Author Topic: I have $25K to spend - but how?  (Read 1524 times)

dcsaver

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I have $25K to spend - but how?
« on: May 17, 2019, 05:57:26 AM »
I have $25K to spend - but how?

My situation: I am semi-retired, work part-time. Last year, my father died and an insurance policy paid me $25K which has been sitting around in the credit union. I need to invest it.

I earn $25K part time, plus freelance work. My yearly earnings average $40K.

My home is paid off. No kids. I’m 64 years old in decent health. My ‘stache is $760,000.

I know everyone recommends Vanguard, but exactly what sorts of investment items should I buy?

ZMonet

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Re: I have $25K to spend - but how?
« Reply #1 on: May 17, 2019, 06:39:49 AM »
Without knowing anything more, I'd say put the $25k in VTSAX (Vanguard Total Stock Market Index Fund Admiral Shares).

You need an investment plan.  Once you figure out why you're investing things (allocations, investment vehicles, etc.) will become a lot easier.

dcsaver

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Re: I have $25K to spend - but how?
« Reply #2 on: May 17, 2019, 08:29:17 AM »
I'm just trying to place the $25,000 in something that will do better than a savings account.

swinginbeef

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Re: I have $25K to spend - but how?
« Reply #3 on: May 17, 2019, 08:56:41 AM »
Probably a little against the grain around here but personally, I think you should consider spending/donating at least a chunk of it on something to honor your old man. Take a nice, reflective trip. Buy something for yourself that you think your dad would have liked. Donate a chunk to a cause or charity your dad appreciated. Then put the remainder (if there is a remainder, it's fine if there's not) into VTSAX.

You mention your income but not really much about your expenses, so it's hard to tell your feelings about actually NEEDING that money in the future.

dcsaver

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Re: I have $25K to spend - but how?
« Reply #4 on: May 17, 2019, 12:09:13 PM »
I like the idea about giving part of it away. My father was quite generous so that would be a great way to honor him.

sisto

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Re: I have $25K to spend - but how?
« Reply #5 on: May 17, 2019, 12:31:23 PM »
I like what @swinginbeef said. Then I'd put the rest in VTSAX.

Rob_bob

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Re: I have $25K to spend - but how?
« Reply #6 on: May 17, 2019, 03:45:12 PM »
I'm just trying to place the $25,000 in something that will do better than a savings account.

You didn't say how soon you might need this money or how much risk/volatility you are willing to take.

Online savings accounts can pay around 2.3%, CDs more than that.  Or a total stock market fund for longer term growth with more volatility.  There are bond funds, preferred stock funds that have less volatility and yields ranging from ~2% to 6%.  Or Real Estate Investment Trusts, REIT funds.

Lots of options but you have to know yourself and have a goal for the money.

dcsaver

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Re: I have $25K to spend - but how?
« Reply #7 on: May 17, 2019, 04:03:16 PM »
Right now I don't have any pressing financial needs. Since I'm old, I figure something fairly conservative is my best bet. I parked the money in the credit union while I was trying to wind up my father's business and tend to life. But now I know I need to move it to somewhere it can grow.

dandarc

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Re: I have $25K to spend - but how?
« Reply #8 on: May 17, 2019, 05:32:26 PM »
How is your $760K invested?

BicycleB

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Re: I have $25K to spend - but how?
« Reply #9 on: May 17, 2019, 05:37:20 PM »
What you need really depends on the many unspecified factors that other posters have mentioned.

For example, if you spending needs are covered by your Social Security payment, you don't need to do anything with the $25k.

If your income from the $760k plus SS barely covers your spending, maybe VSMGX (Vanguard Lifestrategy Moderate Growth Fund).

Really, as has been stated, it depends on your other investments / income streams, your spending needs and patterns, plus your personal goals. A standard careful approach would be to take these factors into account, and use them to establish an investment plan, a personalized Investment Policy Statement, that suits you. Look up "IPS" for examples and more discussion. The $25k would then automatically be investable according to your investment plan.

frugaldrummer

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Re: I have $25K to spend - but how?
« Reply #10 on: May 17, 2019, 06:24:13 PM »
Yeah, definitely need to know how your $760k is invested? And how secure your future is without this 25k?

