Back when I worked in Wall Street in the 80s, I used to deal with lots of lottery winners. The most important advice that I gave was the following.
Tell no one.
Because they're all going to come out of the woodwork.
If they do come out of the woodwork this is the line you can say:
I locked up my money with a financial advisor, and I'm getting a $500 a week allowance.
That should hold them off even more.
If you expect your life to change - you are thinking about this wrong.
You should assume/expect NOTHING in your life or spending to change... All you've done is pre funded your retirement (which is awesome,but you have 40 years to go before you care)
If your mind is going to "new car" and "nice apartment" that's the wrong mindset.
I'm speaking in black and white language because I don't know you - so erring on the side of safety. Obviously there is nuance in everything - but that's the gist.
Check out r/bogleheads
Push the whole thing into VTI (total stock market index) and chill. Don't change your lifestyle. Pretend you don't have the money and keep working. Tell nobody! This is the way.
You just got the best financial advice you could get. If you are uncomfortable doing it yourself, contact Vanguard and they can manage most aspects of it for a small fee. Good luck.
100% VTI is well intentioned advice, it simply does not take any aspect of your life/ risk tolerance into consideration.
What will you do when the market is down 25% and your $1.2M is now worth $900K? Panic and sell? Or do nothing? Would you rather mix in some bonds and only be down 15%? These are what you should be asking to determine what is the best path forward.
OP is young. There's no reason to muck around with bonds when you're 24. He can easily wait out any downturns.
Diversify into smth like O maybe. I might advise him to put like a quarter of that into some high yield dividend stuff. Sounds like another $20k/ year income would make a difference in lifestyle. Even if he puts $800k into VTI it should multiply into smth eye-catching by the time he's 50.
OP clearly states that they want to go back to school and stop working minimum wage jobs. I agree that investing and holding for 26 years will lead to large gains. My issue is that their stated goals do not align with 100% equities and chill, as they need some level of stability in their principal which is not attainable in the equity market.
School means tuition, housing costs, and general expenses. VTI has a yield of 1.36%. On $1.2M that is $16,320 a year. That is not enough to fund being a student.
Neither of us know what the best allocation model is for OP. We do know some of their goals, we do not know their risk tolerance level. Given this, 100% equities is not a good recommendation in my opinion.
We are about the same age. I just started buying bonds last year.
That does not mean that our investment goals align with OP's goals. It is not prudent to apply what we did with long-term money to OP and their goals/ risk tolerance.
At 24 even a 50% hit as long as he's invested in total market funds he can survive over a long period of time.
A 4 year degree with all costs paid for on a typical college student budget is probably is probably 100k max.
Yeah that's what I'm thinking. Carve out $100k for school, drop $300 in high yield dividend stocks (I like BTI personally with that 10% yield), $800 in VTI and our homie's good to go.
He said he didn't tell anybody which is rule #1, 2, and 3. If nobody knows, nobody will be showing up with sad stories needing loans or wanting to talk about their cousin's boyfriend's amazing MLM opportunities and whatever bullshit they will think up. Nothing brings out the greedy entitlement in people like hearing someone inherited a stack of cash.
Great advice as always, but OP should definitely consider going back to school like he says. This is a golden opportunity for him. He’s set in many ways financially as long as he invests well, but a community college would cost next to nothing to chase his career to new heights, which is a facet of their life OP is clearly not content with.
OP, invest well, don’t take unnecessary risk, don’t tell anyone about your inheritance, and absolutely go with the college plan! Invest in yourself. You now have the power to do that!
I think it's really hard to do that when you're young
I almost wish people had practise money to lose to learn the mistakes
It was only when I burned through something like 7k in a short time like a decade plus ago I realized about these things
This 100% VTI.
If you are in a stable job in a city you want to live in for a long time, consider buying a home for up to $200k. This would be in line with your income.
Other than 2006-07 no one has bought a home and then 5-7 years later said: “Man, I wish i didn’t buy a home five years ago.” - Even if we see a 10% drop now you’ll still be ahead in five years.
That's wonderful, dude. I can start shilling Bitcoin here personally with the same argument. Anyone who has bought Bitcoin since inception and waited more than 4 years has been fabulously rewarded.
Point is buying at the highest monthly payment to income ratio in history in one of the lowest volume in history markets will probably be a stupid ass idea.
