and put all new money there.  Then have a good look at what type of "product" the insurance company sold you.  You may be better off closing that account and moving the money to a lower fee account with fewer complications at a pure brokerage house.

[HPstache]

And for the above question yes I do have debt. I have 140K left on my mortgage and 20K left on my truck. Plan on paying the truck off this year with quarterly bonus throughout the year.

What's the interest rate on the truck?

[Rambo28]

And for the above question yes I do have debt. I have 140K left on my mortgage and 20K left on my truck. Plan on paying the truck off this year with quarterly bonus throughout the year.

What's the interest rate on the truck?

Interest rate on the truck is 3.9%

[Rambo28]

SIMPLE IRA is through Wells fargo with 40K in it and has done well. ANWPX and DWGAX are the holdings in that account. Fees are low and that gets a 3% match through my employer.

The american funds Roth IRA is through Northwestern Mutual (probably a problem) I have put in $5175 and have gained $1832 for a total of $7012 since 2014. I only put in $75 a month as this is a side account for me. Fees have only been $70 lifetime.


And for the above question yes I do have debt. I have 140K left on my mortgage and 20K left on my truck. Plan on paying the truck off this year with quarterly bonus throughout the year.

What kind of account do you have at the life insurance company?  Is there some type of annuity involved?

In your shoes, I would open an account at Fridelity or Vanguard and put all new money there.  Then have a good look at what type of "product" the insurance company sold you.  You may be better off closing that account and moving the money to a lower fee account with fewer complications at a pure brokerage house.

The first NM product is a whole life insurance policy.thats the one that I am going to cash in because it was a bad mistake and hasn't lived up to the dividends it was supposed to.
The other NW product is my Roth IRA as mentioned above. Do you think I should close that one too and move it? That one seems to be doing well with one 70$ fees in it's lifetime.

I will look into Vanguard as that was my first thought on where to move the money too.

[Monerexia]

SIMPLE IRA is through Wells fargo with 40K in it and has done well. ANWPX and DWGAX are the holdings in that account. Fees are low and that gets a 3% match through my employer.

The american funds Roth IRA is through Northwestern Mutual (probably a problem) I have put in $5175 and have gained $1832 for a total of $7012 since 2014. I only put in $75 a month as this is a side account for me. Fees have only been $70 lifetime.


And for the above question yes I do have debt. I have 140K left on my mortgage and 20K left on my truck. Plan on paying the truck off this year with quarterly bonus throughout the year.

What kind of account do you have at the life insurance company?  Is there some type of annuity involved?

In your shoes, I would open an account at Fridelity or Vanguard and put all new money there.  Then have a good look at what type of "product" the insurance company sold you.  You may be better off closing that account and moving the money to a lower fee account with fewer complications at a pure brokerage house.

This. In general those accounts are a nightmare of fees that peck you to death over and over and over and burn through any real profit while pumping you full of sunshine. Fidelity and Vanguard FTW.

[MustacheAndaHalf]

SIMPLE IRA is through Wells fargo with 40K in it and has done well. ANWPX and DWGAX are the holdings in that account. Fees are low and that gets a 3% match through my employer.

Earlier you mentioned a 35% cumulative gain over 5 years.  That's about half the U.S. stock market return.  If you had invested in a total stock market fund, your gains would have been closer to +75% for the past 5 years.

I'd strongly recommend you look at the expense ratios in your plan, and put everything in the lowest expense ratio fund.  In every case I've seen, that's always a low cost, passive index fund.  The expense ratio is what percent of your money the fund silently takes from you every year.  Your current funds are higher cost:
ANWPX has an 0.76% expense ratio
DWGAX has a 1.30% expense ratio
Good expenses are below 0.30%, and there's a number of funds below 0.10%.

There's also some good books which base their conclusions on historical stock market data.  "A Random Walk Down Wall Street" was originally published in 1973, and it's 12th edition came out last month.  Any library will have a copy, so you take take a look for free.

[Rambo28]

SIMPLE IRA is through Wells fargo with 40K in it and has done well. ANWPX and DWGAX are the holdings in that account. Fees are low and that gets a 3% match through my employer.

Earlier you mentioned a 35% cumulative gain over 5 years.  That's about half the U.S. stock market return.  If you had invested in a total stock market fund, your gains would have been closer to +75% for the past 5 years.

