Coming into @ $400,000. At 48y w/ wife and 6yo daughter, what would be a prudent way to invest?

Answer 1

DIVERSIFY!

The others are right... look for a qualified financial advisor in your area who can help with all aspects. You will need to look at taxes (pay some now, so you don't have to pay them later), diversification (don't go with a company limited to only mutual funds or only CDs or only one type of fund - look at alternative investments and the international market) and short-term, medium-term and long-term planning. Write down your goals for the funds, and share that with your financial consultant.

You should look at what you want to do with the funds... put money away for your daughter's education, pay off some bills (keep your mortgage - that's good debt), or gift the funds. Your other investments you may already have through your employer should also be considered with this money.

A good financial advisor will create a proposal for you based on your needs and goals. Look for a firm with a Certified Financial Planner (CFP) - that's about the highest level of designation a financial planner can get.

The main thing is to not go crazy with the money. Several lottery winners have ended up bankrupt because they spend, spend, spend. It's better to be comfortable now and comfortable in retirement than rich for a couple years and living in the streets in five years (yes, it's happened).

If you'd like, my firm would be glad to help you out. We do a lot of work with "instant wealth" individuals. Or, you're welcome to review our website and gain some guidance.

Answer 2

It all depends on your goals. The beginning to any financial house is insurance. Especially w/a 6yo daughter, you want to protect the assets you have. A good rule of thumb is $100-120K of insurance per every $1K you make yearly. Buy term insurance until your daughter is 18yo and/or until you no longer need a steady income (retirement).

Everyone first instinct is to pay off loans, bills, debts, etc... but before all that, pay yourself. You will always have bills... so invest a bit in yourself first and then worry about debt after.

Again, it depends on your goals, but if I were you, I'd start with an education plan for my daughter. With the cost of higher edu. rising yearly... fully fund a state 529, and supplement with a coverdale if necessary. Since she's young, your monthly allocation won't be high.

Secondly.. Do you have an IRA? research any old retirements funds you might have (401k, etc.) and roll it over to a traditional IRA. Next open a Roth IRA... You can only open one if you make under $110K annually ($160K joint income). $4,000 is the maximum amount the government allows anyone under 50 years old to contribute, annually, to his or her combined IRAs. For individuals 50 or older, the limit has been bumped to $4,500 per year. Couples who file jointly may contribute $4,000 each to separate Roth IRAs unless either is 50 or older. The maximum is $4,500. You cant beat tax free growth!

Now worry about debt. Pay off the highest revolving interest debts you have first and work your way down. Set a number that you will put aside towards debt monthly and dont decrease it until your entire debt is payed off. Once one debt is payed, reallocate funds to the next highest interest debt and so on.

The key is to pay yourself first. These are the basics, if you've already done all this, look into a very diverse portfolio of strong investments. Don't limit yourself, diversefy by investing not only in funds, but precious metals, land/real-estate, etc. Being 48yo, you don't want to take as high of a risk as a 28yo. But it all depends on your goals.

Good luck!

Answer 3

1. Start a 529 (Coverdell) account for your daughter -- it's a tax-sheltered education account for minors. Use it to send her to college in 12 years (they come quicker than you think :-). You can only put in a couple thousand dollars a year but it's smart.

2. Max out an IRA for you and your wife. Again, that's like $8000 total for the pair of you but do that every year, with some of your liquid funds.

3. If the $400k is before taxes, set aside a large chunk so you can easily pay taxes next April. Get an accountant or buy a copy ofTurboTax or something, and figure out how much you'll need to pay.

4. If you want to shelter a certain amount of income from taxes, look into tax-free annuities or tax-free municipal bonds. They tend not to pay a lot but you don't pay taxes on their returns.

5. Unless you really want to become an expert on P/E ratios, small-cap versus mid-cap stocks, and the like... get a financial advisor. Find a CFP (certified financial planner) you can trust, one who has a proven record and a good market allocation scheme to diversify your holdings. You'll probably end up with a mix of mutual funds, individual stocks, and individual bonds that return anywhere from a slight loss to a big win. And to know how you're doing, keep track of the various indexes -- NASDAQ 100, S&P, Dow Jones and the like.

