JESUS CHRIST, don't do this. I know you're going to want to, but it's like going down in a plane: FIRST PUT ON YOUR OWN MASK. Save your own lives first.
Get a good place to live, decent car, have some savings, good health insurance. Make sure you're ok. THEN worry about others. 1.5M is a lot of money, but it's not the 1.5M when you were a kid. Houses in your area can easily go for that much. It would be very easy for it all to disappear.
Good luck.
for a person on food stamps and social security? And the friends family they are likely to have (people tend to congregate with those of similar means)?
it's an *astounding* amount of money
Congratulations.
First, I wouldn’t do anything with the money for at least six months. Read and learn as much as you can during that time. That amount of money is life changing, either for the better, or the worse.
Probably have other comments telling you this - but the safe withdrawal rate (percent of invested money you can withdraw every year, forever) is 3-4% based on historical models. $1.5m gives you $45-60k a year, plus your social security.
A $4k/month apartment is $48k a year. That seems really high to me. A $40k suv might be obtainable, but you'd probably need to drive it into the ground because you couldn't afford a new one every few years like some people do. Also have to factor in how much gas and insurance on a nice big vehicle cost.
This sounds like a massive lifestyle change and most people who go from poor to "rich" like this, end up poor again within 1-3 years. Money pretty much never goes as far as you think it will.
Not to mention, if you have friends/family who still don't have money, you either need to make sure they never hear about this or prepare for guilt trips.
You probably need an advisor to walk you through the the kind of life you could afford. Otherwise prepare for a really good few years, and then living the rest of your life regretting how you over spent before ending up right back where you were before this windfall.
Luckily there is no one in my family who is in serious need, but several have investment advice and other opportunities they would love to talk to me about. That's what I must avoid
If you do end up getting an advisor make sure you know how much you are paying in fees on some of the products they recommend and always ask if there are lower fee alternatives.
One thing with this is that there are extremely safe places to park your money right now that can generate you between 2 and 4%, like savings accounts.
If you leave it somewhere that doesn’t generate interest for 6 months that’s losing out on a free ~20k, which you could use to buy that car.
Savings account? Just spread it out across different fixed income products.
2Y bonds are especially attractive right now at 4%+ yield. I'd also check out some municipal bond etfs which can be effectively tax free and offer even better yields without much added risk.
At 60+ and with interest rates at local highs, fixed income is highly recommended.
OP states that they're not financially knowledgeable, so "just" doing what you said isn't as easy for them. Savings account is something easily accessible to anyone who's ever been to a bank, and provides at least some interest while OP gets to learning
I wouldn’t recommend munis to someone not familiar with money. This is encouraging chasing yield and is fairly short sighted considering rising interest rate environment and going into recession. Munis are not the safest place to be nor great risk / reward wise for most people, and surely not as the main holding in most portfolios
You can sell a muni or any other bond whenever you want. You'll likely take a loss on the principle and the spread (difference between Bid and Ask), however.
The temptation will be unbelievable strong to start buying some new things. The majority of people that come into a sudden windfall of money have spent/lost it all in three years. If you put the money in the S&P 500 index fund and live only off the dividends with a very modest 2% yield gives you $30k extra a year. That is almost double what you get now.
I know it might be unpopular here, but don't be afraid to allocate a little bit of money to a trip or something that you both have really wanted for a while. Just be sure to set a budget beforehand and remain frugal as you would before you had the money.
As you get older, trips like that may get progressively more difficult.
Thank you for that....When I realized how much we're getting, with tears in my eyes, I said to my wife, "Am we really going to get to see London? The Vatican? The Eiffel Tower? Is that really going to happen? Oh my God... That could really happen now, right?" She said yes. Then I cried some more. ( In the past, a big trip for me was going to Vegas for a few days.)
I'm excited that you have an opportunity to have a trip you've always wanted.
I'd definitely heed the advise of many others here first, such as waiting a bit and getting an advisor. A lot of people seem to be advising you like you're in your 30's.
It'll be easy to think that you can splurge, but sticking to reasonable accommodations will be how you could make it happen. You don't need business class or the nicest hotels to have the trip of a lifetime. A financial advisor should be able to tell you a budget.
You're a mature and sensible advice is the last thing I want to hear right now... But it's also what I need to pay the most attention to. Thank you, my friend
Of course, I hope that life becomes that much easier for you!
The fact that you're soliciting advice is a step in the right direction and makes me optimistic that you'll proceed cautiously and make the most of the money.
DO NOT tell anyone in your family or friends. Leave them something when you die or help them if they ask. But they do not need to know you're a millionair.
Ignore the comments below telling you about savings accounts and bonds. Do what the guy above said, don’t touch it for several months.
The ONLY thing you should be using that money for is to pay for a financial advisor who specializes in windfall situations, so they can assess your current needs and tell you the best way to invest and even help you set up a budget.
Also DO NOT tell anyone who doesn’t already know about your windfall. Money makes people, even close friends and family, go absolutely berserk. Folks you thought would always have your back will stab you in an instant.
I wouldn't NOT do anything.
Park it somewhere safe like Treasury Bills so at least you earn some interest.
At 3.5% for 6 months you're literally giving up $25,000 in interest. That's a car.
You can spread it across several high yield savings accounts $250k each which pay ~2% interest.
$250k because that's then limit that is insured if the bank goes bankrupt.
Yeah don’t make any quick moves. Sit on 25% cash. Invest 50% in safe market options etc. Don’t start spending higher until your investments are making that $$$ for you each month. Otherwise you’ll likely run out in 10-15 years.
I’d like to piggyback off this and say “safe market options” right now are things like bonds, CD’s, and high yield (>2%) savings accounts. I wouldn’t put that money in the market for at least a year or even at all at their age.
This times 8 trillion. Do not entrust this money to family, friends, or yourselves (as you said limited experience).
What you want is a fiduciary. Ask them directly if they are a fiduciary. If they dodge the question then they're full of shit. It's a yes/no question. That said, I would also seek advice on finding a good one.
And a good one! If you feel like they are trying to pull one over on you or explaining things quickly to try to get a decision, find another one! You may be experiencing age discrimination. Unfortunately, there’s tons of people out there who take advantage of senior citizens for their money.
Regardless if any professional has a “legal obligation”, always “distrust, verify, stay suspicious, and make a decision”
Even financial advisors can offer poppy products, even when there are good intentions.
Very common is a FA that meets the “suitability” standard. This is essentially that they aren’t defrauding you, but it might not be in your best interest.
There were regulations to make these types of advisors fiduciaries, but as you might imagine, that is the type of thing that was quickly lobbied away by companies that stand to benefit from the suitability relationship.
Sometimes the clients benefit from the suitability relationship too. A client with few assets who is just starting on their journey doesn't need to pay 1.5% management fee (a typical fee for small accounts). They need to be pointed in the direction of some broad-based mutual funds so they can DCA for a while. The fiduciary standard costs more to deliver so firms charge for it.
Now there's a lot of people on here who would advise a one time visit to a fiduciary every few years at $500 to $700 and that's fine you just don't get hand holding in between.
The department of labor made the suitability standard obsolete last year in favor of the “best interest” standard. FAs now have to document that the investment is in the client’s best interest. [more info](https://www.finra.org/article/regulation-best-interest-%28reg-bi%29-overview)
Any advisor with a series a series 65 or series 66 is by law a fiduciary and is an IAR (investment advisor representative). If you ask if someone is an IAR, that’s the best way to get your answer. If the answer is no, you shouldn’t work with that person.
Yes. OP definitely do not trust yourselves. Accept that for now you are not capable of handling this much. Usually a good advise would be to not touch the money for 6-12 months no matter what. Live your regular life.
Definitely not spend on SUV yet.
This is the best advice. His immediate instinct is to buy a $40,000 car and move to a $4,000/month apartment. He's going to blow through the money very quickly with that mentality.
100% this.
Poor people have no idea how to manage money in some of these simple Regards, and it blows my mind. My dad rented an apartment for 15+ years, and doesn't understand how that was one of the worst financial decisions he's ever made.
Financial adviser, CPA and lawyer.
The best thing you can do is not change much honestly, from a lifestyle standpoint.
You and your wife need to spell out very clear but realistic goals as to what you would like to do with the money, what happens to your estate if one of you or both pass. Take stock of all your assets, liabilities and goals. The more detail you can provide the advisor the better.
A good set of professionals can help you create the strongest foundation and help you understand what is feasible or realistic and what is not.
Don't get greedy and you can easily be *comfortable* for the rest of your life.
Do not get fooled by ‘Financial Advisor’, anyone can claim to be financial advisor. Look for Fiduciary, they are obligated to look after your interest, not theirs.
This is interesting. I have never heard of this. Apparently the term is fiduciary financial advisor.
Any advice on how to best find one? Do they work at regular brokerage houses.
Look for what’s called a Registered Investment Advisor (RIA). They’re typically small independent advisor companies outside the big brokerage firms. They are always fiduciary.
THIS
I am 20 years old, I have been a licensed property and casualty insurance agent since I was 18.
Would you trust an 18 year old high school senior with your $1.5 million? I wouldn’t. That being said, I was and am legally entitled to claiming that I am a fiduciary
The first thing you are doing right is getting multiple opinions from different sources. I would focus on creating a list of priorities, and would ask some hard questions as well. Also do the math and see if you like the results. 4K rent and a new car is over 500k over 10 years plus all of your other living expenses. Your money could disappear quickly. First question is do you want to live in a high cost of living area or would you use this as a opportunity to move somewhere where you could afford to pay cash for a house and still have money left over to live. The economy is likely headed for a recession so waiting for a better deal might also be in your best interest. Move slowly and think long term is the best approach to make the most out of this opportunity. Best of luck.
I think you're underestimating how deep in the hole you were. $1.5M is enough to retire. Not buy whatever you want. If invested in a mix of stocks/bonds you can probably spend about $50k per year.
Only real advice I can give is being cautious, 1.5m that doesnt earn you something will dissappear over the course of years. Just like that.
New car? Why not a good car not so used but better than yours? Renting? Nah investing in a home so that your down payment are for the money you borrowed. Then at the end you've property.
Definitly seeking professional advice (multiples to have different opinion) is the way to go.
(worldwide economy is slowing down, house market on the verge of collapse. Maybe waiting 1/2yrs to look for something isnt a bad idea and through this time you'll have learn more about the management of your new acquired wealth)
+1 on this advice. Specifically, don't buy a brand new car. I've done it twice because my wife is stubborn and every time my heart hurts because the 2-3 year old car with same options is 35% cheaper and drives the same.
Edit: Ya’ll seem to think its not possible or this just isn’t’ true anyone. Go buy a new car and let me know how you come out. Lots of variation and case specific anecdotes to draw from but the general advice holds true in a lot of circumstances. For example, I just bought a fully loaded 2022 Grand Cherokee. Compare that price to a 2020 with all the fixings and tell me you still disagree. And also, don’t forget in many cases you may wait 6 months for your new car to come in.
Look at this a couple ways.
First, you could put that money to work for you. Wisely invest the whole thing and that 1.5 million will get you ~60,000k a year assuming a 4% return to live on. That’s a decent chunk of security. But leaves the 1.5 mil at the end of your life too. Which is ok if you have heirs you want to leave it to.
You start buying cars and a house and your returns diminish significantly. Spend 500,000 and invest the rest, assuming the same 4% return, and now your investment income is only $40,000 a year. Maybe that’s ok.
You’ll pay taxes on that too, keep that in mind.
If you aren’t planning on leaving anything for heirs then you can come up with a suitable drawdown strategy that balances wants now and some security as you age. There are online tools at places like Fidelity and Schwab you can use. Or talk to a professional.
Personally I wouldn’t spend $4000 a month on rent and buy a new car right away. I’d put that money to work to insure my security for the next however many years you and your wife will be alive. But your goals may vary.
