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Terry creates a financial plan for windfall

By Terry Savage on August 06, 2022 | Financial Planning / Retirement

Terry, My wife and I recently sold an inherited house. After commissions and fees we have $130,000. We are unsure where to invest it. We are both in our late 50s. We have two girls 12 & 17 year old. I retired 2 years ago with pension and work a seasonal job. We live a comfortable life within our means. We are debt free except for approx $4,000 left on an auto loan. We have $300,000 in retirement savings/mutual funds. We are thinking about something with little to no volatility and a guaranteed rate of return. Your insight would be appreciated.

Terry Says

OK — there’s the “professional” answer to this question and the “personal” answer! Here’s the difference. You’ve already done a great job of managing your money. Don’t let this windfall blow you away. You really don’t have to invest ALL of it — but you should invest “some” of it. Otherwise, the weight of risk will overwhelm the peace of mind you have already managed to create. (That’s the personal side of it!)

So here’s a general suggestion.
You could open a 529 College Savings Account for each of your daughters. If you live in Illinois, go to www.BrightStart.com. Elsewhere, go to Vanguard.com and open the plans there. Choose a conservative investment choice — or the age-based plan. Perhaps put $10,000 into each account. The money comes out tax-free and can be used for college in any state.

Take about $50,000 and invest in a conservative equity-income fund. You’re retired so it can’t be inside an IRA. Just open a joint account with your spouse. My personal favorite place to do this is at T.Rowe Price — using their MM fund and their equity/income fund. Move $10,000 into the EquityIncome fund and $40,000 into their money fund. Then give instructions to automatically move $2,000 per month from the MM fund into the EquityIncome fund on the 7th day (or any day you pick!) of every month for one year. That way, you won’t be investing it all either at the top — or the bottom — of the market!

Then each of you should purchase $10,000 of Series I-bonds — check the latest column at my website– and earn 9.62% for the next 6 months.

And leave the balance accessible for emergencies in a low-yielding bank money market account.

I usually don’t get that specific — and you don’t have to follow these ideas — but it should give you some perspective.
And please keep working that seasonal job. Two young daughters will need not only college but weddings! So you need to keep bringing in enough to live on — and to save even more money!!

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