What do I do with a sudden influx of cash due to divorce?
August 23, 2017 4:15 AM
I am about to have a large amount of money due to divorce and the sale of my former home. What do I do with it?
I am unexpectedly getting divorced in a couple months (that part is ok...he will be moving out of state in a few weeks and it's amicable at this point). I will end up with about $600,000 in cash after everything is settled and the house is sold. I have about $300,000 in retirement accounts and a decent job (about $90,000/year usually, though in a somewhat insecure industry, and about $30,000 in cash savings). I have had cancer twice previously so am loathe to sock it all into retirement accounts (I am early 40s and not sure I will get to retirement, though I do make enough contributions to get the employer match, and I have long term care insurance which is portable. My treatment has cost me about $50,000 so far). I am living with a friend at the moment and can probably continue that for the foreseeable future/indefinitely, so I don't need the money to buy another house right away (but might in a couple years). My husband handled the investments, so I am not sure what I do now. Stocks? Let a broker handle it (I feel like they are more interested in making themselves money than making me money)? Mutual funds? Buy a house as a rental? Just putting it in the bank(s) seems like a terrible idea. IDK. Anyone with experience in similar situations (inheritance, divorce)? I would like to grow the money, but preserving it is paramount since presumably I will at some point buy a house again.
I am unexpectedly getting divorced in a couple months (that part is ok...he will be moving out of state in a few weeks and it's amicable at this point). I will end up with about $600,000 in cash after everything is settled and the house is sold. I have about $300,000 in retirement accounts and a decent job (about $90,000/year usually, though in a somewhat insecure industry, and about $30,000 in cash savings). I have had cancer twice previously so am loathe to sock it all into retirement accounts (I am early 40s and not sure I will get to retirement, though I do make enough contributions to get the employer match, and I have long term care insurance which is portable. My treatment has cost me about $50,000 so far). I am living with a friend at the moment and can probably continue that for the foreseeable future/indefinitely, so I don't need the money to buy another house right away (but might in a couple years). My husband handled the investments, so I am not sure what I do now. Stocks? Let a broker handle it (I feel like they are more interested in making themselves money than making me money)? Mutual funds? Buy a house as a rental? Just putting it in the bank(s) seems like a terrible idea. IDK. Anyone with experience in similar situations (inheritance, divorce)? I would like to grow the money, but preserving it is paramount since presumably I will at some point buy a house again.
You might find that anybody with over half a mil in savings gets bumped to top tier fawning level by their bank, which is kind of disconcerting at first.
posted by flabdablet at 4:26 AM on August 23, 2017
posted by flabdablet at 4:26 AM on August 23, 2017
Schwab is amazing. I have never paid them a dime for anything except trades.
posted by Mr. Yuck at 4:50 AM on August 23, 2017
posted by Mr. Yuck at 4:50 AM on August 23, 2017
In a sorta similar situation with a similar windfall, I found a local financial advisor (independently owned, but affiliated with Raymond James). I ended up transferring all my accounts to them, and they manage all my investments (retirement and otherwise) for me now, for a flat rate.
I meet a couple times a year with my guy, and he asks me lots of questions about my short- and long-term plans. He's also careful to explain his overall strategy, the returns I'm getting vs. my fees. I used to manage my own accounts and stick to mostly index funds, and after a year of having someone else do it, I'm confident that he's worth the cost. He's doing a great job of making me money, but I also just really like not having to worry about any of it. He's always humbly proud of what a good job he did for me, and it's kinda adorable.
One of the goals I gave him when I hired him was that I wanted to buy a house this year. He just helped me wire money from my investment account to cover my down payment. It was really easy.
I'd say look for a financial planner or financial advisor with good reviews near you. They'll meet with you for free to talk about what you're looking for and what they can provide. They'll explain their fee structure. Many can do a fee-based model (they make money when you make trades) or a flat rate, and should be able to explain which is a better deal given your goals and situation. Ideally, find someone who's a good personality fit for you, and who explains things to the level you need.
posted by katieinshoes at 5:02 AM on August 23, 2017
I meet a couple times a year with my guy, and he asks me lots of questions about my short- and long-term plans. He's also careful to explain his overall strategy, the returns I'm getting vs. my fees. I used to manage my own accounts and stick to mostly index funds, and after a year of having someone else do it, I'm confident that he's worth the cost. He's doing a great job of making me money, but I also just really like not having to worry about any of it. He's always humbly proud of what a good job he did for me, and it's kinda adorable.
One of the goals I gave him when I hired him was that I wanted to buy a house this year. He just helped me wire money from my investment account to cover my down payment. It was really easy.
I'd say look for a financial planner or financial advisor with good reviews near you. They'll meet with you for free to talk about what you're looking for and what they can provide. They'll explain their fee structure. Many can do a fee-based model (they make money when you make trades) or a flat rate, and should be able to explain which is a better deal given your goals and situation. Ideally, find someone who's a good personality fit for you, and who explains things to the level you need.
posted by katieinshoes at 5:02 AM on August 23, 2017
You might want to find out if you're supposed to pay taxes on your share of the profits from the house sale (you paid x for it when you bought it and now it's worth x+y because of appreciation, taxes could be on y) unless you use the money to buy another house within some set period. Do you have an accountant? She or he will know this.
posted by mareli at 5:48 AM on August 23, 2017
posted by mareli at 5:48 AM on August 23, 2017
look for a financial planner or financial advisor with good reviews near you.
I think that's a good idea too.
Reason I recommend dumping everything straight in a high yield savings account to begin with is so that you can approach the task of seeking out competent tailored financial advice without the risk of being railroaded into poor decisions by a burning urge to get that done right this instant omg now.