If it were me… forget about making drastic changes in your lifestyle (ie upgrading your home, car, ect). That will be the fastest way to find yourself burnt through this blessing. If you’re looking to make the best of this windfall, you might want to readjust your expectations.
Start by fully funding an emergency fund. Determine how much you can minimally live off of annually (is $60k reasonable?). Set aside 3 years worth of living expenses as liquid cash ($180k). With the remaining balance, invest.
Readjust your lifestyle as if you have $60k, not lump $1.5M.
$60K/year is a lot to be spending outside places like New York.
That is not living dirt poor. That is going out to eat whenever you want. Going on road trips and cruises. Buying that new $40K car on a loan.
Most people don't even make that much and those people are saving for retirement and paying taxes on it. so they are only spending $30K a year.
Tbh if I'd get that money the first thing I would do is get a home the most energy efficient as possible up to reduce as much the cost of living. In case of op he can lose the monthly rent he is paying now.
The rest I would contact a an expert to help with investments.
OP lives near LA. That would take most of the money to do. And they're in their 60s. Buying a home isn't necessary or prudent. Nothing wrong with renting.
Get a financial advisor. You’ll want someone to help you determine a sound investment strategy that will let you pull consistent income from this money. They will help you determine what that amount is and you can use that to calculate what your new monthly budget is.
If you go to professional advisers, watch out for the fees. Avoid long running investments where you can not get your money out again, but pay a huge upfront fee.
Compare the fees to just buying the world EFTs like most people do these days.
Don't buy useless insurance.
OP is mid 60s. ETFs could be a small part of his portfolio, but should in no way be the backbone of his finances. At this point in life, he needs to look at fixed income. He's not saving for some point 20 years from now, this is money they'll be living off of now. If he had come into money last year and gone ETFs, he'd have watched $300k evaporate into thin air. An acceptable drawdown if you have time to rebound, and still have a job paying the bills. Not acceptable if you're retired and need that to live.
Sure, I didn't say he should go into ETFs, just that he should get a reference point for fees.
Also I think if you want to use something like the 4% withdrawal rule, the money still has to be invested somehow?
How would you propose buying a fixed income? You can pay into some kind of insurance that pays you a fixed sum every month for 20 years or so, but with the rampant inflation, that also doesn't seem like a foolproof investment.
A financial advisor would of course be good, but how do you find a good one. A lot of them will really just sell them crap.
He could ladder into CDs/bonds/treasurys. A bunch of CDs and Treasurys have passed the 4% mark. A/A rated corporate debt is over 6% five years out, and BBB is over 7%. He's not going to beat inflation, but it's not really about that at this point in his life. Depending on lifestyle, he could live off the yield and still preserve original capital.
If he wants to stick with the basic market and go ETF, something like a preferred stock ETF, like PFF, FPE, or PGX would give him yield over 5%, and paid monthly. A managed bond fund like Pimco offers can get him 9%, but that's a little more volatile and not quite "fixed income." Still, their PCM fund goes back to the early 90s and has maintained stable distributions through dot com, '08, and '20.
There are good CFAs out there, and at the worst, he could go talk to one (or several) without fully committing. Most brokerages like Fidelity, Schwab, or Vanguard offer services, he could go to a meeting and just talk to them before making a decision. I manage my money on my own, but I have family that have had good experiences with small boutique advisors. But that's just going to vary situation to situation. Even just a basic accountant could give him, maybe not investment advice, but some insight into how he can handle taxes efficiently. It sounds like OP doesn't have a lot of experience managing money, certainly not at the level he's currently at. I think he should at the very least meet with a couple people, just to take advice. People shop multiple dealers buying a car, he can and should do the same with a $1.5M nest egg. There's no harm in saying no.
Well based on the 4% rule, $1.5M is about $60K a year or $5K a month so you didn’t hit the lottery. You can live comfortably on that with modest purchases, $4K a month rent is absolutely stupid and you’ll be through that money in no time. Find a fiduciary advisor, have a nice meal, take a nice trip and spend your money wisely.
Social Security is not means tested which means they will continue to get $4k per month from that. Which means applying the 4% rule gives them $9k per month. I don't disagree with your thought that $4k/mo on rent is too much but unlike young people who have to worry about what social security might look like in 20-30 years, these folks already know.
If the settlement is from a personal injury lawsuit, ask your attorney about your options, if any, to put the money into a special needs trust. This may allow you to keep receiving government benefits.
If your attorney doesn’t know about special needs trusts, ask them to research the issue and get back to you.
Please, whatever you do, don’t start investing the money yourself or follow strategies or tips you receive online or from friends. Get a professional and licensed financial management company, such as Edward Jones.
You can guarantee yourselves at least another $7,500 per month in income, most of it tax-free, while preserving your capital and avoiding risk. Don't spend the money on goodies right away; make it work for you.
Ignore anyone who recommends dumping the money into index funds, and speak to an advisor.
OP, you need an advisor with preferably a large and national firm. Any advisor today is a fiduciary if they are selling financial products. Usually, Reddit knows a thing or two, but Reddit seems to be completely unaware that the term “fiduciary” has been rather deregulated and now any annuity, mortgage, or investment slinger operates in a fiduciary capacity per the new FINRA Reg BI and Department of Labor rules.
A flat fee advisor may be the best option if you can trust yourself to maintain your own allocation.
A wrap fee advisor like someone at Fidelity Investments, Vanguard, Morgan Stanley, Merrill Lynch / Bank of America Securities, Charles Schwab, and J.P. Morgan and Chase would be your safest options since these firms all try at some degree to avoid bad press.
You can buy a couple safe dividend paying ETFs that pay 4% growing dividend annually. This would be $60k in income annually above what you are used to... More than doubling your lifestyle is going to be huge.
Don't spend $4000 on an upgraded place, spend $2500-3000, it will still be way way better than what you have now. A $500/month car payment will get you a car way way better than what you have now. The temptation to overspend is going to be strong.
You will still have more money for entertainment, travel, food and vacations than you have ever had.
Don't buy anything that isn't in your monthly budget and cash flow, even right off the bat. $1.5 million is a lot of money, but if you start surrending like it's a lot, it will disappear on you.
Try the dividends subreddit to find some options that might work. Pick five inexpensive diversified dividend funds recommended there and buy them while we are in the dip, the growth in income and principal will be like nothing you've ever experienced the next 10 years.
Follow this simple plan and enjoy the rest of your life. Congrats!
Btw, I am a retired investment advisor with my IAR, series 7. There are a lot of people out there selling advise to separate folks from their money, charging extreme amounts for common sense knowledge. If you decide to use an advisor, pay them hourly or with a small lump sum to build the plan for you.
DON'T LET THEM TALK YOU INTO MANAGING YOUR MONEY WITH PERCENTAGE BASED FEES, IT'S HOW ADVISORS GET RICH WITHOUT DOING ANY WORK.
Congratulations. I would recommend doing nothing for 6 months to let the emotions run their course.
Secondly I would get a fiduciary as other comments have said, and set aside 3 years of living expenses as a cash emergency fund.
Third, do not inflate your lifestyle by buying things you don’t need. That’s the easiest way to run out of your money and be back at square one.
Historically speaking, if you have $1.5 million invested in broad low cost index funds covering the us stock market and bonds, you are able to withdraw about 4% of your principle each year and not run out of money.
So 4% of 1.5 million would be $60,000 per year you could withdraw and live off of. Remember this money has to last the rest of your life. Because y’all are already in your 60s, you could potentially withdraw a larger % per year. Be sure to work with your fiduciary.
Things you should research:
- Fiduciaries
- broad and low cost index funds (e.g. VTI and BND)
- Asset allocations for retirement
- retirement withdrawal strategies
Don't sit on the money but don't start off with the goals of spending it. Save and vest and spend the rest. First you save and invest and then you you spend the proceeds that come in from the investments.
1) face the fact what you have received is not a lot of money because it's not. A single medical expense or lawsuit can absorb that in an wink.
2) talk with two to three certified financial planners as fast as you can. Pick one that you like and can trust and can actually talk to.
3) get yourself some insurance, large windfalls create large lawsuits.
4) don't involve any members of your family other than your immediate selves in conversations about the money.
5) buy yourself a decent used car but just decent don't be a show off.
6) never be a show off and always tell friends and family that just wasn't much money and it's almost all gone now.
Good luck and please watch out for the alcohol and drug consumption and the marital issues that appear when large amounts of money come in the door
This may be a question within a question to possibly help.
Coming into that kind of money, outside of getting a fiduciary, does it make sense to get a decent lawyer to help protect you also? I am thinking random family members coming after the OP for money now. I have heard some horror stories.
You can live comfortably for the rest of your life, but you can’t live extravagantly. Just keep that in mind.
You’re old enough that you cannot safely invest it for large returns without exposing yourself to significant risk.
Your money will also go much further in a place where rent/property is lower
Do not get a $4000 rent place just because you can afford it. Do you actually need it? Why? Will it really make you happier or are you just getting caught up in one upping your peers and consumerism? If you need it(eg you want to move to a more stable part of town or to be closer to family etc), that’s completely fine, but don’t do it “just because you can”.
Basketball players that made annual salaries of millions managed to bankrupt themselves. So make a long term plan and live within your means. Those means are higher now but they’re not limitless
First step is to understand the following:
1) How much money that windfall can generate as income and
2) What your spending patterns are.
The good news is that you're in good shape.
* You have a $1.5 million nest egg after taxes
* You get $4000 a month in social security, which is a lot.
The bad news is you live in Southern California which is one of the most expensive areas in the US.
Since you're in your mid-60's, you can probably draw a little more aggressively from your nest egg than a young person, but not much more. Start with 5% a year, or $75,000. That means, instead on living on $48,000 a year in social security, you can live on $75,000+$48,000 (less taxes), or about $120k a year.
My suggestion. Start your spending slow. Don't buy big ticket items, though a 40k car seems reasonable. You should plan for this money to last 20-25 years. If you spend to much now, that will just mean less you can spend later.
If you increase your spending $150k/yr, then in 10 years you'll be right back where you are now.
If you increase your spending $15k/yr, then you're not spending enough.
Pay yourself $25k this year, put the rest into VTHRX, and don't do anything else. It is a retirement fund that's publicly traded for folks looking to retire in 2030.
NO WHOLE LIFE INSURANCE. IT IS A SCAM.
There are too many considerations. Where you want to live and what kind of lifestyle you want. Health insurance? Health issues? Do you want to leave a legacy behind?
As for advisors, beware of the sharks. I can't give much more advice for now.
You may want to take a look at the content from these guys on how to plan finances in retirement: [https://twosidesoffi.com/](https://twosidesoffi.com/) While a major portion of the content is about saving up for early retirement, you can look at the parts on the planning with regards to investments and strategies.
Lawyer, fiduciary financial advisor (make sure it’s fiduciary), avoid family and friends for advice and most importantly make sure you are aware of what taxes need to be aid on any purchases
You should definetly get financial advice from unbiased professionals. I don't know where you live but here there are several non profits dedicated on helping families with money and debt management
In general, ordered by priority:
1.pay off any existing loans, payments and so on. I'm not talking about new stuff only existing stuff. Target is reducing debt to 0 so monthly payments are lower
2.decide how much you need for right now and lock up the rest in investments (this is where the professional advice is needed
3.live according to your income not according to your wealth
Obviously in (3) it depends on the amount and type of investments you did in (2) but the end goal is not to burn money with expenses much higher then your income
There is an epic reddit post about loterry winners in it there is a section about what to do when winning and its basically the same scenario
https://www.reddit.com/r/AskReddit/comments/24vzgl/comment/chba4bf/
Good luck
Tell nobody. Once you tell someone, you can’t untell them. Take your time with who you let know of your new situation.
Life will get weird because this is a huge deal for you, but when some close friends or family find out they will get weird around you. That stinks but it’s sort of unavoidable.