I'd strongly recommend you look at the expense ratios in your plan, and put everything in the lowest expense ratio fund.  In every case I've seen, that's always a low cost, passive index fund.  The expense ratio is what percent of your money the fund silently takes from you every year.  Your current funds are higher cost:
ANWPX has an 0.76% expense ratio
DWGAX has a 1.30% expense ratio
Good expenses are below 0.30%, and there's a number of funds below 0.10%.

There's also some good books which base their conclusions on historical stock market data.  "A Random Walk Down Wall Street" was originally published in 1973, and it's 12th edition came out last month.  Any library will have a copy, so you take take a look for free.

Thanks for the advice.
Is this as easy as me telling my Wells Fargo adviser to start putting my money in VTSAX(or something of the low expense)? or is it better for me to get a Vanguard account on my own and figure it out myself? I also have the $8000 or so from the original post that I am closing out my life insurance MISTAKE that I did a few years back and transferring that somewhere too.

[Another Reader]

You want to get away from Wells Fargo.  They are fee-oriented and will push you toward investments which bring them fees.  With your lack of experience, you might prefer Fidelity, which can offer you a better website than Vanguard and possibly a nearby office.  Vanguard is fine for set it and forget it, but the customer service is weak.  You should also educate yourself on investing.  The principles are very straightforward and easy to apply.  Read a couple of books and articles recommended around here for starters.  Bernstein's "If You Can" and JL Collins' "Simple Path to Wealth"  Are good introductory books.

Do you have a 401 (k) where you work?  Look into that as well.  If you have an employer match, that's free money.

[Rambo28]

You want to get away from Wells Fargo.  They are fee-oriented and will push you toward investments which bring them fees.  With your lack of experience, you might prefer Fidelity, which can offer you a better website than Vanguard and possibly a nearby office.  Vanguard is fine for set it and forget it, but the customer service is weak.  You should also educate yourself on investing.  The principles are very straightforward and easy to apply.  Read a couple of books and articles recommended around here for starters.  Bernstein's "If You Can" and JL Collins' "Simple Path to Wealth"  Are good introductory books.

Do you have a 401 (k) where you work?  Look into that as well.  If you have an employer match, that's free money.

I read the JL Collins and the past month have dove pretty deep into some search items on this forum. After educating myself a bit more the past few days, I think I understand a little more of what to do. My next question is Roth IRA or trad. IRA for the money I took out of the life insurance surrender. I have $10,000 total to put somewhere.

For a recap, I do have a SIMPLE IRA ($40k) through work which I put in 3% of my salary($125/month) and they match the 3%. That is the one through Wells Fargo, but I can open a Fidelity or Vanguard account and have it go to there instead.
I also have a Roth IRA that I fund $75 per month through northwestern mutual but through American funds. I'm actually not sure what it has to do with northwestern mutual as I log in through American funds to see everything... It is at 7k.

[Another Reader]

How did you open the Roth IRA at Northwestern? Did the Northwestern agent open it for you?  If so, in your shoes, I would read through the paperwork you got from the insurance agent that sold you this.  If you don't have it or it is too complicated, get the agent to explain what type of account this is to you.  If this is a plain vanilla IRA, just transfer the account in kind to Fidelity or Vanguard.  The simplest way to handle an IRA transfer for a plain IRA is to walk into a Fidelity office with an account statement and let them set up the new account and request the transfer.  If it more complicated than that, get a full explanation of the type of account it is.  Then come back here. 

[grobinski]

Hey Rambo28,

You're getting good advice and you're lucky to be straightening things out before you have too much time and money in play. Fees and high expense ratios = giving banks and brokers money that could be yours.

The recommended reads are great and we're glad to hear you've begun to inform yourself. If you want a little more motivation to not pay anybody more than you have to, check out The Retirement Gamble. https://www.pbs.org/video/frontline-retirement-gamble/

Here is a great calculator to illustrate the cost of fees over time.
https://www.begintoinvest.com/expense-ratio-calculator/

I plugged in your $7000 + $1200 more a year - over 20 years the .9 expense ratio of your current funds will cost you $7700 vs $140 on a low fee index like VTSMX, FSKAX or FZROX (zero expense ratio) obviously more $ would be a bigger difference.

So, yeah, figure out what that NW $ is in and how to transfer it. Get the $40k out of Wells Fargo and into Fidelity or Vanguard (I do agree with @Another Reader that Fidelity is somewhat more user friendly, but I also find all of their "tools" and clutter somewhat annoying).



Congrats on taking an important step toward controlling you own $ and toward FI!