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Investing help. What's my next move?

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  • Investing help. What's my next move?

    Age 53, wife age 51
    Income of 380000$ pre tax
    Mortgages #1 primary residence $220000 at 2.875, currently paying $5000.00/mo
    Mortgage #2 vacation home $170000 at 3.125% currently paying $6000.00/mo
    No credit card debt
    Two kids in college, education already covered
    Savings of $500,000 after recent lump sum non qualified deferment payout of $350000 from job change (after taxes)
    401 k maxed out with $800,000 currently

  • #2
    Not really sure what the precise question is.  If it is how should you invest the $500k, I would recommend using the Boglehead three fund portfolio with a stock/bond allocation you are comfortable with.  If you are unsure about the allocation, look up target date funds at Vanguard for a date when you want to use the cash and get close to the allocation they recommend.  You can either invest a lump sum or smaller amounts each month for a year or two if you are uncomfortable with lump sum.

    How are you paying $11k per month on $390k of mortgages?  Are you paying down principal the mortgage each month?


    • #3
      Paying down the principals with a goal of Completing within 4-5 years. Would like to invest the savings to work toward a goal of 3 million at time of retirement at age 60 if possible. Will likely work part time in retirement and not draw from retirement accounts until 65.


      • #4
        By my calculation, you have about half of your after tax income ($132,000) required to pay for the two mortgages. That is a lot!

        You need to get from $1.3M to $3M in seven years, which is a little more than a double. Assuming that owning the two homes is non-negotiable, I might set aside $100k as the emergency fund, and invest the remaining $400k fairly aggressively, (80+ percent equities), adding $3000-5000 per month to the taxable investment account. Continue to max out the 401k account and look for other opportunities for tax-deferred savings (HSA, backdoor Roth, profit sharing plan, deferred comp, etc.).


        • #5
          Recommend you read Simple Wealth, Inevitable Wealth and follow the investing instructions (ignore the 1% AUM recommendation as it is just used for example purposes). Also read the One Page Investment Plan for help in DIY planning. You have good numbers, but financial planning could be particularly beneficial for you, especially this close to retirement.
          My passion is protecting clients and others from predatory and ignorant advisors 270-247-6087 for CPA clients (we are Flat Fee for both CPA & Fee-Only Financial Planning)
          Johanna Fox, CPA, CFP is affiliated with Wrenne Financial for financial planning clients


          • #6
            I don't see any mention of your estate plan. If you haven't updated it recently, I would highly recommend you review your estate planning documents, especially your Durable Powers of Attorney. A couple of things to look for in your Durable Powers of Attorney, that I often see done poorly, are:

            • Does it address the issue of gifting my your agent? If so, does it limit the amount of the gift? If your agent is a family member, does it permit your agent to also receive a gift?

              • I see a lot of durable powers of attorney written that limit gifts to the annual Federal estate tax exclusion amount. Why? I have no idea.

              • I also see quite a few durable powers of attorney where the agent was not expressly granted the right to receive a gift; thereby excluding them from any gifting.

            • Does it grant your agent the ability to add or change beneficiaries? Does it do so for all types of beneficiary needs (life insurance, IRAs, 401(k)s, annuities, disability insurance, etc.)?

              • I've seen many wills where the only place that the ability to add or change beneficiaries is addressed is in the subsection on life insurance, limiting your agent to being able to make beneficiary adjustments only on life insurance.

            Also, be sure to contact your various financial institutions and find out if they require you to re-notarize your Durable Powers of Attorney from time to time. I've seen some financial institutions that now require you to re-notarize your documents every two years - or they will not accept them.

            Nowadays, some financial institutions are looking for any excuse to not honor your Durable Powers of Attorney. Why? Because the bean counters have figures out that they make money every day they hold onto your money. So, if they can find a way to deny the use of your power or attorney and force you to go through the legal system, they will get to hold onto your money for a few more months. And, when the judge finally forces them to accept the power of attorney, they are not penalized.

            So, do your family and loved ones a favor and make sure your estate planning documents are in good order.