How would you invest $25,000 windfall

[vespito]

Hi all,

My wife may be receiving a windfall - not sure on the amount.  If it were up to her, she would keep it all in cash.  I am trying to find a simple plan of action that would better serve her.  Currently, she only has about $25,000 saved for retirement invested in VTSAX (she is mid-30's).  She has no 401k through work; she has/will max out her Roth each year.  I'd like her to take any windfall to supplement her retirement funds.

Assumptions:
Maxing out my 410k and both of our Roth IRA's
No debt
Adequate emergency fund
We do not plan on buying home in immediate future

[Saverocity]

Hi all,

My wife may be receiving a windfall - not sure on the amount.  If it were up to her, she would keep it all in cash.  I am trying to find a simple plan of action that would better serve her.  Currently, she only has about $25,000 saved for retirement invested in VTSAX (she is mid-30's).  She has no 401k through work; she has/will max out her Roth each year.  I'd like her to take any windfall to supplement her retirement funds.

Assumptions:
Maxing out my 410k and both of our Roth IRA's
No debt
Adequate emergency fund
We do not plan on buying home in immediate future

What is your monthly disposable income that could be invested additionally to this 25K?

[KingCoin]

Just max out all your retirement accounts. Any reason that you wouldn't?

[Will]

What do you hope to gain by sitting out and then DCA-ing in?

[vespito]

Thanks for the feedback.

@Saverocity - currently, my wife makes monthly contributions to her roth.  Basically, she invests $5500 a year.  No more but I'm trying to change that.  She is very frugal already but there may be a few places she could cut back.  Still, considering her income I can't complain.

@KingCoin - we already max out retirement accounts.  I'm just trying to find an easy investment vehicle for my wife's post-retirement savings.  I'll probably be handling the account maintenance, but she needs to decide (or at least agree to) how the money will be invested.

@will - Not sure!  If I'm honest, it's an irrational fear that the day she/I invest the money, the market will somehow hit a high and then it'll be downhill from there.  OK, that sounds dumb when I type it out...

[KingCoin]

@KingCoin - we already max out retirement accounts.  I'm just trying to find an easy investment vehicle for my wife's post-retirement savings.  I'll probably be handling the account maintenance, but she needs to decide (or at least agree to) how the money will be invested.

Ah, missed that in the OP. I'd choose the target date then lacking other information about your portfolio. Really, you need to come up with a target asset allocation and then figure out to spread your different accounts across assets to achieve that target.

No reason to DCA unless you're seriously worried about buyer's remorse.

[Saverocity]

Thanks for the feedback.

@Saverocity - currently, my wife makes monthly contributions to her roth.  Basically, she invests $5500 a year.  No more but I'm trying to change that.  She is very frugal already but there may be a few places she could cut back.  Still, considering her income I can't complain.

@KingCoin - we already max out retirement accounts.  I'm just trying to find an easy investment vehicle for my wife's post-retirement savings.  I'll probably be handling the account maintenance, but she needs to decide (or at least agree to) how the money will be invested.

@will - Not sure!  If I'm honest, it's an irrational fear that the day she/I invest the money, the market will somehow hit a high and then it'll be downhill from there.  OK, that sounds dumb when I type it out...

The reason I asked is to balance the DCA option.  The concern people have is if they dump the windfall in and the market drops there will be remorse - if there is sufficient available monthly disposable income that could start DCA from that point to rebuild any hit on the $25K you could go all in and would probably be better off. 

Think about a 10% monthly drop in the market, would mean your 25K went down to 22.5K - if you had a spare 1K at that point you could rebuild and protect by buying cheap.

[vespito]

I really appreciate the feedback.

@Saverocity - I see what you mean.  I think DCA is something I won't worry about in this specific situation - I think getting the money invested sooner is the way to go.  I invest $500 month outside of my 401k, so that should offset any remorse.  I'm always buying index funds and plan on doing so until FI is achieved.

@Kingcoin - " Really, you need to come up with a target asset allocation and then figure out to spread your different accounts across assets to achieve that target" - yes - that is pretty much the right thing to do.  I'm just (making excuses...) trying to get my partner to take a little more ownership which is why I've been focusing on simple.  But I agree, our portfolio should be looked at holistically; doing things piecemeal is probably not the most efficient way.

[Saverocity]

I really appreciate the feedback.

@Saverocity - I see what you mean.  I think DCA is something I won't worry about in this specific situation - I think getting the money invested sooner is the way to go.  I invest $500 month outside of my 401k, so that should offset any remorse.  I'm always buying index funds and plan on doing so until FI is achieved.

@Kingcoin - " Really, you need to come up with a target asset allocation and then figure out to spread your different accounts across assets to achieve that target" - yes - that is pretty much the right thing to do.  I'm just (making excuses...) trying to get my partner to take a little more ownership which is why I've been focusing on simple.  But I agree, our portfolio should be looked at holistically; doing things piecemeal is probably not the most efficient way.

I think the best advice I could give you based on your feedback is to sit down with your wife and explore why her choices are what they are, it might be some deep seated emotional factors that are influencing her money choices - if you can find a way to unearth those in a friendly environment and find alignment, even if such alignment is a little more conservative that the optimum investment you will probably be in much better shape overall.

Explore her childhood, any periods where there was too much risk, or periods of cash flow shortages/poverty and see if you can rebuild a trusting plan together.  Big picture $25K doesn't mean a hoot compared to getting the two of you on the same track.

[dachs]

Dollar cost averaging does not make sense if you think that the stock market will grow over time. And if you don't, you should not invest in stocks!

[Frankies Girl]

Been there, done that but on a larger scale. Got a substantial inheritance after my dad died in 2012. Was a big catalyst for me finding MMM in the first place. I knew nothing about investing and was pretty scared of the stock market.

I did my homework, read stuff from MMM, the Mad FIentist and JLCollins, and I'm not scared any more. Fear is what happens when you lack knowledge.

I put 95% into the stock market in index funds, and as soon as the other bit comes through, it's going in there too.

[WillPen]

If you know you're going to be buying a home within the next year or two, I would hang onto it.

Otherwise, I would put it in VTSAX or whatever you asset allocation calls for.

My wife and I are (or were) in the same situation -- We had a chunk of change but weren't sure what to do with it. It so turns out we have a real estate opportunity I think we will act on. She's probably like your wife -- She would just assume hang onto it because she's risk averse and weary of the stock market.