If you're as financially stable as it appears and are quite comfortable at your current $40k per year spending, then why not use the $25k for something that really means a lot to you? You're financially set, not "old" at 64 (I'm not at 63! Just got back from the gym!) and if there is something you've always wanted to do (travel? Buy a Harley? Put in a pool? Get a jacuzzi? Buy a grand piano?) now is the time while you can still enjoy it.

I'm not suggesting just blowing money for the sake of blowing it, but using this gift to do or buy something that will give you pleasure over time. Now, if you don't feel your financial picture is as good as it appears, i'd either add it to your investments or use it for practical items if needed, like a new roof or other home maintenance.

frugaldrummer

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Re: I have $25K to spend - but how?
« Reply #11 on: May 17, 2019, 06:35:14 PM »
Btw the reason I say you're in good shape, a 4% withdrawal rate on your $760,000 would give you $30,000 a year. Assuming your social security benefits will be at least $10,000 a year, sounds like you've got things covered.

And if you're uncomfortable with spending all of the $25,000, how about investing $20,000 and spending 5k? That's plenty for a trip to Europe or Hawaii, or a good used piano, or a whole rock band worth of instruments, or nice furniture, or whatever would float your boat.

dcsaver

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Re: I have $25K to spend - but how?
« Reply #12 on: May 17, 2019, 08:35:59 PM »
My expenses are pretty low; I do everything I want to do on the $40K per year. The $760K is a mix of 401K money and investments.At the time social security kicks in, I'll get about $2200 a month. But I hope to delay collecting that by continuing to work. And when my mother passes, I'll probably get something, too.

I like the suggestions about giving away some money. I wouldn't have thought of that.Thanks for the feedback, fellow Mustachions! It was extremely helpful.

ColoradoSaving

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Re: I have $25K to spend - but how?
« Reply #13 on: May 17, 2019, 08:43:01 PM »
$25,000 is worth about $1000 a year of safe withdrawals, so $83 a month to start.

As others suggested, taking $5,000 might be fun, and investing the rest in VTSAX.

Lulee

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Re: I have $25K to spend - but how?
« Reply #14 on: May 18, 2019, 08:06:29 AM »
I like the suggestions about giving away some money. I wouldn't have thought of that.Thanks for the feedback, fellow Mustachions! It was extremely helpful.

@dcsaver , if you like the idea of giving some of it away, there's a thread you might like --- https://forum.mrmoneymustache.com/welcome-to-the-forum/most-fun-you've-ever-had-giving-away-money/.  I loved reading about people doing things anonymously, the kindness of their generosity paired with a bit of sneaky fun!

dcsaver

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Re: I have $25K to spend - but how?
« Reply #15 on: May 18, 2019, 08:44:35 AM »
That's an absolutely inspirational thread! I think I'll try to give away some  money anonymously - but in a way where I can see the results or at least the receipt of the funds. Normally, I can be a bit of a miser - this should be a good exercise for me.

MrThatsDifferent

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Re: I have $25K to spend - but how?
« Reply #16 on: May 18, 2019, 04:08:22 PM »
That's an absolutely inspirational thread! I think I'll try to give away some  money anonymously - but in a way where I can see the results or at least the receipt of the funds. Normally, I can be a bit of a miser - this should be a good exercise for me.

You seem to be ok so the $25k is just extra. If you’re looking at doing something with the money, I’d suggest www.kiva.org. They’re the perfect non profit for me. They provide micro loans to people so you can help people helping themselves. The nice bit is when they repay the money and you get your money back, you can keep lending that to more people. You can also donate to kiva to help them keep the program going. To me, it’s the most mustachian non profit around.

dcsaver

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Re: I have $25K to spend - but how?
« Reply #17 on: May 19, 2019, 08:40:06 PM »
I never heard of Kiva before. Thanks for the suggestion; I might try them out.

Raymond Reddington

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Re: I have $25K to spend - but how?
« Reply #18 on: May 25, 2019, 08:44:46 AM »
1/2 in VTSAX, 1/2 in a municipal bond fund that's exempt from taxes in your state as well as federal