6. Keep a certain amount of it in a liquid fund earning as much as you can; a couple of financial institutions now offer what they're calling "linked accounts." One that I am researching lets you connect this account to up to five other accounts -- including banking and brokerage accounts -- so you can move money easily back and forth (subject to any restrictions and legal limitations, of course). Because the other prudent thing to do with extra capital is of course to buy a house if you don't already have one. The main advantage: putting $100,000 down on a $500,000 home is like a five-to-one lever on your money. What do I mean? You spend $100,000 on a house worth $500k. Let's say that house goes up 5% a year -- now it's worth $525k.

So your $100k investment has produced an appreciation of $25k in one year -- because you are using the leverage of home ownership. (That's also an argument AGAINST putting down TOO much on a home, because if you'd put $200k down you'd still only have earned $25k in appreciation, so you'd only be leveraging to 12.5%. On the plus side, your mortgage payments would be much smaller.)

Answer 4

Definitely consult a professional financial advisor for details and to understand your exact situation viv-a-vis taxes and such.

I am of about the same age -- and Iimagine that you, like me, don't want to HAVE to work past about age 55 or 60 (though I will continue to just because I enjoy what I do, I hope you are fortunate enought to feel the same way!). The advice that I have received is that:

(1) Your age in years should be approcimately the percentage of your retirement income that is in cash or cash equivalents (cash in the bank, CD's, etc -- really secure government bonds can count as well).

(2) As we are reaching the final decade of our working period, we want to reduce the overall risk of our portfolios because we won't have as much (if any) time to rebuild them if the market goes catastrophically sour.

(3) We want diversity both in terms of the types of businesses we invest in, and the regions where we invest. AGain, this is to help shield against across-the-board catastrophic market downturns.

My financial advisor has steered me to the American Family of mutual funds, where I have been invested for about 12 years now. I have personally found them to be excellent when viewed over that time period. Some individual "boom" years they have underperformed specific other stocks or funds, but over that period of time they have averaged very good returns by not taking such a bath as these other stocks and funds do in the "bust" years.

One thing to consider would be an investment-grade life insurance policy to protect against the worst case. With $400K essentially in the bank, all it really needs to cover is the balance of your mortgage. If you don't have one yet, get it before you turn 50 or it will probably no longer be affordable.

As for your daughter, you need to consider whether she will be going to public or private schools. If public, plan on invenstments that over 12 years will grow to be enough to cover at least basic college tuition. If private school then of course you will want to hold some back as cash reserves to cover the cost of the private schools.

Answer 5

STEP 1. SEE A FINANCIAL ADVISER SO YOU CAN LIMIT YOUR FEDERAL AND STATE TAX EXPOSURE.

STEP2. READ AND HEED STEP 1.

STEP 3 CONSIDER A REVOCABLE LIVING TRUST TO PROTECT YOUR INHERITANCE SHOULD YOU DIE.

If you simply blunder off into the savings morass without advice you will loose a big chunk thru otherwise avoidable taxes.

WHEN YOU SEE YOUR FINANCIAL ADVISER DISCUSS:
1. FUNDING YOUR CHILD'S COLLEGE FUND
2.. FUNDING YOUR 401k
3. YOUR ELIGIBILITY FOR ROTH IRA"s
4. ETC ETC.

VERY IMPORTANT - Be extremely carefull of buying life insurance unless the owner of the policy on your life is your Revocable Trust. Most people are unaware that a policy on their life, that they own will, upon their death result in the face amount being paid tax free to the beneficiary BUT that amount also is shown a part of your estate which absent a Trust will be probated and you could be exposed to taxes as high as 40%.

Answer 6

First off , How are you getting the money? If it is from a lottery from the web don't believe it.I get about 15 emails a day saying I have won
over 500000 dollars or more. If it is legit Second save most of it in a high interest account. In about a year you would have a good return on your money. Spend the interest.

Answer 7

Pay off or buy a house. Gives you instant return on your invest as you will no longer have a house payment. Anything left over you should discuss with a financial advisor.

Answer 8

See a registered investment advisor and also possibly a tax law attorney to see if you can prevent any excess taxation on the inheritance.

Answer 9

Depends on how much risk you want to take. I would think you would want to put at least half into the stock market, then some into bond funds, maybe buy some annuities.

Answer 10

Put it all in CDs, Barry Manilow has about a 6% yield on a 1 year.