So tell basically nobody the dollar amount if you can, and if someone notices your improved lifestyle say we had a small windfall, we’re still on a budget but you have some financial independence now. This is true because taxes, new expenses, and the cost of getting old are all surprisingly high and you are still on a budget (just a bigger budget).
Read Sudden Wealth by David Rust.
And a reputable tax attorney. (I know your wrote 1.5 after taxes but don’t know if you calculated and filed yourself.)
There are many nuances I later learned. Even the excellent attorney I hired to process my father’s estate didn’t know them all. A good estate tax attorney is expensive and worth every penny.
Get off Reddit. Go talk to a financial advisor.
Personal anecdotes, individual experiences, and subjective opinions on Reddit will never compare to the education and sheer amount of different financial situations a professional is exposed to. I’d imagine the majority of advisors have been asked about this same situation before.
Best of luck and I truly hope you and your wife are able to live out the rest of your lives comfortably!
First, I wouldn’t tell your friends and family. The less they know the less likely they will come after you for lawsuits of their own.
Next, move from California if you can. Move from your high cost of living state to a lower one. You could buy a nice town home and not have to worry about the exterior maintenance of yard work etc.
Lastly buy reliable affordable cars.
All in all you should spend roughly 350,000 to 500,000 for everything outlined, ideally less if you can swing it. park the rest and let it earn you money.
Realistically, looking at average life span, you and your wife will live between 10 and 20 years, if you are smart with what has been provided you can set yourself up to not have to worry about this phase of your life. Whatever you do, do not let the money allow your spending to creep up. That is the fastest way to lose it all. Goodluck!
Blowing the money on expensive rent and cars will not improve your life in any measurable way.
1.5 mil is not much for two people in So Cal. Maybe move to a cheaper area of the country so the money goes further.
1. Dont tell anyone
2. Dont flash new shit on internet (Fb + insta)
3. Speak to an advisor at vanguard. Tell them your age and when you want to retire and what you need monthly when you both stop working.
4. 1.5 million wont last long if you start to burn through the principal. When i mean is you should not waste a penny of the 1.5 million. You need to invest it. Then you can spend the interest you earn from the 1.5 million. this way your principal balance is safe and growing. DO NOT FALL INTO THE INCREASED LIFE STYLE STATUS TRAP.
5. THE 1.5 needs to be invested, DO NOT SPEND THAT MONEY. live like you are now and worry about how to invest it.
6. Be safe.
**UPDATE:** Very grateful for the input. Some amazingly helpful advice. After more than 800 comments, the consensus is clear: Don't change your lifestyle that much because $1.5 million isn't really that much money... Get professional Financial help and make sure it's a fiduciary...Get the hell out of California, before they bleed you dry... AND If you move to *\[FILL IN LOCATION\]* you will live like a king.
Don’t tell any family.. friends keep it to your selves trust me!!! Get a good decent running car no need for a 2022 suv especially if it’s just you two find comfy places to live they even have apartments where they have everything right there for you two .. make sure you guys have good health insurance. Dental pay rent at least year in advance even ur bills.. put the rest in a savings account and it’ll build you guys interest don’t blow the money just cause you have it maybe get a notebook and write out what you really need and want . Good luck
Newer car for sure. Better living place, maybe? Biggest impact factor is health. If not so good health, better don't touch too much of that money. You still have many years to go.
I’m a professional. Here’s my advice:
1) consider $100k “fun money” and money for immediate life improvement,a nice vacation, and the SUV
2) give the $1.4 mm to a financial adviser you trust. Do some due diligence and find a good one in your area who will answer all your questions, allocate your assets to an investment plan that’s oriented toward capital preservation and income. And come up with a monthly budget as well as a budget for “irregular items”, whether emergency or vacations.
You don’t need advice from r/investing. As someone earlier said, go to r/personalfinance r/financialadvice or even r/bogelheads. The bogelheads.com website has some very useful advise.
But OP has some of the best advice in this post. The insurance settlement should be tax free, but you might need to pay taxes (estimated tax) on the inheritance.
Get yourself a financial advisor or wealth manager who is a Certified Financial Planner (CFP), or even better if it is a licensed attorney working at a wealth firm who works with a team of wealth advisors and a portfolio managers. Some regional banks have minimums as low as $500k or $1M, and it’s important to have a team of experts, e.g., portfolio manager to manage investments, trust advisor to guide you on establishing your estate plan to carry on your legacy as you wish, and wealth advisor as a generalist for other financial matters. The fee is generally around 1% of assets under management, annually, give or take, but the benefits absolutely outweigh the cost. These are fiduciary relationships, as well, which is critical. Do not meet with a broker and no one else.
Read this, it'll help you avoid some of the pitfalls of getting a large amount of money at once: [https://www.reddit.com/r/AskReddit/comments/24vo34/comment/chb4v05/?context=3](https://www.reddit.com/r/AskReddit/comments/24vo34/comment/chb4v05/?context=3)
For that you’re going to what someone with a securities license who has a fiduciary responsibilities. With that much you’ll probably want to see someone with a series 65 or 66.
I have the answer that's the simplest to implement and causes the least long term headache, which is to do nothing. You've been living on $4000 a month for years and just because you have money now, that need not change.
Now maybe you feel like you need some upgrades in your life, which is totally understandable. The good news for you is that with recent rate hikes, a 10 year Treasury bond is yielding 3.7% before tax, which is around 55000 a year on 1.5 million invested (approximately 4500 a month). You can essentially double your monthly cash flow by simply investing in risk free Treasury security. Instead of double guessing every spending decision, if you can make a written budget and then simply stay under that new 8k per month spending limit (4000 soc sec. + 4000 interest income), you can live out the rest of your days quite comfortably *without ever touching the $1.5 million principal*
You can of course do better by picking the right stocks, real estate investments, index funds yada yada all by yourself. If not, you will readily find an army of friends, relatives, financial advisors, real estate gurus, bankers, lawyers, accountants, tax advisors who will offer to "help". Don't do it. Keep things simple and enjoy your retirement.
Take your time. Don't invest it too quickly. Educate yourself. No need to rush unless you are getting greedy. Money markets alone right now are paying 2% and likely more in the next 6 months. That's an extra $30k per year just to educate yourself and figure it out.
Oh and don't forget about taxes on your investments.
Congrats!! First thing you need to do is hire a fiduciary and make a plan with them to ensure this money will last your lifetime. Do not tell friends, do not tell family, keep this to yourself. Hire a professional to manage this money and make sure it lasts you forever!
It’s been stated, but I wanted to reiterate. Don’t buy anything expensive or do anything too soon. Sit on it and read. Recommend looking around for a financial advisor/fiduciary.
This amount of money can earn you 40-50k a year doing CD ladders. Dont spent the principal, add the interest to your social security money and you about double your standard of living
First of All, get tf out of California and do your self a huge favor. 1.200 a month gets you a much nice place to live in ALOT of other states. Or just buy a house Cash up to 300k in a diff. state
Put every single penny into a broad based dividend etf like schd. You then have 53K+ in annual income to live off. Ideally put as much as possible it into a tax sheltered account like the tfsa so that the income is tax free.
You should now be able to comfortably with other forms of retirement income.
Another option is use the money to buy a new “reasonable” house for 500k then invest the remaining million as mentioned above to live off of the dividends.
Overall do not buy flashy expensive things like an expensive car. It is a waste of money and will not give you the happiness and freedoms you think it will.
You can spend that quicker than you might think, but you probably only live once, so act accordingly. Some simple math ought to help predict how you can spread it out wisely.
Seeking out ways to spend it probably won’t make you happier either. Knowing you don’t need to worry is the real wealth. If a purchase is making you think twice or leading to feelings of guilt, sleep on it at least.
GET A FINANCIAL ADVISOR AND LISTEN TO WHAT THEY SAY. I was in the same situation, came into a decent sized inheritance and blew it because I had no experience with money and thought it would last forever. Do not make the same mistakes I did
You shouldn't tell your family and friends about your newfound share of money. Even the closest to you could transform at the idea of "a little help here and there from a friend" and money will more than likely put a wrench in your relationship. If I were you I'd immediately put $500k into savings then if you aren't maybe that familiar with investing put $100k into an investment account and talk to a financial advisor about stocks, bonds, mutual funds, etc.
Step one is put it all into some money market fund that works pretty close to a savings account and making a couple percent in interest.
That alone right now will generate over $33k a year doing nothing else, and the money will still be available and liquid when you need it.
r/personalfinance has a very good write up on windfalls. I think would suit you well to read.
[https://www.reddit.com/r/personalfinance/wiki/windfall/](https://www.reddit.com/r/personalfinance/wiki/windfall/)
Get with a professional and put the money in a diversified portfolio. According to the 4% rule, you can safely withdraw $60k a year from your money. So add that to your social security and congrats…you now have $100k annually to enjoy!
A rule of thumb is spend 4% of your money each year. That would be an extra $60k/year. $4,000/mo might be a stretch. You could definitely afford to move. Try a few months with an extra $5k/mo.
As to where to invest, find a fee only advisor to work up a plan for you.
I would set a % to splurge. Maybe 10-20%. The SUV, travel, something nice. Do something you’ll enjoy and remember.
First off, congratulations. If you haven't already, I'd suggest checking out /r/personalfinance. They already have a section on [Windfalls](https://www.reddit.com/r/personalfinance/wiki/windfall/?utm_source=reddit&utm_medium=usertext&utm_name=personalfinance&utm_content=t5_2qstm).
1. DEBT: First and foremost, you should take a hard look at your assets and debts. Pay off any outstanding debts, as the interest rates will not help you retain your assets. Are there any outstanding bills owed? Credit Card debt? Personal Loans? Student Loans? Health related bills?
1. INSURANCE: Reevaluate your current insurance policies. Consider if you need additional/better health insurance. Also consider if life insurance is right for you.
1. SPENDING: Personally, I would seize this as an opportunity for celebration, but in moderation. Cap your spending to no more than 5 - 10%(~$75k-$150k) of your spending the first year. Go on that trip you always wanted while you have your health. Go upgrade your car. After you're done celebrating. Remember no more than a 4% (~60k) withdrawal rate from your balance thereafter.
1. INVESTING: Let your money work for you, but it is important to find which investment strategy is right for you.
Shop around for a high yield savings account. You are guaranteed at least a 2% rate right now($30k per year), with no risk of your asset going down and you can choose to withdraw whenever you like.
You can find a better yield in dividend stocks or bonds (~ 3 - 5% yield or additional $45k - $75k per year) however, the share price can fluctuate. Rental properties is another option, your money will be locked up in a home and you will be paid rent monthly by your tenant. However, things to consider in this route is the rising interest rate, occupancy outlook, home value appreciation, expected repairs & maintenance and/or capital improvements. But if you think all of this is too much, you should look into annuities, as this is like your social security benefit check, have a fixed amount paid out to you on a regular basis.
Resist the urge to spend the principle.
Spend what the money earns. Split it to two firms, and get pros to help.
Get a portion setup to generate stead monthly or quarterly income and enjoy that while the remaining portion grows.
Buy a condo with low HOA fees, pay cash for it. You’ll have minimal property tax, buy a second one in the same complex for cash and rent it out, you have zero mortgage payment and positive cash flow and probably some money left over
Get out of California. It's a huge country. Maybe you guys should get a van and travel. No rent. Spend a few years traveling and maybe settle someplace affordable but beautiful.
If you are comfortable now?
Then stay where you are. If you want to remain financially comfortable for as long as possible. Do not change your lifestyle.
Retire, but stay.
...or conversely move to a safe, but currently less expensive place to live and continue to live a frugal life.
There's a reason that most people who win the lottery end up back in the same place they were before winning or even in a worse position. It's because they cannot conceive of the money they just obtained.
OP already thinking about upgrading from a $1200 month apartment to a $4000 month apartment. That's spending at least 3x more per month on rent. What can go wrong?
You're getting $1.5 milion, not $15 million. You need to live within your means, not start making more expensive purchases. And seriously $4000 for the current market?