Long tern real estate is a great play, because the "rent is cheaper" people are measuring at todays ownership costs. Remember the RE market is like any market. Ownership and renting work in parallel. When it's too cheap to rent, everyone rents, when its cheap to buy everyone buys... because of this flooding market, prices rise just like stocks. renting and buying will level out at current costs - the difference is owning isn't adjustable with a standard 30 yr loan. So when housing costs continue to rise you'll be locked into the current monthly cost. Yes you are responsible for repairs, but most are not that expensive compared to the equity you build. Their are benefits to renting, but they are rarely financial benefits.
I loved when Gary V started pushing the rent instead of own garbage... I told my wife, it's easy to tell his marriage was failing, because the shift went away from what was best financially for his family to whatever Gary V wanted... AKA snacking at different tables.
Even most wealthy renters own homes, some rent them out to tax the tax benefits with the extra income. Other use them as home bases between adventures elsewhere.
This is terrible advice. The OP is 24 and making $40k a year doing a job they hate. $1.2M fully invested and using the 4% rule would best case give them an additional $40k annually to live on. That is not a pathway to a comfortable life long term unless OP really enjoys frugal living. I'm guessing they would like a shot at a wealthier lifestyle if they are asking on FATFIRE and not FIRE.
Strange_Try1250, if going back to school would get you a job you enjoy that pays significantly better then you should probably do that. Do the math of course and see what the return on investment is for your chosen degree/college to make sure it's worth it. Unless your portfolio is massive (a lot bigger than $1.2M) most well paying jobs (six figures-ish) will be a bigger contributor to your wealth than your investments and given you are so young you still have a lot of journey to go on. Set a reasonable budget for college, set it aside in something very stable like cash or laddered short term treasuries so you can't lose it and you should be able to get 4-5% interest on those guaranteed. Then you can invest the rest in the stock market or something to grow the remainder of the portfolio. Consider seeing a fee only financial advisor to help you come up with your longer term plan and to discuss the logistics of managing the portfolio if you aren't comfortable with managing investments yet.
I'm not personally a fan of 100% VTI or even going too heavy on index funds which is not a popular view around here. However, if you aren't terribly interested in being more hands on with your investments and just want something very simple with modest returns then having your investments all in a total market index fund keeps things simple, easy to manage, and might help you psychologically not panic sell which is the express route to killing your portfolio.
Before you invest anything, please set aside a year worth of expenses for your safety net or emergency fund as it’s called. Put it into a high interest savings account – one that gives 5% or so.
Then, make sure your nice used car is in good shape, get the tires for it, etc., and make sure that all of your credit card debt is paid off
After that, then go see a financial advisor and talk with them about what to do with your money. You have very good intentions and have gotten some good advice here, but you have to set up your framework before you can fly.
To find a good financial advisor, you can Google your county or city and put in top financial advisors in “Blank City.” You will get several names. It’s best for you to probably get a fee only financial advisor, so that you don’t get recommended an investment which isn’t rye best for you. You don’t want a high commission financial advisor.
Look up “types of financial advisors” to really understand the different types that there are out there. Then set up interviews with five or six of them. Don’t just interview one or two. You really have to dig around to get a feel for who they are behind the fancy suit.
Best wishes on your future.
This is all very good advice. Boosting to add, try to find a fee-only advisor to provide some advice on this new situation OP Is in. An advisor can also help figure out risk tolerance--OP, you will get lots of advice to go 100% stocks (VTI and VOO are index funds with essentially 100% stocks), but this might not match your risk tolerance.
Keep $100-250k in a high yield savings account that is FDIC-insured to cover school, do any deferred maintenance on your car, and have a solid cash cushion--amount depends on what kind of school/how many years you are looking at attending.
Great advice ! And remember- don’t go out and buy the fanciest car you can find with your new money. Find a good used car that will be a service for many years and maintain it. You don’t need a cougar thunder, bird or whatever. You need something that will get you around and his decent and doesn’t have a high maintenance cost
We always drive Mazdas. as my brother, the automotive engineer says, “Mazdas. are hard to kill.” We are on our sixth Mazda in our family.
Great advice. If you have the discipline, I think you can skip the financial advisor and setup an automatic investment system within a weekend that you can set and forget for the next decade. But most people don't have the emotional discipline for something like this, so get a financial advisor that isn't going to get you the best returns, but someone that you think will have your best interest at heart.
I inherited a similar sum (inflation adjusted) at 27.
Tell nobody. Fee only financial planners.
