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One more to add is Reddit's Personal Finance, where this question gets asked a lot. The wiki (second link, search for Windfall) esp has a number of great articl

by nemild 6y ago

One more to add is Reddit's Personal Finance, where this question gets asked a lot. The wiki (second link, search for Windfall) esp has a number of great articles on topics like this. https://www.reddit.com/r/personalfinance/ https://www.reddit.com/r/personalfinance/ https://www.reddit.com/r/personalfinance/wiki/index https://www.reddit.com/r/personalfinance/wiki/index

alex_sikora 6y ago
I'd probably recommend https://old.reddit.com/r/FatFIRE https://old.reddit.com/r/FatFIRE over /r/pf as it's more likely to have people that have experienced getting a large lump sum like this.
- monktastic1 6y ago
  FatFIRE is for people who want to live large off their savings (usually understood as >$100k/yr passive income, which generally requires $2.5M+ in invested assets). That doesn't seem to describe OP's position. If FIRE is an interest, then https://www.reddit.com/r/financialindependence/ https://www.reddit.com/r/financialindependence/ is a better bet.
  - Justin_K 6y ago
    4% roi is far worse than market and real estate averages.
    - rabidrat 6y ago
      Not anymore.
      - Justin_K 6y ago
        Based upon what?
        dmoy 6y ago
        It's not 4% ROI, it's 4% withdrawal rate. And even that is not super safe if you're retiring for many decades (the RE part). You can use a variety of online calculators to back test a 4% withdrawal rate - maybe 80% safe, but 20% of the time you'll go broke before dying.
        IvoCass 6y ago
        Why isn't it safe? Or where can I read more on that?
        dmoy 6y ago
        Sure, so there's a few things to look at. The first is going back to the origins of the 4% number in the first place, the trinity study. The parameters for that were a 30 year retirement period, and success was "not completely run out of money after 30 years, 95% of the time". If you extrapolate from that original study, if you retire for more than 30 years (FIRE includes retiring early), success drops from 95%. There's articles exploring that, e.g. https://www.fiphysician.com/safe-withdrawal-rate-early-retirement/ https://www.fiphysician.com/safe-withdrawal-rate-early-retir... https://www.madfientist.com/safe-withdrawal-rate/#:~:text=The%204%25%20rule%20is%20actually,average%20returns%20or%20nominal%20returns https://www.madfientist.com/safe-withdrawal-rate/#:~:text=Th... And then there are a variety of online calculators where you can play with the numbers yourself. The other elephant in the room is pre-Medicare healthcare costs.
    - icedchai 6y ago
      4% is what FIRE folks consider "safe" over long periods of time. It is based on the well-known Trinity study: https://en.wikipedia.org/wiki/Trinity_study https://en.wikipedia.org/wiki/Trinity_study
      - Justin_K 6y ago
        ...but it's still worse than market averages.
        doingmyting 6y ago
        Yes, that's why it's considered the worst case and a safe bet to withdraw
        voisin 6y ago
        I think it is 4% nominal, which leaves some excess returns to keep pace with inflation.
- koolba 6y ago
  I really appreciate linking directly to old reddit rather than the crap default.
BbzzbB 6y ago
PF will say the same thing as always (not that it's wrong), i.e. SPY if you're risk-tolerant, some Vanguard I don't recall (VOO?) if you're less so.
- arcticbull 6y ago
  VOO and SPY are basically the same thing, SPY is older and structured as a trust, VOO is an ETF. Both track the S&P 500. They'll probably recommend some combination of equity and bonds, probably a split between VOO (slightly lower fees and more efficient payout of dividends -- I do mean slightly) and TLT (20+ year treasuries). VOO and TLT have limited correlation as treasuries are seen as a safe-haven. We've seen huge spikes in treasury funds recently, since they go up in value when interest rates go down. It's a bit unintuitive, but treasury funds have to cycle through their holdings over time to track the index, so when interest rates on new issues go down, older issues command a premium in the amount of pre-paid interest.
- reducesuffering 6y ago
  VOO is the same index as SPY (SP500), so that can't be it. Maybe you meant BND, a highly popular total bond market ETF that would be for the risk-intolerant?
- csmiller 6y ago
  Maybe VTSAX?