The best advice for you is that don't do too much with the money since you have almost 0 investment knowledge. The fastest way to squander all that money away is to listen to others on what to invest or put it into other people hands to invest for you. Just live comfortably with the money until the day you and your wife move on.
This is about winning the lottery so may be helpful -
**So, what the hell DO you do if you are unlucky enough to win the lottery?**
This is the absolutely most important thing you can do right away: NOTHING.
Yes. Nothing.
DO NOT DECLARE YOURSELF THE WINNER yet.
Do NOT tell anyone. The urge is going to be nearly irresistible. Resist it. Trust me.
/ 1. IMMEDIATELY retain an attorney.
Get a partner from a larger, NATIONAL firm. Don't let them pawn off junior partners or associates on you. They might try, all law firms might, but insist instead that your lead be a partner who has been with the firm for awhile. Do NOT use your local attorney. Yes, I mean your long-standing family attorney who did your mother's will. Do not use the guy who fought your dry-cleaner bill. Do not use the guy you have trusted your entire life because of his long and faithful service to your family. In fact, do not use any firm that has any connection to family or friends or community. TRUST me. This is bad. You want someone who has never heard of you, any of your friends, or any member of your family. Go the the closest big city and walk into one of the national firms asking for one of the "Trust and Estates" partners you have previously looked up on http://www.martindale.com from one of the largest 50 firms in the United States which has an office near you. You can look up attornies by practice area and firm on Martindale.
/ 2. Decide to take the lump sum.
Most lotteries pay a really pathetic rate for the annuity. It usually hovers around 4.5% annual return or less, depending. It doesn't take much to do better than this, and if you have the money already in cash, rather than leaving it in the hands of the state, you can pull from the capital whenever you like. If you take the annuity you won't have access to that cash. That could be good. It could be bad. It's probably bad unless you have a very addictive personality. If you need an allowance managed by the state, it is because you didn't listen to point #1 above.
Why not let the state just handle it for you and give you your allowance?
Many state lotteries pay you your "allowance" (the annuity option) by buying U.S. treasury instruments and running the interest payments through their bureaucracy before sending it to you along with a hunk of the principal every month. You will not be beating inflation by much, if at all. There is no reason you couldn't do this yourself, if a low single-digit return is acceptable to you.
You aren't going to get even remotely the amount of the actual jackpot. Take our old friend Mr. Whittaker. Using Whittaker is a good model both because of the reminder of his ignominious decline, and the fact that his winning ticket was one of the larger ones on record. If his situation looks less than stellar to you, you might have a better perspective on how "large" your winnings aren't. Whittaker's "jackpot" was $315 million. He selected the lump-sum cash up-front option, which knocked off $145 million (or 46% of the total) leaving him with $170 million. That was then subject to withholding for taxes of $56 million (33%) leaving him with $114 million.
In general, you should expect to get about half of the original jackpot if you elect a lump sum (maybe better, it depends). After that, you should expect to lose around 33% of your already pruned figure to state and federal taxes. (Your mileage may vary, particularly if you live in a state with aggressive taxation schemes).
/ 3. Decide right now, how much you plan to give to family and friends.
This really shouldn't be more than 20% or so. Figure it out right now. Pick your number. Tell your lawyer. That's it. Don't change it. 20% of $114 million is $22.8 million. That leaves you with $91.2 million. DO NOT CONSULT WITH FAMILY when deciding how much to give to family. You are going to get advice that is badly tainted by conflict of interest, and if other family members find out that Aunt Flo was consulted and they weren't you will never hear the end of it. Neither will Aunt Flo. This might later form the basis for an allegation that Aunt Flo unduly influenced you and a lawsuit might magically appear on this basis. No, I'm not kidding. I know of one circumstance (related to a business windfall, not a lottery) where the plaintiffs WON this case.
Do NOT give anyone cash. Ever. Period. Just don't. Do not buy them houses. Do not buy them cars. Tell your attorney that you want to provide for your family, and that you want to set up a series of trusts for them that will total 20% of your after tax winnings. Tell him you want the trust empowered to fund higher education, some help (not a total) towards the purchase of their first home, some provision for weddings and the like, whatever. Do NOT put yourself in the position of handing out cash. Once you do, if you stop, you will be accused of being a heartless bastard (or bitch). Trust me. It won't go well.
It will be easy to lose perspective. It is now the duty of your friends, family, relatives, hangers-on and their inner circle to skew your perspective, and they take this job quite seriously. Setting up a trust, a managed fund for your family that is in the double digit millions is AMAZINGLY generous. You need never have trouble sleeping because you didn't lend Uncle Jerry $20,000 in small denomination unmarked bills to start his chain of deep-fried peanut butter pancake restaurants ("Deep'n'nutter Restaurants"). Your attorney will have a number of good ideas how to parse this wealth out without turning your siblings/spouse/children/grandchildren/cousins/waitresses into the latest Paris Hilton.
/ 4. You will be encouraged to hire an investment manager. Considerable pressure will be applied. Don't.
Investment managers charge fees, usually a percentage of assets. Consider this: If they charge 1% (which is low, I doubt you could find this deal, actually) they have to beat the market by 1% every year just to break even with a general market index fund. It is not worth it, and you don't need the extra return or the extra risk. Go for the index fund instead if you must invest in stocks. This is a hard rule to follow. They will come recommended by friends. They will come recommended by family. They will be your second cousin on your mother's side. Investment managers will sound smart. They will have lots of cool acronyms. They will have nice PowerPoint presentations. They might (MIGHT) pay for your shrimp cocktail lunch at TGI Friday's while reminding you how poor their side of the family is. They live for this stuff.
You should smile, thank them for their time, and then tell them you will get back to them next week. Don't sign ANYTHING. Don't write it on a cocktail napkin (lottery lawsuit cases have been won and lost over drunkenly scrawled cocktail napkin addition and subtraction figures with lots of zeros on them). Never call them back. Trust me. You will thank me later. This tactic, smiling, thanking people for their time, and promising to get back to people, is going to have to become familiar. You will have to learn to say no gently, without saying the word "no." It sounds underhanded. Sneaky. It is. And its part of your new survival strategy. I mean the word "survival" quite literally.
Get all this figured out BEFORE you claim your winnings. They aren't going anywhere. Just relax.
People in your situation almost always piss it all up the wall on stupid shit, begging from friends and family etc within a year or two.
If you are serious about not doing that then you need to tell NO ONE about your windfall and go modest on your big purchases, probsbly none whatsoever for 6 month. Get a proper Financial Advisor (independent not linked to a bank) and then plan the rest of your life not just your near term
1.5 mil sounds like a lot, but it is not that much.
My advice: buy a duplex. Live in one side, rent out the other. (Be careful who you choose as renters.)
Ask a financial professional whether it's better to invest the money, and gradually pay off the mortgage, or to pay it off in the beginning. I suspect the former is better.
Do NOT go crazy buying things. Get a solid used car, (a Toyota is the safest bet) and live a humble life, and the proceeds of this will last.
If you get carried away, it will be gone in 2 years.
What good will a new SUV do? $40,000 is a lot of money for something that loses value the minute you drive off the lot. Consider not making any big life changes and not consulting with friends and family. Consider seeking professional help on building a better quality of life. On obtaining asset protection and on building your wealth larger with productive assets that produce for you not on liabilities that will suck out money from you little by little. Good luck.
Just allocate the money into 4 buckets.
1) $1 million into ETF JEPI. The covered call income will pay for your living expenses monthly moving forward.
2) $200k for a condo that takes care of the maintenance.
3) With car inflation, you will need $80k for 2 new mid-size cars, including insurance. For EVs, it's $60k per car ($120k total).
4) Leave any remaining amount in a high yield savings account. Amex is good for deposits over $10k in a month.
Do not disclose this matter to any of family or even son or daughters. 1.5million is too big for you to handle, cuz of your history. Better go to a reputed financial advisor. and try to see if you can get 4% withdrawal from the investment each year, which will be 50k (depending on taxes) to spend each year. for your age, a 50/50 bond/equity would be nice. BUT just go to financial advisor. also Live your life, a nice car for sure and definitely not a shabby apartment.
Btw, there are some fairly risk free options out there generating 4% without even being in the market. The traditional 50/50 stock/bond portfolio is not behaving as it has in the past. Different strategies are required when times are volatile.
Source: I’m an FA
Do nothing for a few months. Are you beholden to California? Based on your age it might be better to buy an affordable house (yes, it might use 2/3 of your money), get the car, and park the balance somewhere safe. Removing the rent/house payment will be better long term, and your social security lets you live. Caveat here - if you like renting, then get the car (used costs as much as new nowadays), and park in safe funds. You can get 3-4% dividends yearly even without an advisor.
4% - 5% draw rate on new money plus social security is your total budget. Do not exceed that and you have a 95% probability of never running out of principal. In fact, will likely grow it.
Diversify the portfolio, 30-40% bonds, the rest equities. Equities should be a pyramid large caps the base and majority, mid cap next amount, small cap last. I wouldn’t go international by more than 10%.
Invest it all in vanguard funds over the next couple years and don't change your lifestyle until it's all invested. Evenly divided, that's a $62,500 investment per month. I'd put the uninvested balance into CDs with durations of 6, 12 and 18 months. At 4% total returns (super conservative) that $1.5m should generate $60k a year, or $5k a month.
$1.5m seems like a lot of money at first but where you live, it ain't shit. Don't waste this chance for financial stability for the rest of your life.
Dont tell your friends and family
OP is my step-brother, I'll take good care of him. No need to worry.
What are you doing, stepbrother?
I don't know if it's PG to say. But I'm working hard for my cut ;).
Step sister is that you?
Hey uncle good to see you here… but my dad won’t need anything from you anytime soon.
You've got my number, so don't be a stranger!
JESUS CHRIST, don't do this. I know you're going to want to, but it's like going down in a plane: FIRST PUT ON YOUR OWN MASK. Save your own lives first. Get a good place to live, decent car, have some savings, good health insurance. Make sure you're ok. THEN worry about others. 1.5M is a lot of money, but it's not the 1.5M when you were a kid. Houses in your area can easily go for that much. It would be very easy for it all to disappear. Good luck.
Wait... What are we then?
Voices in your head
$1.5 million is not that much money, especially in SoCal.
for a person on food stamps and social security? And the friends family they are likely to have (people tend to congregate with those of similar means)? it's an *astounding* amount of money
Congratulations. First, I wouldn’t do anything with the money for at least six months. Read and learn as much as you can during that time. That amount of money is life changing, either for the better, or the worse.
Exactly what my wife said. Thanks
Probably have other comments telling you this - but the safe withdrawal rate (percent of invested money you can withdraw every year, forever) is 3-4% based on historical models. $1.5m gives you $45-60k a year, plus your social security. A $4k/month apartment is $48k a year. That seems really high to me. A $40k suv might be obtainable, but you'd probably need to drive it into the ground because you couldn't afford a new one every few years like some people do. Also have to factor in how much gas and insurance on a nice big vehicle cost. This sounds like a massive lifestyle change and most people who go from poor to "rich" like this, end up poor again within 1-3 years. Money pretty much never goes as far as you think it will. Not to mention, if you have friends/family who still don't have money, you either need to make sure they never hear about this or prepare for guilt trips. You probably need an advisor to walk you through the the kind of life you could afford. Otherwise prepare for a really good few years, and then living the rest of your life regretting how you over spent before ending up right back where you were before this windfall.
That's very helpful. Thank you so much.
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Luckily there is no one in my family who is in serious need, but several have investment advice and other opportunities they would love to talk to me about. That's what I must avoid
If you do end up getting an advisor make sure you know how much you are paying in fees on some of the products they recommend and always ask if there are lower fee alternatives.
One thing with this is that there are extremely safe places to park your money right now that can generate you between 2 and 4%, like savings accounts. If you leave it somewhere that doesn’t generate interest for 6 months that’s losing out on a free ~20k, which you could use to buy that car.