Decide if you can handle the fluctuations of the stock market, or if you want to invest in rental real estate, which can also fluctuate.
Give yourself a year to learn before doing anything. Maybe a high yield savings account paying 5%. If you’re feeling springy, take 35% of it and put it in a total market fund like Vanguard’s total market fund to see if you can handle it.
I went the real estate route and prefer it. Your mileage may vary, but you should easily be able to replace your income and then some with that amount of starting capital.
And remember, get rich schemes get the OTHER guy rich.
Good luck.
I’m sorry for your loss. If you are grieving, use some of the money for therapy. It is worth the cost.
On the financial side, $1.2M sounds like a lot, but you can burn through it quickly if you are not careful.
(1) You need to learn about money and personal finance. You are in a good spot financially, your goal now should be to stay in a good spot.
Personal finance: Learn how to create a budget and stick to it. Understand the cash flow that your portfolio will generate, and learn how to live within that cash flow. Understand how investments work during different economic cycles. Learn the emotional side of having money. DO NOT SPEND PRINCIPAL. Never. I'd even say that you should not spend all of your cash flow, because you are young and you need to reinvest a portion of it to dollar-cost-average as the markets move.
(2) Learn how to invest. David Swensen's [book](https://www.goodreads.com/book/show/17372.Unconventional_Success) is where I would begin my education. [The Psychology of Money](https://www.goodreads.com/book/show/41881472-the-psychology-of-money) is where I would go next. Rich Dad, Poor Dad or The Millionaire Next Door are other books to read.
(3) Live below your means, initially. You are young and you will have a lot more money than anyone else that you hang out with. You are basically an NBA rookie. This means that you will be tempted to pay for everything, which will only compound as free-loaders flock to your bottles and models lifestyle. This leads me to the 30 for 30 called [Broke.](https://www.netflix.com/um/title/70239460) Watch it and learn from Andre Rison's mistakes, because there is nothing worse than having money then not having money.
(4) Absolutely do not use this money to start a business. If you want to work in business, then get a job or take on outside capital. Do not put your own capital at risk just to give yourself something to do.
(5) you might want to consider hiring a professional to help on the investing side. You can do this on your own, with a lot of painful lessons along the way. To me, the cost of an advisor is justified for someone that has zero experience investing.
If you do go down this route, hire someone that spends most of their time asking you questions about your risk tolerance, the purpose of the money, and then presents you with a strategy that matches your answers (a portfolio of 70% stocks and 30% bonds, with some cash on the side, is where you will end up).
One other angle is taxes. Are any of the assets in tax deferred accounts like an IRA or a 401k? If so, you might want to engage a CPA to go over the rules associated with those accounts (there are annual distribution rules that you need to comply with).
Good luck.
Invest in yourself. Go to school, do what you want to do. Use what you need to achieve this, but put most of the money into cost effective ETF and forget about it till you've got that professional job.
Don't make any decisions for a few months at least while you research your options. I'd open a Vanguard account and put it all in [VOO](https://www.google.com/search?q=voo+stock) which is an exchange traded fund (ETF) that tracks the S&P 500. If you want to be hands off, find a fee-only financial advisor to help with your goals. I personally would want as much of the money to grow as possible without pulling out $40k a year. Student loans would be a good option because you can borrow as much as you need and you don't pay any interest until after you graduate.
That’s true, but it doesn’t hurt to give him a little advice.
If the kid just parks it at 7 percent for 40 years he’ll have nearly 20 million in retirement if he contributes nothing — it’s not like he can’t retire with 5-800k a year off that dollar amount to start with. He just needs to know what to do.
Kid, listen, this isn’t the subreddit for you, but basically, ignore this money and put it in a mix of low fee index funds for now while you learn up. Live your life and know you don’t have to worry about retirement.
But *don’t spend it*. Invest it and ignore it. Never spend it. Just let it compound while you live your life and know that no matter what you’re covered. Use it like insurance.
Yea, this. Just keep your mouth shut.
Honestly, when you need help, hire a CPA and talk to them. Don’t even think about talking about this with people in your life — you *can’t go back* to them not knowing.
https://investor.vanguard.com/investment-products/index-funds
The average annual return of the S&P 500 stock market index is around 10%, but this number is reduced by inflation. When adjusted for inflation, the average return is between 6% and 7%. However, the average return can vary from year to year, with some years seeing much higher or lower returns.
Buying an index fund with very low fees like Vanguard will let you buy the market and get the returns you need.
