Author Topic: investing a windfall  (Read 3834 times)

MNM

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investing a windfall
« on: February 16, 2015, 12:19:17 PM »
this topic has been covered quite a bit, but some of my questions get at other issues...   i welcome people's thoughts.

i've received a windfall of about $100k (no taxes).

single, no kids, 37yo

my situation before the windfall is this:
290k in assets, with an 80/20 AA.  the bonds are all in my work 401(k) and a trad IRA.  otherwise, stock index funds.

35k in taxable vanguard acct
35k in trad IRA vanguard
25k in roth vanguard
16k in TIAA-CREF annuity
180k in 401(K) fidelity

no debt

if i choose the logic of "invest the winfall in your taxable acct at your current AA," then i'd be holding bonds in my taxable account.

i don't want to move funds from my roth or trad ira into bonds (for purpose of rebalancing) because i plan to hold these a very very long time and want to keep these funds in equities.

so i could:
- rebalance my work 401(k) more heavily toward bonds and invest the windfall in stock index funds
- leave current assets allocated as they are.  invest the windfall in stock index funds knowing it's a gamble.
- suck it up and hold bonds in my taxable accounts.

I'm saving about $40,000/year.  Should have enough to FIRE at 50, even without the windfall, and don't have a goal of leaving work much sooner than that.

i've hesitated to post this because it feels like a silly question -- everyone's situation is different.  But i feel a real tension between holding stocks in the funds i plan to tap into last (roth and IRA, which i plan to roll into my roth eventually), and putting bonds in my tax-advantaged accounts.


Mississippi Mudstache

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Re: investing a windfall
« Reply #1 on: February 16, 2015, 12:52:59 PM »
- rebalance my work 401(k) more heavily toward bonds and invest the windfall in stock index funds

This would be my choice.

aj_yooper

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Re: investing a windfall
« Reply #2 on: February 16, 2015, 02:28:00 PM »
If you haven't maxed out your 401k and other tax sheltered space (assuming you will retire in a lower tax bracket), you could put more money there and compensate for any loss of income you may need by tapping the windfall for that amount.  Otherwise, index funds in a Roth, if available to you, or a taxable account.  Have you fully funded a HSA account at work?  If you want bonds in a taxable, you could do a municipal index.

Retired To Win

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Re: investing a windfall
« Reply #3 on: February 17, 2015, 06:27:47 AM »
I would opt for gradual rebalancing instead of trying to make the allocations work right off the gitgo.  You say you are saving $40,000 a year.  You could factor in the $100,000 windfall into your next 12-month saving/investing profile and place the money where your allocation plan indicates in monthly modules of about $11-12,000 a month.

Good luck.

Wolf359

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Re: investing a windfall
« Reply #4 on: February 19, 2015, 05:10:44 PM »
What about using tax exempt bond funds in the taxable accounts?  That minimizes your taxes, while reserving your precious tax-deferred/exempt accounts for capital appreciation.  It also simplifies things -- you can simply AA as originally called for, without worrying about keeping bonds out of the taxable accounts.

Financial.Velociraptor

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Re: investing a windfall
« Reply #5 on: February 19, 2015, 06:17:38 PM »
I also vote for the municipal bond fund.  I like (and hold) NIO for that purpose.