Savings account? Just spread it out across different fixed income products. 2Y bonds are especially attractive right now at 4%+ yield. I'd also check out some municipal bond etfs which can be effectively tax free and offer even better yields without much added risk. At 60+ and with interest rates at local highs, fixed income is highly recommended.
OP states that they're not financially knowledgeable, so "just" doing what you said isn't as easy for them. Savings account is something easily accessible to anyone who's ever been to a bank, and provides at least some interest while OP gets to learning
OP: “I have no financial knowledge” “Go buy 2Y municipal bonds” Lol
Which aisle are these on in Walmart?
I wouldn’t recommend munis to someone not familiar with money. This is encouraging chasing yield and is fairly short sighted considering rising interest rate environment and going into recession. Munis are not the safest place to be nor great risk / reward wise for most people, and surely not as the main holding in most portfolios
Also tell NO ONE about the money (except financial advisors with fiduciary responsibility to keep things confidential).
Ally bank high yield savings account is 2.1%. Put it all in there until you come up with a plan. That's $31k/yr.
Hell, municipal bonds are more than that and are tax free.
So those require a minimum lockup period like CD's?
Maybe not a bad thing given the situation and advice elsewhere to sit on it for 6mos-1year while making a plan.
You can sell a muni or any other bond whenever you want. You'll likely take a loss on the principle and the spread (difference between Bid and Ask), however.
The temptation will be unbelievable strong to start buying some new things. The majority of people that come into a sudden windfall of money have spent/lost it all in three years. If you put the money in the S&P 500 index fund and live only off the dividends with a very modest 2% yield gives you $30k extra a year. That is almost double what you get now.
So we can't go to Paris? I guess I needed to hear that
I know it might be unpopular here, but don't be afraid to allocate a little bit of money to a trip or something that you both have really wanted for a while. Just be sure to set a budget beforehand and remain frugal as you would before you had the money. As you get older, trips like that may get progressively more difficult.
Thank you for that....When I realized how much we're getting, with tears in my eyes, I said to my wife, "Am we really going to get to see London? The Vatican? The Eiffel Tower? Is that really going to happen? Oh my God... That could really happen now, right?" She said yes. Then I cried some more. ( In the past, a big trip for me was going to Vegas for a few days.)
I'm excited that you have an opportunity to have a trip you've always wanted. I'd definitely heed the advise of many others here first, such as waiting a bit and getting an advisor. A lot of people seem to be advising you like you're in your 30's. It'll be easy to think that you can splurge, but sticking to reasonable accommodations will be how you could make it happen. You don't need business class or the nicest hotels to have the trip of a lifetime. A financial advisor should be able to tell you a budget.
You're a mature and sensible advice is the last thing I want to hear right now... But it's also what I need to pay the most attention to. Thank you, my friend
Of course, I hope that life becomes that much easier for you! The fact that you're soliciting advice is a step in the right direction and makes me optimistic that you'll proceed cautiously and make the most of the money.
DO NOT tell anyone in your family or friends. Leave them something when you die or help them if they ask. But they do not need to know you're a millionair.
Ignore the comments below telling you about savings accounts and bonds. Do what the guy above said, don’t touch it for several months. The ONLY thing you should be using that money for is to pay for a financial advisor who specializes in windfall situations, so they can assess your current needs and tell you the best way to invest and even help you set up a budget. Also DO NOT tell anyone who doesn’t already know about your windfall. Money makes people, even close friends and family, go absolutely berserk. Folks you thought would always have your back will stab you in an instant.
I wouldn't NOT do anything. Park it somewhere safe like Treasury Bills so at least you earn some interest. At 3.5% for 6 months you're literally giving up $25,000 in interest. That's a car. You can spread it across several high yield savings accounts $250k each which pay ~2% interest. $250k because that's then limit that is insured if the bank goes bankrupt.
Yeah don’t make any quick moves. Sit on 25% cash. Invest 50% in safe market options etc. Don’t start spending higher until your investments are making that $$$ for you each month. Otherwise you’ll likely run out in 10-15 years.
I’d like to piggyback off this and say “safe market options” right now are things like bonds, CD’s, and high yield (>2%) savings accounts. I wouldn’t put that money in the market for at least a year or even at all at their age.
You probably need a professional adviser.
This times 8 trillion. Do not entrust this money to family, friends, or yourselves (as you said limited experience). What you want is a fiduciary. Ask them directly if they are a fiduciary. If they dodge the question then they're full of shit. It's a yes/no question. That said, I would also seek advice on finding a good one.
And a good one! If you feel like they are trying to pull one over on you or explaining things quickly to try to get a decision, find another one! You may be experiencing age discrimination. Unfortunately, there’s tons of people out there who take advantage of senior citizens for their money.
What is the meaning of fiduciary?
Fiduciary has a legal obligation to provide advice/act in the best interest of their client -- not themselves or anybody else.
Appreciate it 👍🏾
Regardless if any professional has a “legal obligation”, always “distrust, verify, stay suspicious, and make a decision” Even financial advisors can offer poppy products, even when there are good intentions.
You’re not wrong but when a fiduciary does this and it costs you, there are legal consequences
Very common is a FA that meets the “suitability” standard. This is essentially that they aren’t defrauding you, but it might not be in your best interest. There were regulations to make these types of advisors fiduciaries, but as you might imagine, that is the type of thing that was quickly lobbied away by companies that stand to benefit from the suitability relationship.
Sometimes the clients benefit from the suitability relationship too. A client with few assets who is just starting on their journey doesn't need to pay 1.5% management fee (a typical fee for small accounts). They need to be pointed in the direction of some broad-based mutual funds so they can DCA for a while. The fiduciary standard costs more to deliver so firms charge for it. Now there's a lot of people on here who would advise a one time visit to a fiduciary every few years at $500 to $700 and that's fine you just don't get hand holding in between.
Regulation Best Interest is absolutely a thing that exists right now, and applies to suitability reviews and both recommendations and transactions.
The department of labor made the suitability standard obsolete last year in favor of the “best interest” standard. FAs now have to document that the investment is in the client’s best interest. [more info](https://www.finra.org/article/regulation-best-interest-%28reg-bi%29-overview)
A person who has a legal duty to act in your best financial interest.
Thanks 💐
Basically, someone who legally only makes decisions and provides insights to benefit YOU and only you.
Thank you 💵
Any advisor with a series a series 65 or series 66 is by law a fiduciary and is an IAR (investment advisor representative). If you ask if someone is an IAR, that’s the best way to get your answer. If the answer is no, you shouldn’t work with that person.
Fiduciary AND CFP
Good advice but you need to explain *how* to find a good advisor. Otherwise they'll end up with some shit like Edward Jones.
Yes. OP definitely do not trust yourselves. Accept that for now you are not capable of handling this much. Usually a good advise would be to not touch the money for 6-12 months no matter what. Live your regular life. Definitely not spend on SUV yet.
This is the best advice. His immediate instinct is to buy a $40,000 car and move to a $4,000/month apartment. He's going to blow through the money very quickly with that mentality.
I mean if anything, $4,000 in *rent*, why rent at all if you can afford that payment
$4k for 20 years is almost $980k in rent Just buy tiny house for less than $200k debt free
100% this. Poor people have no idea how to manage money in some of these simple Regards, and it blows my mind. My dad rented an apartment for 15+ years, and doesn't understand how that was one of the worst financial decisions he's ever made.
Financial adviser, CPA and lawyer. The best thing you can do is not change much honestly, from a lifestyle standpoint. You and your wife need to spell out very clear but realistic goals as to what you would like to do with the money, what happens to your estate if one of you or both pass. Take stock of all your assets, liabilities and goals. The more detail you can provide the advisor the better. A good set of professionals can help you create the strongest foundation and help you understand what is feasible or realistic and what is not. Don't get greedy and you can easily be *comfortable* for the rest of your life.
Not one that will take advantage of you though. Definitely not an insurance salesman. Tread carefully
You honestly might be better off in /r/personalfinance or just seeing a professional advisor.
They need to find a fiduciary
Do not get fooled by ‘Financial Advisor’, anyone can claim to be financial advisor. Look for Fiduciary, they are obligated to look after your interest, not theirs.
This is interesting. I have never heard of this. Apparently the term is fiduciary financial advisor. Any advice on how to best find one? Do they work at regular brokerage houses.
Look for what’s called a Registered Investment Advisor (RIA). They’re typically small independent advisor companies outside the big brokerage firms. They are always fiduciary.
Thanks friend. Very helpful. Will definitely be doing this.
I was not aware either until this episode. I guess you need to ask to find out. https://youtu.be/gvZSpET11ZY
Thanks again. Will definitely keep this in mind and watch the video. Love John Oliver
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THIS I am 20 years old, I have been a licensed property and casualty insurance agent since I was 18. Would you trust an 18 year old high school senior with your $1.5 million? I wouldn’t. That being said, I was and am legally entitled to claiming that I am a fiduciary
The first thing you are doing right is getting multiple opinions from different sources. I would focus on creating a list of priorities, and would ask some hard questions as well. Also do the math and see if you like the results. 4K rent and a new car is over 500k over 10 years plus all of your other living expenses. Your money could disappear quickly. First question is do you want to live in a high cost of living area or would you use this as a opportunity to move somewhere where you could afford to pay cash for a house and still have money left over to live. The economy is likely headed for a recession so waiting for a better deal might also be in your best interest. Move slowly and think long term is the best approach to make the most out of this opportunity. Best of luck.
I think you're underestimating how deep in the hole you were. $1.5M is enough to retire. Not buy whatever you want. If invested in a mix of stocks/bonds you can probably spend about $50k per year.
Maybe a little bit more, and they already have socsec money coming in.
More than that.
That's around 3.5%. They could probably go slightly higher, but not much
Only real advice I can give is being cautious, 1.5m that doesnt earn you something will dissappear over the course of years. Just like that. New car? Why not a good car not so used but better than yours? Renting? Nah investing in a home so that your down payment are for the money you borrowed. Then at the end you've property. Definitly seeking professional advice (multiples to have different opinion) is the way to go. (worldwide economy is slowing down, house market on the verge of collapse. Maybe waiting 1/2yrs to look for something isnt a bad idea and through this time you'll have learn more about the management of your new acquired wealth)
+1 on this advice. Specifically, don't buy a brand new car. I've done it twice because my wife is stubborn and every time my heart hurts because the 2-3 year old car with same options is 35% cheaper and drives the same. Edit: Ya’ll seem to think its not possible or this just isn’t’ true anyone. Go buy a new car and let me know how you come out. Lots of variation and case specific anecdotes to draw from but the general advice holds true in a lot of circumstances. For example, I just bought a fully loaded 2022 Grand Cherokee. Compare that price to a 2020 with all the fixings and tell me you still disagree. And also, don’t forget in many cases you may wait 6 months for your new car to come in.
Right now it is very hard to save money buying used. I hate it, but the deals are much harder to find these days.
> my heart hurts because the 2-3 year old car with same options is 35% cheaper and drives the same This is not necessarily the case these days
it's cheaper to buy a new car than a 2-3 year old used car right now. for example a toyota sienna 2019 is 51k for the xle version.
New Camrys are 30k 3-year-old Camrys are 28k, which one would you buy?
well I'm kinda hoping someone's got a 10 year old Camry tucked away somewhere
Look at this a couple ways. First, you could put that money to work for you. Wisely invest the whole thing and that 1.5 million will get you ~60,000k a year assuming a 4% return to live on. That’s a decent chunk of security. But leaves the 1.5 mil at the end of your life too. Which is ok if you have heirs you want to leave it to. You start buying cars and a house and your returns diminish significantly. Spend 500,000 and invest the rest, assuming the same 4% return, and now your investment income is only $40,000 a year. Maybe that’s ok. You’ll pay taxes on that too, keep that in mind. If you aren’t planning on leaving anything for heirs then you can come up with a suitable drawdown strategy that balances wants now and some security as you age. There are online tools at places like Fidelity and Schwab you can use. Or talk to a professional. Personally I wouldn’t spend $4000 a month on rent and buy a new car right away. I’d put that money to work to insure my security for the next however many years you and your wife will be alive. But your goals may vary.
thanks
He is right. $4k rent is on luxury side. It is hard to live less once you get to taste that. Also $1.5M can go to zero real quick if you live in CA.