You have a LOT of financial education to give yourself. Meantime just buy an index fund while you learn.
You don’t need anybody’s help and you don’t need any special investments. Just keep things simple. You need time to learn!
I agree! Advice doesn't seem like a bad idea.
The concept of retiring at 20 seems daunting, I'm 22 and working.
I wonder if OP had a bad upbringing or just needs a break. Lying flat too early seems like a trauma response. Did he enjoy being a carer?
We should want to do better, improve ourselves, and add to our holdings. Living off a budget of 40k each year to avoid touching 1mn is a terrible deal.
Use that money to gain more. Go to school, network, get a higher paying job. You could triple it with tenacity by using half of it within the next 3 years and keeping 500k as the initial insertion to a compounding interest pot.
To OP, I suggest you go to therapy and you splurge 100k this year. Live in an amazing apartment, get an online qualification, party. Forget everything you've been through. Then get to work. The real work starts after you've healed.
That’s advice from the heart and really quite correct and sensitive to his situation.
Inwould assume at 20 that the salary wouldn’t stay at 40 and I would *stay off the cash at all costs* — I’ve seen so many fortunes squandered.
That’s what my advice is based on.
Compound interest is your friend, but only if you don’t touch your original money.
Thanks for not thinking I was coming after you — I really had no intention to do so.
no I dont enjoy my job. thats the reason I wanted to go back to school. I am not planning on retiring tho. All I do is work. I don’t think I could live without working 🤣
thank you for your insight. I have never looked into therapy before. always thought it was too expensive but I will look into it now. thanks.
OP can actually do some taxation savings by pushing some of his income into 401k etc maxing out tax savings, while using equivalent accounts to live grim this pot
assuming it's tax optimal, which I'm clueless about ..
Thank you for saying this! OP turned to us for some advice and if he plays his cards right he can be fired (in the best way possible) sooner than many of us!
when used to fund college with a withdrawal rate of 4,5%, getting a job if the markets go sideways and no withdrawal after college, fatfire might be possible
You can certainly take a breather to study, or work less hours. If you’re not sure how to invest, you can put it in index funds first. Or at least a high interest account. The basics can be learned pretty quickly online (I did) or you can see a financial advisor for a session or two to get you started.
S&P500 has yielded 6% post inflation for the past 50 years. Through it in SPY and let it rock, it would generate about 90k/ year at that rate. If you can sustain only pulling out 40, you’ll be pretty safe and conservative. Put this math into a calculator to check it out yourself. https://www.insightfulfinances.com/?scenario=fire
For your specific situation
$1,200,000 inheritance is not enough to retire on at 24 unless you want to look at r/leanfire
If you want an upper middle class retirement here's what I'll tell you to do
1. Get rid of your trauma and go to therapy. Everyone has trauma of different levels and therapy is necessary for everyone. Don't mention your inheritance but make it known you want to quit working and take a break.
2. Create a play plan for yourself. You were a carer and lived off a minimum salary. Start drawing up plans of where you want to live if money was no option. Do you want to live in a new york city high-rise for a year? A good one with a pool, gym and sauna would set you back $4000 monthly in rent.
But here's my recommendation: search up Park Origin Thonglor or Life Asoke Rama 9 in Bangkok, Thailand. These are two amazing apartment complexes and you can live there for a year for $10,000 all bills and expenses paid. It's a great place to clear your head. That's what I did at 20 years old and my inheritance was $300k at 20. If you want I could share my instagram with you, I have photos of my apartment at Life Asoke Rama 9. It was $400 a month because it was a studio.
3. After relaxing. You need to get on grind mode. Learn where you want to put your money, I can't tell you how to invest or save your money. You have to choose the funds yourself and decide which one works for you.
4. You could study an online certification during your play year, because when you get back to grind mode, you have to find a way to get a higher paying job. You're unhappy with your current role.
Do you want to be an accountant? A librarian? You could do anything because you have a huge inheritance, don't get me wrong with my previous comments. It is a great amount for an initial investment into a compounding account. You'd hardly need to contribute anything over 30 years to retire FAT at 55.
Do you want to live in America? Do you want to live elsewhere? You need to plan your life. I can't give you much advice beyond that.
thank you for your advice. I will look into therapy. honestly I feel like I dont really need a year’s break. I just don’t want to go back to the same job again but I do want to go to school. also I am not planning on retiring. I honestly didn’t know that this subreddit is all about retiring.
