Investment suggestions for CASH ($1MM tax cleared and $750K in retirement a/c)

[chagan]

Sitting on $750K in cash in a retirement account, and post tax cash ~ $1.1M in a savings account (currently early 5.65% APY) for another month maximum...

Any suggestions of best way to put all that money to good use?

[Freedomin5]

Have you looked at the investment order?

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

[EvenSteven]

It would be a useful exercise to write an investment policy statement:

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


Start with how much immediate liquid cash you need, usually somewhere between 3 and 12 months worth of expenses, and keep that in cash or 3 month T-bills.

There is a wide range of investments that can be appropriate. Pick how much equity vs fixed income you would like. Generally anywhere from 40% stocks/ 60% bonds, all the way up to 100% stocks. Use low cost, widely diversified index funds for both stocks and bonds.

Then decide what you want your ratio of US to international you want. Start at the market cap, somewhere around 60/40 US/International. If you have a strong preference, you could go all the way up to 100% US and probably be OK.

Rebalance once a year, unless you forget, then do it whenever you happen to remember.

Then go do fun things you enjoy.

[ChpBstrd]

You'd have to post some more info about yourself (working or FIRE, old or young, risk tolerant or intolerant, objectives, etc.). Also does "tax cleared" mean in a Roth?

Otherwise the standard advice becomes put it all in VTI.

[MDM]

Consider Tax-efficient fund placement - but only after you have decided on your desired overall Asset allocation.

[MustacheAndaHalf]

Very light on details, so I don't know if this is an inherited IRA:

"The SECURE Act mandated that non-spousal beneficiaries must withdraw all the funds from an inherited IRAs within 10 years."
https://www.investopedia.com/terms/i/inherited_ira.asp

[chagan]

My apologies for the ultra light details:

This is cash in a savings account, not an IRA. This is not cash needed for day to day use or for 3-12 months of expenses.. This is free and clear cash that I have been sitting on and have not deployed in the market, besides earning 5.65% on a savings account.

Both me and the wife still work, and make about $650K a year between the 2 of us. My income is through a small business so most of it goes towards Defined Benefit Plan and solo 401K. No particular reason for not doing F.I.R.E besides liking to work, although more importantly not sure what exactly I want to do after R.E.

Assets:
Cash: $1.1M (the one I am having this question on where to invest)
Equity: $850k (one home in Chicago that we reside in, and 2 rental properties in AZ, all paid off)
Cars: $30k (paid off)
Retirement accounts (include Defined benefit pension and both 401ks): $3M
Taxable Brokerage account assets: $1M
Roth IRA: Approx $18K
Wife's vested RSUs: $700K
Foreign Assets: $300K

[Heckler]

Any suggestions of best way to put all that money to good use?

You’re not quite Space Travel rich, but I would say you’ve made it.

Spend it on experiences with friends and family before you or your dearest pass away.

[ATtiny85]

Very light on details, so I don't know if this is an inherited IRA:

"The SECURE Act mandated that non-spousal beneficiaries must withdraw all the funds from an inherited IRAs within 10 years."
https://www.investopedia.com/terms/i/inherited_ira.asp

It’s not, but what would it change if it was? A little tax planning perhaps, but the base question remains.

[MustacheAndaHalf]

Very light on details, so I don't know if this is an inherited IRA:

"The SECURE Act mandated that non-spousal beneficiaries must withdraw all the funds from an inherited IRAs within 10 years."
https://www.investopedia.com/terms/i/inherited_ira.asp

It’s not, but what would it change if it was? A little tax planning perhaps, but the base question remains.

I had two assumptions you may disagree with: (1) annual withdrawals (2) ensuring the money doesn't drop significantly before withdrawal.  For the next few years, that would mean a cash allocation to protect the amount.  The last few years could start in equities, but at some point there wouldn't be enough time for a recovery, which pushes the stock allocation closer to 0% over time.

OP has since clarified the above situation doesn't apply to them.

[MustacheAndaHalf]

Cars: $30k (paid off)

This reminds me of "The Millionaire Next Door", where the biggest draw for a group of midwestern deca-millionaires was the free food.  They drove beat-up old cars and wore denim jeans to work.

If you haven't thought about the assets you need to retire, consider it.  Spending extra years working is fine if you enjoy the work, but your savings could provide you other options.

Foreign Assets: $300K

I live outside the U.S. and file FBAR every year (bank or other assets over $10,000 USD).  At $300k in foreign assets, you might need to file some additional IRS forms as well.
https://www.irs.gov/businesses/corporations/do-i-need-to-file-form-8938-statement-of-specified-foreign-financial-assets

Cash: $1.1M (the one I am having this question on where to invest)

I'll compare two bond ETFs to demonstrate the value of municipal bonds for someone in the 35% bracket:

BND : Vanguard Total Bond Market ETF, 4.75% SEC yield (after 35% Fed tax : 3.09%)
VTEB : Vanguard Tax-Exempt Bond ETF, 3.59% SEC yield (after 35% Fed tax : 3.59%)

VTEB has higher quality bonds (2.5% BBB vs 13.4%) but is slightly more sensitive to interest rates (6.5x duration compared to 6.1x duration).  The interest is exempt from Federal income tax, and the municipal bonds are diversified across the U.S.

[chagan]

My thanks for the thoughtful suggestions.

I laughed out loud on the deca millionaires driving beat up cars comment. I can see how it might look like my $30K car being beat up but its a pretty nice Acura SUV, pretty modern with all necessary current age gizmos that serves our purpose.

I do file FBAR, although FBAR is more on Foreign income and not just assets holdings, it does focus on financial assets, my real estate assets dont need to be declared in there far as I know, only the income on those assets towards rent proceeds etc has to be declared.

I had thought about straight up MUNI ladders as an alternative, but Vanguard Bond ETFs is also a good idea, lot cheaper in terms of cost of entry. Couple Citibank Private client reps are on my case to earn some commission on MUNI/bond ladders.