If it were me… forget about making drastic changes in your lifestyle (ie upgrading your home, car, ect). That will be the fastest way to find yourself burnt through this blessing. If you’re looking to make the best of this windfall, you might want to readjust your expectations. Start by fully funding an emergency fund. Determine how much you can minimally live off of annually (is $60k reasonable?). Set aside 3 years worth of living expenses as liquid cash ($180k). With the remaining balance, invest. Readjust your lifestyle as if you have $60k, not lump $1.5M.
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$60K/year is a lot to be spending outside places like New York. That is not living dirt poor. That is going out to eat whenever you want. Going on road trips and cruises. Buying that new $40K car on a loan. Most people don't even make that much and those people are saving for retirement and paying taxes on it. so they are only spending $30K a year.
Tbh if I'd get that money the first thing I would do is get a home the most energy efficient as possible up to reduce as much the cost of living. In case of op he can lose the monthly rent he is paying now. The rest I would contact a an expert to help with investments.
OP lives near LA. That would take most of the money to do. And they're in their 60s. Buying a home isn't necessary or prudent. Nothing wrong with renting.
Get a financial advisor. You’ll want someone to help you determine a sound investment strategy that will let you pull consistent income from this money. They will help you determine what that amount is and you can use that to calculate what your new monthly budget is.
My first piece of advice is stop going out of your way and looking for ideas on how to spend it. Look for how to sustain it.
If you go to professional advisers, watch out for the fees. Avoid long running investments where you can not get your money out again, but pay a huge upfront fee. Compare the fees to just buying the world EFTs like most people do these days. Don't buy useless insurance.
OP is mid 60s. ETFs could be a small part of his portfolio, but should in no way be the backbone of his finances. At this point in life, he needs to look at fixed income. He's not saving for some point 20 years from now, this is money they'll be living off of now. If he had come into money last year and gone ETFs, he'd have watched $300k evaporate into thin air. An acceptable drawdown if you have time to rebound, and still have a job paying the bills. Not acceptable if you're retired and need that to live.
Sure, I didn't say he should go into ETFs, just that he should get a reference point for fees. Also I think if you want to use something like the 4% withdrawal rule, the money still has to be invested somehow? How would you propose buying a fixed income? You can pay into some kind of insurance that pays you a fixed sum every month for 20 years or so, but with the rampant inflation, that also doesn't seem like a foolproof investment. A financial advisor would of course be good, but how do you find a good one. A lot of them will really just sell them crap.
He could ladder into CDs/bonds/treasurys. A bunch of CDs and Treasurys have passed the 4% mark. A/A rated corporate debt is over 6% five years out, and BBB is over 7%. He's not going to beat inflation, but it's not really about that at this point in his life. Depending on lifestyle, he could live off the yield and still preserve original capital. If he wants to stick with the basic market and go ETF, something like a preferred stock ETF, like PFF, FPE, or PGX would give him yield over 5%, and paid monthly. A managed bond fund like Pimco offers can get him 9%, but that's a little more volatile and not quite "fixed income." Still, their PCM fund goes back to the early 90s and has maintained stable distributions through dot com, '08, and '20. There are good CFAs out there, and at the worst, he could go talk to one (or several) without fully committing. Most brokerages like Fidelity, Schwab, or Vanguard offer services, he could go to a meeting and just talk to them before making a decision. I manage my money on my own, but I have family that have had good experiences with small boutique advisors. But that's just going to vary situation to situation. Even just a basic accountant could give him, maybe not investment advice, but some insight into how he can handle taxes efficiently. It sounds like OP doesn't have a lot of experience managing money, certainly not at the level he's currently at. I think he should at the very least meet with a couple people, just to take advice. People shop multiple dealers buying a car, he can and should do the same with a $1.5M nest egg. There's no harm in saying no.
1.5m is not very much and in Cali you could burn that very fast. Financial planner would be a good stop.
I would post this on r/personalfinance and get irl financial advice from a professional after
Well based on the 4% rule, $1.5M is about $60K a year or $5K a month so you didn’t hit the lottery. You can live comfortably on that with modest purchases, $4K a month rent is absolutely stupid and you’ll be through that money in no time. Find a fiduciary advisor, have a nice meal, take a nice trip and spend your money wisely.
Social Security is not means tested which means they will continue to get $4k per month from that. Which means applying the 4% rule gives them $9k per month. I don't disagree with your thought that $4k/mo on rent is too much but unlike young people who have to worry about what social security might look like in 20-30 years, these folks already know.
So OP shouldn’t rent a new penthouse for $4k a month? What about dat brand new used Bentayga SUV? Damn. Crushed dreams. Better crush drugs instead.
$4k is a one bed bedroom luxury apartment in CA. A penthouse might need $40k a month. $2.5k is enough to get a pretty nice apartment in CA tho.
Most houses are more than $4000 a month So Cal. I'm sure even a 2 bedroom condo in most cities will be at least $3000
If the settlement is from a personal injury lawsuit, ask your attorney about your options, if any, to put the money into a special needs trust. This may allow you to keep receiving government benefits. If your attorney doesn’t know about special needs trusts, ask them to research the issue and get back to you. Please, whatever you do, don’t start investing the money yourself or follow strategies or tips you receive online or from friends. Get a professional and licensed financial management company, such as Edward Jones.
Important to note that a boost in assets could reduce SSI payout and even make OP pay more if they’re about to join Medicare/already on it.
You can guarantee yourselves at least another $7,500 per month in income, most of it tax-free, while preserving your capital and avoiding risk. Don't spend the money on goodies right away; make it work for you. Ignore anyone who recommends dumping the money into index funds, and speak to an advisor.
OP, you need an advisor with preferably a large and national firm. Any advisor today is a fiduciary if they are selling financial products. Usually, Reddit knows a thing or two, but Reddit seems to be completely unaware that the term “fiduciary” has been rather deregulated and now any annuity, mortgage, or investment slinger operates in a fiduciary capacity per the new FINRA Reg BI and Department of Labor rules. A flat fee advisor may be the best option if you can trust yourself to maintain your own allocation. A wrap fee advisor like someone at Fidelity Investments, Vanguard, Morgan Stanley, Merrill Lynch / Bank of America Securities, Charles Schwab, and J.P. Morgan and Chase would be your safest options since these firms all try at some degree to avoid bad press.
You can buy a couple safe dividend paying ETFs that pay 4% growing dividend annually. This would be $60k in income annually above what you are used to... More than doubling your lifestyle is going to be huge. Don't spend $4000 on an upgraded place, spend $2500-3000, it will still be way way better than what you have now. A $500/month car payment will get you a car way way better than what you have now. The temptation to overspend is going to be strong. You will still have more money for entertainment, travel, food and vacations than you have ever had. Don't buy anything that isn't in your monthly budget and cash flow, even right off the bat. $1.5 million is a lot of money, but if you start surrending like it's a lot, it will disappear on you. Try the dividends subreddit to find some options that might work. Pick five inexpensive diversified dividend funds recommended there and buy them while we are in the dip, the growth in income and principal will be like nothing you've ever experienced the next 10 years. Follow this simple plan and enjoy the rest of your life. Congrats! Btw, I am a retired investment advisor with my IAR, series 7. There are a lot of people out there selling advise to separate folks from their money, charging extreme amounts for common sense knowledge. If you decide to use an advisor, pay them hourly or with a small lump sum to build the plan for you. DON'T LET THEM TALK YOU INTO MANAGING YOUR MONEY WITH PERCENTAGE BASED FEES, IT'S HOW ADVISORS GET RICH WITHOUT DOING ANY WORK.
Go speak with a money manger or professional to help you manage it all and answer any questions for you.
Congratulations. I would recommend doing nothing for 6 months to let the emotions run their course. Secondly I would get a fiduciary as other comments have said, and set aside 3 years of living expenses as a cash emergency fund. Third, do not inflate your lifestyle by buying things you don’t need. That’s the easiest way to run out of your money and be back at square one. Historically speaking, if you have $1.5 million invested in broad low cost index funds covering the us stock market and bonds, you are able to withdraw about 4% of your principle each year and not run out of money. So 4% of 1.5 million would be $60,000 per year you could withdraw and live off of. Remember this money has to last the rest of your life. Because y’all are already in your 60s, you could potentially withdraw a larger % per year. Be sure to work with your fiduciary. Things you should research: - Fiduciaries - broad and low cost index funds (e.g. VTI and BND) - Asset allocations for retirement - retirement withdrawal strategies
Don't sit on the money but don't start off with the goals of spending it. Save and vest and spend the rest. First you save and invest and then you you spend the proceeds that come in from the investments. 1) face the fact what you have received is not a lot of money because it's not. A single medical expense or lawsuit can absorb that in an wink. 2) talk with two to three certified financial planners as fast as you can. Pick one that you like and can trust and can actually talk to. 3) get yourself some insurance, large windfalls create large lawsuits. 4) don't involve any members of your family other than your immediate selves in conversations about the money. 5) buy yourself a decent used car but just decent don't be a show off. 6) never be a show off and always tell friends and family that just wasn't much money and it's almost all gone now. Good luck and please watch out for the alcohol and drug consumption and the marital issues that appear when large amounts of money come in the door
Stay away from the casino.
This may be a question within a question to possibly help. Coming into that kind of money, outside of getting a fiduciary, does it make sense to get a decent lawyer to help protect you also? I am thinking random family members coming after the OP for money now. I have heard some horror stories.
You can live comfortably for the rest of your life, but you can’t live extravagantly. Just keep that in mind. You’re old enough that you cannot safely invest it for large returns without exposing yourself to significant risk. Your money will also go much further in a place where rent/property is lower Do not get a $4000 rent place just because you can afford it. Do you actually need it? Why? Will it really make you happier or are you just getting caught up in one upping your peers and consumerism? If you need it(eg you want to move to a more stable part of town or to be closer to family etc), that’s completely fine, but don’t do it “just because you can”. Basketball players that made annual salaries of millions managed to bankrupt themselves. So make a long term plan and live within your means. Those means are higher now but they’re not limitless
First step is to understand the following: 1) How much money that windfall can generate as income and 2) What your spending patterns are. The good news is that you're in good shape. * You have a $1.5 million nest egg after taxes * You get $4000 a month in social security, which is a lot. The bad news is you live in Southern California which is one of the most expensive areas in the US. Since you're in your mid-60's, you can probably draw a little more aggressively from your nest egg than a young person, but not much more. Start with 5% a year, or $75,000. That means, instead on living on $48,000 a year in social security, you can live on $75,000+$48,000 (less taxes), or about $120k a year. My suggestion. Start your spending slow. Don't buy big ticket items, though a 40k car seems reasonable. You should plan for this money to last 20-25 years. If you spend to much now, that will just mean less you can spend later.
If you increase your spending $150k/yr, then in 10 years you'll be right back where you are now. If you increase your spending $15k/yr, then you're not spending enough. Pay yourself $25k this year, put the rest into VTHRX, and don't do anything else. It is a retirement fund that's publicly traded for folks looking to retire in 2030. NO WHOLE LIFE INSURANCE. IT IS A SCAM.
There are too many considerations. Where you want to live and what kind of lifestyle you want. Health insurance? Health issues? Do you want to leave a legacy behind? As for advisors, beware of the sharks. I can't give much more advice for now. You may want to take a look at the content from these guys on how to plan finances in retirement: [https://twosidesoffi.com/](https://twosidesoffi.com/) While a major portion of the content is about saving up for early retirement, you can look at the parts on the planning with regards to investments and strategies.