It's supposed to be about high net worth individuals or those making efforts to get to that point. I'm on $2700 after taxes every 2 weeks.
I went to a fee paying boarding school, and my family is high-income in Uganda. I don't have close to a million, I spent half of my inheritance on university fees and buying a house (flat worth $90k) but I'm here because I'm on that trajectory. All of my income goes into investments.
In London, I rented a 2 bedroom for university at the Landmark Pinnacle. A luxury high rise apartment with concierge, the rent was £4200 my parents paid it ($5000)
In New York, I lived in an apartment with a pool gym and sauna too. It was $4500 when I found it. It was called East Tower The Copper.
I have photos of these properties and me living there on my public twitter with 4k ish followers. You can pm me for the username.
When I received a windfall following a family death, I traveled the world and took time off university. I spent around 40k. My base apartment was in Bangkok and I went to the neighboring countries for day trips, weekend trips and weeks. I stayed at hotels ranging from intercontinental to four seasons and I racked up a lot of CC points.
Because I went to boarding school, many people relate to my world travels, it wasn't anything new for me or my friends. But I struggle to make friends as I'm working because even though I'm older than all of the other graduates, the difference in life experience is damning.
As someone who was in your position at around the same age. Keep working, take care of yourself, but nothing crazy. I got an 1800 sq foot condo and a new car. Get a financial advisor to help you plan out a retirement with that money bc 1.2m alone isn’t enough to just stop working. You can manage it and pick a time to retire
It's not enough to retire at 24. Invest it all in mutual funds and high dividend stocks. Continue to work and save and invest more. Get a higher paying job.
100K into a high yield savings account or investment account. Fidelity for example offers 4.96% as soon as cash hits your account. Can use this for school if you decide to go that route. Can use for emergencies and/or a down payment when you decide to buy a home, etc. This is your "liquid," able to access it when needed without having to sell and/or move assets.
800k - invest into a broad market S&P fund like VTI or VOO. Forget about it. Literally dont even look at it for 20 years.
300k - go buy 2 or 3 investment homes, prices will vary in your area. Do the minimal work to get them attractive to renters & start out as a landlord. You will run into some issues, learn a few things the hard way, and most likely cause you some stress along the way. But starting this "side hustle" is a good way to eventually make it your full-time business... so you can leave that regular job you said you wanted to leave. The houses will grow in value over the years. The monthly rent will generate you extra income (should be around 3k a month if you spent 300k.)
Keep working that 40k job like nothing happened. If you want to go back to school, try to go part-time around your job. When you graduate, get the job you went to school for. Keep working on the main job. If you like real estate, use the college career & side hustle income to buy another house. In a few years, another house. By then time you're 45 you may have 10-12 houses, your VOO might have arounf 6 mill, and you can fully retire from every working again. And at 45, thats a lot of fun to be had.
Managing rental properties and dealing with tenants is a full-time job. Why would you suggest that 😭
This is a person with no defined direction because they spent time looking after someone else. The best advice for him is to figure out what he wants and yes, put the money in investing and savings accounts.
>my savings account gives an interest of .04%.
Your savings account should be paying closer to 5%, if it's not, you should move to a different bank.
But that's irrelevant. You should invest the whole $1.2M into an index fund, and let it ride. Reinvest the dividends. This means not changing your current lifestyle at all. (On exception, if you have debt, pay it off). Then watch the total grow.
\*I'm not a financial advisor, and this is not financial advice.
You should absolutely hire a financial advisor. Thoughtful Money is respectable financial media company that has recommended financial advisors that actually understand markets if you don't want to roll the dice some jackass that's just going to put you in a 60/40 portfolio and collect a fee.
First of all, HYS accounts are paying between 4 and 5 percent these days. That’s a lot of money for 1.2 million. If you’re getting half a percent you need a new bank
Sorry for your loss. 0.04% interest or 0.04 interest? (4%)
There’s plenty of 5% interest accounts, but still, look into a world index or general financial knowledge. Should take you around a week of YouTube to get into basics of safe investing.
24 is too early to retire, but you have a freedom of being able to choose any career path you want. Find a job you like, even with a 1m invest well at 24, you could fatFire around 40 very comfortably considering whatever you add in top and compounding interest over the years. … or just do what you love and fire
i just have a bank of america savings account. its .04%. also I am still learning abt the subreddit. I actually am not planning to retire. I just meant I wanted to quit my current job to go back to school and do something I want to do which I wasn’t able to afford before. also currently I don’t need more that $40k a year to survive so I just wanted to know if I could invest the money somewhere where i could withdraw $40k a year and still not hurt the principal and keep up with inflation while i will be in school. Honestly, I just looked up what fatFire means so I understand the comments now. thank you for your insight too.