by nemild 6y ago

alex_sikora 6y ago

I'd probably recommend https://old.reddit.com/r/FatFIRE https://old.reddit.com/r/FatFIRE over /r/pf as it's more likely to have people that have experienced getting a large lump sum like this.

monktastic1 6y ago
FatFIRE is for people who want to live large off their savings (usually understood as >$100k/yr passive income, which generally requires $2.5M+ in invested assets). That doesn't seem to describe OP's position. If FIRE is an interest, then https://www.reddit.com/r/financialindependence/ https://www.reddit.com/r/financialindependence/ is a better bet.
- Justin_K 6y ago
  4% roi is far worse than market and real estate averages.
  - rabidrat 6y ago
    Not anymore.
    - Justin_K 6y ago
      Based upon what?
      - dmoy 6y ago
        It's not 4% ROI, it's 4% withdrawal rate. And even that is not super safe if you're retiring for many decades (the RE part). You can use a variety of online calculators to back test a 4% withdrawal rate - maybe 80% safe, but 20% of the time you'll go broke before dying.
        IvoCass 6y ago
        Why isn't it safe? Or where can I read more on that?
        dmoy 6y ago
        Sure, so there's a few things to look at. The first is going back to the origins of the 4% number in the first place, the trinity study. The parameters for that were a 30 year retirement period, and success was "not completely run out of money after 30 years, 95% of the time". If you extrapolate from that original study, if you retire for more than 30 years (FIRE includes retiring early), success drops from 95%. There's articles exploring that, e.g. https://www.fiphysician.com/safe-withdrawal-rate-early-retirement/ https://www.fiphysician.com/safe-withdrawal-rate-early-retir... https://www.madfientist.com/safe-withdrawal-rate/#:~:text=The%204%25%20rule%20is%20actually,average%20returns%20or%20nominal%20returns https://www.madfientist.com/safe-withdrawal-rate/#:~:text=Th... And then there are a variety of online calculators where you can play with the numbers yourself. The other elephant in the room is pre-Medicare healthcare costs.
  - icedchai 6y ago
    4% is what FIRE folks consider "safe" over long periods of time. It is based on the well-known Trinity study: https://en.wikipedia.org/wiki/Trinity_study https://en.wikipedia.org/wiki/Trinity_study
    - Justin_K 6y ago
      ...but it's still worse than market averages.
      - doingmyting 6y ago
        Yes, that's why it's considered the worst case and a safe bet to withdraw
      - voisin 6y ago
        I think it is 4% nominal, which leaves some excess returns to keep pace with inflation.
koolba 6y ago
I really appreciate linking directly to old reddit rather than the crap default.

BbzzbB 6y ago

PF will say the same thing as always (not that it's wrong), i.e. SPY if you're risk-tolerant, some Vanguard I don't recall (VOO?) if you're less so.

arcticbull 6y ago
VOO and SPY are basically the same thing, SPY is older and structured as a trust, VOO is an ETF. Both track the S&P 500. They'll probably recommend some combination of equity and bonds, probably a split between VOO (slightly lower fees and more efficient payout of dividends -- I do mean slightly) and TLT (20+ year treasuries). VOO and TLT have limited correlation as treasuries are seen as a safe-haven. We've seen huge spikes in treasury funds recently, since they go up in value when interest rates go down. It's a bit unintuitive, but treasury funds have to cycle through their holdings over time to track the index, so when interest rates on new issues go down, older issues command a premium in the amount of pre-paid interest.
reducesuffering 6y ago
VOO is the same index as SPY (SP500), so that can't be it. Maybe you meant BND, a highly popular total bond market ETF that would be for the risk-intolerant?
csmiller 6y ago
Maybe VTSAX?