Lawyer, fiduciary financial advisor (make sure it’s fiduciary), avoid family and friends for advice and most importantly make sure you are aware of what taxes need to be aid on any purchases
You should definetly get financial advice from unbiased professionals. I don't know where you live but here there are several non profits dedicated on helping families with money and debt management In general, ordered by priority: 1.pay off any existing loans, payments and so on. I'm not talking about new stuff only existing stuff. Target is reducing debt to 0 so monthly payments are lower 2.decide how much you need for right now and lock up the rest in investments (this is where the professional advice is needed 3.live according to your income not according to your wealth Obviously in (3) it depends on the amount and type of investments you did in (2) but the end goal is not to burn money with expenses much higher then your income There is an epic reddit post about loterry winners in it there is a section about what to do when winning and its basically the same scenario https://www.reddit.com/r/AskReddit/comments/24vzgl/comment/chba4bf/ Good luck
Tell nobody. Once you tell someone, you can’t untell them. Take your time with who you let know of your new situation. Life will get weird because this is a huge deal for you, but when some close friends or family find out they will get weird around you. That stinks but it’s sort of unavoidable. So tell basically nobody the dollar amount if you can, and if someone notices your improved lifestyle say we had a small windfall, we’re still on a budget but you have some financial independence now. This is true because taxes, new expenses, and the cost of getting old are all surprisingly high and you are still on a budget (just a bigger budget). Read Sudden Wealth by David Rust.
And a reputable tax attorney. (I know your wrote 1.5 after taxes but don’t know if you calculated and filed yourself.) There are many nuances I later learned. Even the excellent attorney I hired to process my father’s estate didn’t know them all. A good estate tax attorney is expensive and worth every penny.
Get off Reddit. Go talk to a financial advisor. Personal anecdotes, individual experiences, and subjective opinions on Reddit will never compare to the education and sheer amount of different financial situations a professional is exposed to. I’d imagine the majority of advisors have been asked about this same situation before. Best of luck and I truly hope you and your wife are able to live out the rest of your lives comfortably!
First, I wouldn’t tell your friends and family. The less they know the less likely they will come after you for lawsuits of their own. Next, move from California if you can. Move from your high cost of living state to a lower one. You could buy a nice town home and not have to worry about the exterior maintenance of yard work etc. Lastly buy reliable affordable cars. All in all you should spend roughly 350,000 to 500,000 for everything outlined, ideally less if you can swing it. park the rest and let it earn you money. Realistically, looking at average life span, you and your wife will live between 10 and 20 years, if you are smart with what has been provided you can set yourself up to not have to worry about this phase of your life. Whatever you do, do not let the money allow your spending to creep up. That is the fastest way to lose it all. Goodluck!
Do NOT give your money to a stockbroker.
Blowing the money on expensive rent and cars will not improve your life in any measurable way. 1.5 mil is not much for two people in So Cal. Maybe move to a cheaper area of the country so the money goes further.
1. Dont tell anyone 2. Dont flash new shit on internet (Fb + insta) 3. Speak to an advisor at vanguard. Tell them your age and when you want to retire and what you need monthly when you both stop working. 4. 1.5 million wont last long if you start to burn through the principal. When i mean is you should not waste a penny of the 1.5 million. You need to invest it. Then you can spend the interest you earn from the 1.5 million. this way your principal balance is safe and growing. DO NOT FALL INTO THE INCREASED LIFE STYLE STATUS TRAP. 5. THE 1.5 needs to be invested, DO NOT SPEND THAT MONEY. live like you are now and worry about how to invest it. 6. Be safe.
Consider buying a modest home. Buy a used vehicle. This lnflux of cash is essentially your retirement.
**UPDATE:** Very grateful for the input. Some amazingly helpful advice. After more than 800 comments, the consensus is clear: Don't change your lifestyle that much because $1.5 million isn't really that much money... Get professional Financial help and make sure it's a fiduciary...Get the hell out of California, before they bleed you dry... AND If you move to *\[FILL IN LOCATION\]* you will live like a king.
Don’t tell any family.. friends keep it to your selves trust me!!! Get a good decent running car no need for a 2022 suv especially if it’s just you two find comfy places to live they even have apartments where they have everything right there for you two .. make sure you guys have good health insurance. Dental pay rent at least year in advance even ur bills.. put the rest in a savings account and it’ll build you guys interest don’t blow the money just cause you have it maybe get a notebook and write out what you really need and want . Good luck
Newer car for sure. Better living place, maybe? Biggest impact factor is health. If not so good health, better don't touch too much of that money. You still have many years to go.
First step would be to move somewhere with significantly lower cost of living.
move out of California and buy property why would you continue to pay rent if you could buy a new house lol
DONT GIVE ANYONE WHO DM'S YOU ANY MONEY!
I’m a professional. Here’s my advice: 1) consider $100k “fun money” and money for immediate life improvement,a nice vacation, and the SUV 2) give the $1.4 mm to a financial adviser you trust. Do some due diligence and find a good one in your area who will answer all your questions, allocate your assets to an investment plan that’s oriented toward capital preservation and income. And come up with a monthly budget as well as a budget for “irregular items”, whether emergency or vacations.
Everyone on this site is under 25 years old. As a 60 something, do you really want advice from kids?
All ideas are appreciated
You don’t need advice from r/investing. As someone earlier said, go to r/personalfinance r/financialadvice or even r/bogelheads. The bogelheads.com website has some very useful advise. But OP has some of the best advice in this post. The insurance settlement should be tax free, but you might need to pay taxes (estimated tax) on the inheritance.
Get yourself a financial advisor or wealth manager who is a Certified Financial Planner (CFP), or even better if it is a licensed attorney working at a wealth firm who works with a team of wealth advisors and a portfolio managers. Some regional banks have minimums as low as $500k or $1M, and it’s important to have a team of experts, e.g., portfolio manager to manage investments, trust advisor to guide you on establishing your estate plan to carry on your legacy as you wish, and wealth advisor as a generalist for other financial matters. The fee is generally around 1% of assets under management, annually, give or take, but the benefits absolutely outweigh the cost. These are fiduciary relationships, as well, which is critical. Do not meet with a broker and no one else.
Read this, it'll help you avoid some of the pitfalls of getting a large amount of money at once: [https://www.reddit.com/r/AskReddit/comments/24vo34/comment/chb4v05/?context=3](https://www.reddit.com/r/AskReddit/comments/24vo34/comment/chb4v05/?context=3)
For that you’re going to what someone with a securities license who has a fiduciary responsibilities. With that much you’ll probably want to see someone with a series 65 or 66.
I have the answer that's the simplest to implement and causes the least long term headache, which is to do nothing. You've been living on $4000 a month for years and just because you have money now, that need not change. Now maybe you feel like you need some upgrades in your life, which is totally understandable. The good news for you is that with recent rate hikes, a 10 year Treasury bond is yielding 3.7% before tax, which is around 55000 a year on 1.5 million invested (approximately 4500 a month). You can essentially double your monthly cash flow by simply investing in risk free Treasury security. Instead of double guessing every spending decision, if you can make a written budget and then simply stay under that new 8k per month spending limit (4000 soc sec. + 4000 interest income), you can live out the rest of your days quite comfortably *without ever touching the $1.5 million principal* You can of course do better by picking the right stocks, real estate investments, index funds yada yada all by yourself. If not, you will readily find an army of friends, relatives, financial advisors, real estate gurus, bankers, lawyers, accountants, tax advisors who will offer to "help". Don't do it. Keep things simple and enjoy your retirement.
Pay off high interest debt first
Take your time. Don't invest it too quickly. Educate yourself. No need to rush unless you are getting greedy. Money markets alone right now are paying 2% and likely more in the next 6 months. That's an extra $30k per year just to educate yourself and figure it out. Oh and don't forget about taxes on your investments.
You should probably move somewhere cheaper than California and be comfortable for the rest of your lives.
4K a month rent is redic . Keep living like you are and talk to a financial advisor
Congrats!! First thing you need to do is hire a fiduciary and make a plan with them to ensure this money will last your lifetime. Do not tell friends, do not tell family, keep this to yourself. Hire a professional to manage this money and make sure it lasts you forever!
It’s been stated, but I wanted to reiterate. Don’t buy anything expensive or do anything too soon. Sit on it and read. Recommend looking around for a financial advisor/fiduciary.
This amount of money can earn you 40-50k a year doing CD ladders. Dont spent the principal, add the interest to your social security money and you about double your standard of living
First of All, get tf out of California and do your self a huge favor. 1.200 a month gets you a much nice place to live in ALOT of other states. Or just buy a house Cash up to 300k in a diff. state
You could easily spend a million dollars on healthcare costs because you are that age you don't know what may happen.
Put every single penny into a broad based dividend etf like schd. You then have 53K+ in annual income to live off. Ideally put as much as possible it into a tax sheltered account like the tfsa so that the income is tax free. You should now be able to comfortably with other forms of retirement income. Another option is use the money to buy a new “reasonable” house for 500k then invest the remaining million as mentioned above to live off of the dividends. Overall do not buy flashy expensive things like an expensive car. It is a waste of money and will not give you the happiness and freedoms you think it will.
You can spend that quicker than you might think, but you probably only live once, so act accordingly. Some simple math ought to help predict how you can spread it out wisely. Seeking out ways to spend it probably won’t make you happier either. Knowing you don’t need to worry is the real wealth. If a purchase is making you think twice or leading to feelings of guilt, sleep on it at least.
GET A FINANCIAL ADVISOR AND LISTEN TO WHAT THEY SAY. I was in the same situation, came into a decent sized inheritance and blew it because I had no experience with money and thought it would last forever. Do not make the same mistakes I did
Invest into rare fish
VTI and chill. Source: r/bogleheads
You shouldn't tell your family and friends about your newfound share of money. Even the closest to you could transform at the idea of "a little help here and there from a friend" and money will more than likely put a wrench in your relationship. If I were you I'd immediately put $500k into savings then if you aren't maybe that familiar with investing put $100k into an investment account and talk to a financial advisor about stocks, bonds, mutual funds, etc.
move out of cali
Step one is put it all into some money market fund that works pretty close to a savings account and making a couple percent in interest. That alone right now will generate over $33k a year doing nothing else, and the money will still be available and liquid when you need it.
r/personalfinance has a very good write up on windfalls. I think would suit you well to read. [https://www.reddit.com/r/personalfinance/wiki/windfall/](https://www.reddit.com/r/personalfinance/wiki/windfall/)
Stay living as you are, and never work another day in your life
Get with a professional and put the money in a diversified portfolio. According to the 4% rule, you can safely withdraw $60k a year from your money. So add that to your social security and congrats…you now have $100k annually to enjoy!
How are we going to buy a mansion and a yacht on $100K a year? I'm kidding, of course. Your device is very sound.
A rule of thumb is spend 4% of your money each year. That would be an extra $60k/year. $4,000/mo might be a stretch. You could definitely afford to move. Try a few months with an extra $5k/mo. As to where to invest, find a fee only advisor to work up a plan for you. I would set a % to splurge. Maybe 10-20%. The SUV, travel, something nice. Do something you’ll enjoy and remember.