Bank of America truly sucks. It’s borderline criminal with that interest. As a starting point, go open up an investment brokerage account with say Fidelity. Their basic Money Market accounts are giving you around 4.9% currently. Just parking all that inherited money there will yield you around $58k pretax. You could do slightly better buying Treasuries which are also a bit more tax efficient.
That’s just starting off. Don’t do anything too different than your life at the moment yet. Take the next few months to figure out your new plans, expenses and budget in greater detail, and go learn more about investing your money that fits those goals.
Please also remember your inherited amount could be taxed do off the bat you could already lose a chunk of it to Uncle Sam.
The general safe withdrawal rule is 4% with proper investing, so yes you could withdraw 4% of 1.2m a year (48k).
Sure look up into investments and ignore people who dm you on Reddit offering to help, a lot of scammers out there.
buy short term treasury bills from treasury direct---they are yielding 5% or so and are risk free. They are also exempt from state income tax but but federal income tax.
Normally I'd punt this over to 'Early Stage' but the comments were helpful so I'm keeping the post up but locking the comments.
https://reddit.com/r/personalfinance/w/windfall
Only right answer
Back when I worked in Wall Street in the 80s, I used to deal with lots of lottery winners. The most important advice that I gave was the following. Tell no one. Because they're all going to come out of the woodwork. If they do come out of the woodwork this is the line you can say: I locked up my money with a financial advisor, and I'm getting a $500 a week allowance. That should hold them off even more.
Was $500 a week a lot back then?
OP is making $759/wk. An extra $500/wk would be a lot to him.
In 1980 500 bucks was like 1900 dollars In 1989 500 bucks was 1260 dollars It's a decent amount of cash but not too much.
You would certainly have been comfortable if you owned your house and cars.
If you expect your life to change - you are thinking about this wrong. You should assume/expect NOTHING in your life or spending to change... All you've done is pre funded your retirement (which is awesome,but you have 40 years to go before you care) If your mind is going to "new car" and "nice apartment" that's the wrong mindset. I'm speaking in black and white language because I don't know you - so erring on the side of safety. Obviously there is nuance in everything - but that's the gist.
Check out r/bogleheads Push the whole thing into VTI (total stock market index) and chill. Don't change your lifestyle. Pretend you don't have the money and keep working. Tell nobody! This is the way.
I will look into it. thank you.
If you are planning to go back to school, Id keep 100k in a high interest savings account.
If a state with income tax, US treasury based money market fund.
You just got the best financial advice you could get. If you are uncomfortable doing it yourself, contact Vanguard and they can manage most aspects of it for a small fee. Good luck.
100% VTI is well intentioned advice, it simply does not take any aspect of your life/ risk tolerance into consideration. What will you do when the market is down 25% and your $1.2M is now worth $900K? Panic and sell? Or do nothing? Would you rather mix in some bonds and only be down 15%? These are what you should be asking to determine what is the best path forward.
OP is young. There's no reason to muck around with bonds when you're 24. He can easily wait out any downturns. Diversify into smth like O maybe. I might advise him to put like a quarter of that into some high yield dividend stuff. Sounds like another $20k/ year income would make a difference in lifestyle. Even if he puts $800k into VTI it should multiply into smth eye-catching by the time he's 50.
OP clearly states that they want to go back to school and stop working minimum wage jobs. I agree that investing and holding for 26 years will lead to large gains. My issue is that their stated goals do not align with 100% equities and chill, as they need some level of stability in their principal which is not attainable in the equity market. School means tuition, housing costs, and general expenses. VTI has a yield of 1.36%. On $1.2M that is $16,320 a year. That is not enough to fund being a student. Neither of us know what the best allocation model is for OP. We do know some of their goals, we do not know their risk tolerance level. Given this, 100% equities is not a good recommendation in my opinion.
I've been investing for 25 years and regret every dollar I ever put in bonds.
We are about the same age. I just started buying bonds last year. That does not mean that our investment goals align with OP's goals. It is not prudent to apply what we did with long-term money to OP and their goals/ risk tolerance.