The operation of compounding returns will always mean that the difference between stellar and mediocre financial management, over the length of time required to net a return on your $600k that doesn't look puny when sat next to the principal, will swamp the difference between a stellar return and a mediocre one over the first year.
posted by flabdablet at 5:58 AM on August 23, 2017
I think that's a good idea too.
Reason I recommend dumping everything straight in a high yield savings account to begin with is so that you can approach the task of seeking out competent tailored financial advice without the risk of being railroaded into poor decisions by a burning urge to get that done right this instant omg now.
The operation of compounding returns will always mean that the difference between stellar and mediocre financial management, over the length of time required to net a return on your $600k that doesn't look puny when sat next to the principal, will swamp the difference between a stellar return and a mediocre one over the first year.
posted by flabdablet at 5:58 AM on August 23, 2017
Hie thee to Bogleheads. Start with their section on managing a windfall, and look into their readings on asset allocation and the simple three-fund portfolio. Then start perusing the forum, which will help you figure out whether to spend money on an advisor (most people don't really need to, and even if you do, you should at least calculate exactly how much money that costs in dollars).
posted by Dashy at 6:41 AM on August 23, 2017
posted by Dashy at 6:41 AM on August 23, 2017
I was talking with a financial planner before summer, and told him I had bought a house for (vacation) rentals, using what I formerly paid into my pension fund each month for the mortgage, but hopefully soon having income from it which will cover the costs. I'd have expected him to prefer me to put all my money in his business, but he agreed completely. He also suggested that I buy gold. His explanation was that the current financial situation is so volatile, he wouldn't want any client to put all their funds in one pot. He wasn't my financial planner, but when I asked the one my bank provides she agreed. So my advice is that you diversify. Find a good advisor for financial investments, and buy some property. And maybe some gold (which can be nice jewelry for you but be aware that you shouldn't pay much more than the current price for gold pr ounce).
When I divorced, about 30 years ago, I let my ex-husband buy me out of our home because it was filled with bad memories for me. At the time, it was a fair deal. But if the situation had been reversed, I would have been a millionaire today. He would have been broke, regardless, because he eventually mortgaged the house beyond its value being part of the 00's bubble. This experience was part of my reason to use part of my pension savings for property. Property is not good for short term speculation, it's too much of a gamble. But for longer term saving, its excellent. If you plan on eventually buying a new home, it's the best, because your rental property will follow the general movements on the market.
posted by mumimor at 6:54 AM on August 23, 2017
When I divorced, about 30 years ago, I let my ex-husband buy me out of our home because it was filled with bad memories for me. At the time, it was a fair deal. But if the situation had been reversed, I would have been a millionaire today. He would have been broke, regardless, because he eventually mortgaged the house beyond its value being part of the 00's bubble. This experience was part of my reason to use part of my pension savings for property. Property is not good for short term speculation, it's too much of a gamble. But for longer term saving, its excellent. If you plan on eventually buying a new home, it's the best, because your rental property will follow the general movements on the market.
posted by mumimor at 6:54 AM on August 23, 2017
Honestly, a financial advisor is probably overkill for 600K. It's worth it if you're nervous about it, and it may be worth it to sit down with a planner and discuss time horizons - how would you feel if your 600K went down to 500K in a market correction later this year? Would you be patient as it grew back to 700K in 5 years, or would you panic? But otherwise, having a regular money manager seems like overkill to me.
If you're relatively confident and have some appetite for risk, just sticking the money into three Vanguard index funds (see Dashy's Bogleheads reference above) is an easy way to go. Have the dividends paid out as cash instead of being rolled over into further investments if you want a steady payout of about 20-30K each year, but otherwise, have them automatically re-invested as you wait.
I'm sorry about your divorce.
posted by RedOrGreen at 9:13 AM on August 24, 2017
If you're relatively confident and have some appetite for risk, just sticking the money into three Vanguard index funds (see Dashy's Bogleheads reference above) is an easy way to go. Have the dividends paid out as cash instead of being rolled over into further investments if you want a steady payout of about 20-30K each year, but otherwise, have them automatically re-invested as you wait.
I'm sorry about your divorce.
posted by RedOrGreen at 9:13 AM on August 24, 2017
Sorry about the divorce. Been there, done that, got the scars.
On the positive side, fund a trip for me to go to the next MeFi meetup?
posted by Samizdata at 10:21 AM on August 24, 2017
On the positive side, fund a trip for me to go to the next MeFi meetup?
posted by Samizdata at 10:21 AM on August 24, 2017
I really like this book. It is good for newbies without being paternalistic.
If it were me, I'd invest it in 80% stocks, 20% bonds, slowly over the next 2 years or so. With 600K you should be able to make 30K a year (pre-tax) over time. Work for as long as you can, but if your illness becomes worse, you don't really have to work to pay the bills.
posted by miyabo at 5:08 PM on August 24, 2017
If it were me, I'd invest it in 80% stocks, 20% bonds, slowly over the next 2 years or so. With 600K you should be able to make 30K a year (pre-tax) over time. Work for as long as you can, but if your illness becomes worse, you don't really have to work to pay the bills.
posted by miyabo at 5:08 PM on August 24, 2017
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The difference between what $600,000 would net you over one year in a half-decent savings account, and what it would net you in that same year after acting immediately on the soundest possible financial advice, really won't matter very much to a person who has $600,000.
Spread it across three or four different banks if you're worried about bank failure, but other than that, don't worry about it yet. Do your level best to forget you have it until all the Holy Shit What Do I Do Now has well and truly calmed down. Spend the time in between talking to as many financially reliable people as you encounter.
posted by flabdablet at 4:19 AM on August 23, 2017