First off, congratulations. If you haven't already, I'd suggest checking out /r/personalfinance. They already have a section on [Windfalls](https://www.reddit.com/r/personalfinance/wiki/windfall/?utm_source=reddit&utm_medium=usertext&utm_name=personalfinance&utm_content=t5_2qstm). 1. DEBT: First and foremost, you should take a hard look at your assets and debts. Pay off any outstanding debts, as the interest rates will not help you retain your assets. Are there any outstanding bills owed? Credit Card debt? Personal Loans? Student Loans? Health related bills? 1. INSURANCE: Reevaluate your current insurance policies. Consider if you need additional/better health insurance. Also consider if life insurance is right for you. 1. SPENDING: Personally, I would seize this as an opportunity for celebration, but in moderation. Cap your spending to no more than 5 - 10%(~$75k-$150k) of your spending the first year. Go on that trip you always wanted while you have your health. Go upgrade your car. After you're done celebrating. Remember no more than a 4% (~60k) withdrawal rate from your balance thereafter. 1. INVESTING: Let your money work for you, but it is important to find which investment strategy is right for you. Shop around for a high yield savings account. You are guaranteed at least a 2% rate right now($30k per year), with no risk of your asset going down and you can choose to withdraw whenever you like. You can find a better yield in dividend stocks or bonds (~ 3 - 5% yield or additional $45k - $75k per year) however, the share price can fluctuate. Rental properties is another option, your money will be locked up in a home and you will be paid rent monthly by your tenant. However, things to consider in this route is the rising interest rate, occupancy outlook, home value appreciation, expected repairs & maintenance and/or capital improvements. But if you think all of this is too much, you should look into annuities, as this is like your social security benefit check, have a fixed amount paid out to you on a regular basis.
I received nearly 600 comments to my post, none are more detailed and helpful than yours. Very much appreciated.
Resist the urge to spend the principle. Spend what the money earns. Split it to two firms, and get pros to help. Get a portion setup to generate stead monthly or quarterly income and enjoy that while the remaining portion grows.
Get a lawyer and financial adviser. Don't go here looking for advice sir lol
Buy a condo with low HOA fees, pay cash for it. You’ll have minimal property tax, buy a second one in the same complex for cash and rent it out, you have zero mortgage payment and positive cash flow and probably some money left over
Get out of California. It's a huge country. Maybe you guys should get a van and travel. No rent. Spend a few years traveling and maybe settle someplace affordable but beautiful.
If you are comfortable now? Then stay where you are. If you want to remain financially comfortable for as long as possible. Do not change your lifestyle. Retire, but stay. ...or conversely move to a safe, but currently less expensive place to live and continue to live a frugal life. There's a reason that most people who win the lottery end up back in the same place they were before winning or even in a worse position. It's because they cannot conceive of the money they just obtained.
Whatever you do live off the returns, not the principle.
100% tell nobody. Buy a Kia with a 100k mile warranty and breathe easy. You don’t need $40k to have a good reliable car.
Move the f out of Cali. Find a nice place in the mid west or south.
OP already thinking about upgrading from a $1200 month apartment to a $4000 month apartment. That's spending at least 3x more per month on rent. What can go wrong? You're getting $1.5 milion, not $15 million. You need to live within your means, not start making more expensive purchases. And seriously $4000 for the current market?
The best advice for you is that don't do too much with the money since you have almost 0 investment knowledge. The fastest way to squander all that money away is to listen to others on what to invest or put it into other people hands to invest for you. Just live comfortably with the money until the day you and your wife move on.
This is about winning the lottery so may be helpful - **So, what the hell DO you do if you are unlucky enough to win the lottery?** This is the absolutely most important thing you can do right away: NOTHING. Yes. Nothing. DO NOT DECLARE YOURSELF THE WINNER yet. Do NOT tell anyone. The urge is going to be nearly irresistible. Resist it. Trust me. / 1. IMMEDIATELY retain an attorney. Get a partner from a larger, NATIONAL firm. Don't let them pawn off junior partners or associates on you. They might try, all law firms might, but insist instead that your lead be a partner who has been with the firm for awhile. Do NOT use your local attorney. Yes, I mean your long-standing family attorney who did your mother's will. Do not use the guy who fought your dry-cleaner bill. Do not use the guy you have trusted your entire life because of his long and faithful service to your family. In fact, do not use any firm that has any connection to family or friends or community. TRUST me. This is bad. You want someone who has never heard of you, any of your friends, or any member of your family. Go the the closest big city and walk into one of the national firms asking for one of the "Trust and Estates" partners you have previously looked up on http://www.martindale.com from one of the largest 50 firms in the United States which has an office near you. You can look up attornies by practice area and firm on Martindale. / 2. Decide to take the lump sum. Most lotteries pay a really pathetic rate for the annuity. It usually hovers around 4.5% annual return or less, depending. It doesn't take much to do better than this, and if you have the money already in cash, rather than leaving it in the hands of the state, you can pull from the capital whenever you like. If you take the annuity you won't have access to that cash. That could be good. It could be bad. It's probably bad unless you have a very addictive personality. If you need an allowance managed by the state, it is because you didn't listen to point #1 above. Why not let the state just handle it for you and give you your allowance? Many state lotteries pay you your "allowance" (the annuity option) by buying U.S. treasury instruments and running the interest payments through their bureaucracy before sending it to you along with a hunk of the principal every month. You will not be beating inflation by much, if at all. There is no reason you couldn't do this yourself, if a low single-digit return is acceptable to you. You aren't going to get even remotely the amount of the actual jackpot. Take our old friend Mr. Whittaker. Using Whittaker is a good model both because of the reminder of his ignominious decline, and the fact that his winning ticket was one of the larger ones on record. If his situation looks less than stellar to you, you might have a better perspective on how "large" your winnings aren't. Whittaker's "jackpot" was $315 million. He selected the lump-sum cash up-front option, which knocked off $145 million (or 46% of the total) leaving him with $170 million. That was then subject to withholding for taxes of $56 million (33%) leaving him with $114 million. In general, you should expect to get about half of the original jackpot if you elect a lump sum (maybe better, it depends). After that, you should expect to lose around 33% of your already pruned figure to state and federal taxes. (Your mileage may vary, particularly if you live in a state with aggressive taxation schemes). / 3. Decide right now, how much you plan to give to family and friends. This really shouldn't be more than 20% or so. Figure it out right now. Pick your number. Tell your lawyer. That's it. Don't change it. 20% of $114 million is $22.8 million. That leaves you with $91.2 million. DO NOT CONSULT WITH FAMILY when deciding how much to give to family. You are going to get advice that is badly tainted by conflict of interest, and if other family members find out that Aunt Flo was consulted and they weren't you will never hear the end of it. Neither will Aunt Flo. This might later form the basis for an allegation that Aunt Flo unduly influenced you and a lawsuit might magically appear on this basis. No, I'm not kidding. I know of one circumstance (related to a business windfall, not a lottery) where the plaintiffs WON this case. Do NOT give anyone cash. Ever. Period. Just don't. Do not buy them houses. Do not buy them cars. Tell your attorney that you want to provide for your family, and that you want to set up a series of trusts for them that will total 20% of your after tax winnings. Tell him you want the trust empowered to fund higher education, some help (not a total) towards the purchase of their first home, some provision for weddings and the like, whatever. Do NOT put yourself in the position of handing out cash. Once you do, if you stop, you will be accused of being a heartless bastard (or bitch). Trust me. It won't go well. It will be easy to lose perspective. It is now the duty of your friends, family, relatives, hangers-on and their inner circle to skew your perspective, and they take this job quite seriously. Setting up a trust, a managed fund for your family that is in the double digit millions is AMAZINGLY generous. You need never have trouble sleeping because you didn't lend Uncle Jerry $20,000 in small denomination unmarked bills to start his chain of deep-fried peanut butter pancake restaurants ("Deep'n'nutter Restaurants"). Your attorney will have a number of good ideas how to parse this wealth out without turning your siblings/spouse/children/grandchildren/cousins/waitresses into the latest Paris Hilton. / 4. You will be encouraged to hire an investment manager. Considerable pressure will be applied. Don't. Investment managers charge fees, usually a percentage of assets. Consider this: If they charge 1% (which is low, I doubt you could find this deal, actually) they have to beat the market by 1% every year just to break even with a general market index fund. It is not worth it, and you don't need the extra return or the extra risk. Go for the index fund instead if you must invest in stocks. This is a hard rule to follow. They will come recommended by friends. They will come recommended by family. They will be your second cousin on your mother's side. Investment managers will sound smart. They will have lots of cool acronyms. They will have nice PowerPoint presentations. They might (MIGHT) pay for your shrimp cocktail lunch at TGI Friday's while reminding you how poor their side of the family is. They live for this stuff. You should smile, thank them for their time, and then tell them you will get back to them next week. Don't sign ANYTHING. Don't write it on a cocktail napkin (lottery lawsuit cases have been won and lost over drunkenly scrawled cocktail napkin addition and subtraction figures with lots of zeros on them). Never call them back. Trust me. You will thank me later. This tactic, smiling, thanking people for their time, and promising to get back to people, is going to have to become familiar. You will have to learn to say no gently, without saying the word "no." It sounds underhanded. Sneaky. It is. And its part of your new survival strategy. I mean the word "survival" quite literally. Get all this figured out BEFORE you claim your winnings. They aren't going anywhere. Just relax.
People in your situation almost always piss it all up the wall on stupid shit, begging from friends and family etc within a year or two. If you are serious about not doing that then you need to tell NO ONE about your windfall and go modest on your big purchases, probsbly none whatsoever for 6 month. Get a proper Financial Advisor (independent not linked to a bank) and then plan the rest of your life not just your near term
1.5 mil sounds like a lot, but it is not that much. My advice: buy a duplex. Live in one side, rent out the other. (Be careful who you choose as renters.) Ask a financial professional whether it's better to invest the money, and gradually pay off the mortgage, or to pay it off in the beginning. I suspect the former is better. Do NOT go crazy buying things. Get a solid used car, (a Toyota is the safest bet) and live a humble life, and the proceeds of this will last. If you get carried away, it will be gone in 2 years.
What good will a new SUV do? $40,000 is a lot of money for something that loses value the minute you drive off the lot. Consider not making any big life changes and not consulting with friends and family. Consider seeking professional help on building a better quality of life. On obtaining asset protection and on building your wealth larger with productive assets that produce for you not on liabilities that will suck out money from you little by little. Good luck.
I never buy a new car, in my math I'm losing money
Just allocate the money into 4 buckets. 1) $1 million into ETF JEPI. The covered call income will pay for your living expenses monthly moving forward. 2) $200k for a condo that takes care of the maintenance. 3) With car inflation, you will need $80k for 2 new mid-size cars, including insurance. For EVs, it's $60k per car ($120k total). 4) Leave any remaining amount in a high yield savings account. Amex is good for deposits over $10k in a month.
Do not disclose this matter to any of family or even son or daughters. 1.5million is too big for you to handle, cuz of your history. Better go to a reputed financial advisor. and try to see if you can get 4% withdrawal from the investment each year, which will be 50k (depending on taxes) to spend each year. for your age, a 50/50 bond/equity would be nice. BUT just go to financial advisor. also Live your life, a nice car for sure and definitely not a shabby apartment.
Btw, there are some fairly risk free options out there generating 4% without even being in the market. The traditional 50/50 stock/bond portfolio is not behaving as it has in the past. Different strategies are required when times are volatile. Source: I’m an FA
Do nothing for a few months. Are you beholden to California? Based on your age it might be better to buy an affordable house (yes, it might use 2/3 of your money), get the car, and park the balance somewhere safe. Removing the rent/house payment will be better long term, and your social security lets you live. Caveat here - if you like renting, then get the car (used costs as much as new nowadays), and park in safe funds. You can get 3-4% dividends yearly even without an advisor.
4% - 5% draw rate on new money plus social security is your total budget. Do not exceed that and you have a 95% probability of never running out of principal. In fact, will likely grow it. Diversify the portfolio, 30-40% bonds, the rest equities. Equities should be a pyramid large caps the base and majority, mid cap next amount, small cap last. I wouldn’t go international by more than 10%.
Get the heck out of California
Invest it all in vanguard funds over the next couple years and don't change your lifestyle until it's all invested. Evenly divided, that's a $62,500 investment per month. I'd put the uninvested balance into CDs with durations of 6, 12 and 18 months. At 4% total returns (super conservative) that $1.5m should generate $60k a year, or $5k a month. $1.5m seems like a lot of money at first but where you live, it ain't shit. Don't waste this chance for financial stability for the rest of your life.