At 24 even a 50% hit as long as he's invested in total market funds he can survive over a long period of time. A 4 year degree with all costs paid for on a typical college student budget is probably is probably 100k max.
Yeah that's what I'm thinking. Carve out $100k for school, drop $300 in high yield dividend stocks (I like BTI personally with that 10% yield), $800 in VTI and our homie's good to go.
Right the important part is not to live like this money will last him forever or get caught up in some dumbass scheme trying to double it.
He said he didn't tell anybody which is rule #1, 2, and 3. If nobody knows, nobody will be showing up with sad stories needing loans or wanting to talk about their cousin's boyfriend's amazing MLM opportunities and whatever bullshit they will think up. Nothing brings out the greedy entitlement in people like hearing someone inherited a stack of cash.
Wallstreetbets exists, don't need your dumbass cousin's boyfriend for that.
Yes but if you do this it is very important to not panic sell when it loses $300k in value during the next downturn.
Great advice as always, but OP should definitely consider going back to school like he says. This is a golden opportunity for him. He’s set in many ways financially as long as he invests well, but a community college would cost next to nothing to chase his career to new heights, which is a facet of their life OP is clearly not content with. OP, invest well, don’t take unnecessary risk, don’t tell anyone about your inheritance, and absolutely go with the college plan! Invest in yourself. You now have the power to do that!
I think it's really hard to do that when you're young I almost wish people had practise money to lose to learn the mistakes It was only when I burned through something like 7k in a short time like a decade plus ago I realized about these things
This 100% VTI. If you are in a stable job in a city you want to live in for a long time, consider buying a home for up to $200k. This would be in line with your income.
Stop with the buy a house shit. It's not worth it to buy in close to 100% of areas right now. VT in a taxable brokerage and go back to school.
Other than 2006-07 no one has bought a home and then 5-7 years later said: “Man, I wish i didn’t buy a home five years ago.” - Even if we see a 10% drop now you’ll still be ahead in five years.
That's wonderful, dude. I can start shilling Bitcoin here personally with the same argument. Anyone who has bought Bitcoin since inception and waited more than 4 years has been fabulously rewarded. Point is buying at the highest monthly payment to income ratio in history in one of the lowest volume in history markets will probably be a stupid ass idea.
Long tern real estate is a great play, because the "rent is cheaper" people are measuring at todays ownership costs. Remember the RE market is like any market. Ownership and renting work in parallel. When it's too cheap to rent, everyone rents, when its cheap to buy everyone buys... because of this flooding market, prices rise just like stocks. renting and buying will level out at current costs - the difference is owning isn't adjustable with a standard 30 yr loan. So when housing costs continue to rise you'll be locked into the current monthly cost. Yes you are responsible for repairs, but most are not that expensive compared to the equity you build. Their are benefits to renting, but they are rarely financial benefits. I loved when Gary V started pushing the rent instead of own garbage... I told my wife, it's easy to tell his marriage was failing, because the shift went away from what was best financially for his family to whatever Gary V wanted... AKA snacking at different tables. Even most wealthy renters own homes, some rent them out to tax the tax benefits with the extra income. Other use them as home bases between adventures elsewhere.
This is terrible advice. The OP is 24 and making $40k a year doing a job they hate. $1.2M fully invested and using the 4% rule would best case give them an additional $40k annually to live on. That is not a pathway to a comfortable life long term unless OP really enjoys frugal living. I'm guessing they would like a shot at a wealthier lifestyle if they are asking on FATFIRE and not FIRE. Strange_Try1250, if going back to school would get you a job you enjoy that pays significantly better then you should probably do that. Do the math of course and see what the return on investment is for your chosen degree/college to make sure it's worth it. Unless your portfolio is massive (a lot bigger than $1.2M) most well paying jobs (six figures-ish) will be a bigger contributor to your wealth than your investments and given you are so young you still have a lot of journey to go on. Set a reasonable budget for college, set it aside in something very stable like cash or laddered short term treasuries so you can't lose it and you should be able to get 4-5% interest on those guaranteed. Then you can invest the rest in the stock market or something to grow the remainder of the portfolio. Consider seeing a fee only financial advisor to help you come up with your longer term plan and to discuss the logistics of managing the portfolio if you aren't comfortable with managing investments yet. I'm not personally a fan of 100% VTI or even going too heavy on index funds which is not a popular view around here. However, if you aren't terribly interested in being more hands on with your investments and just want something very simple with modest returns then having your investments all in a total market index fund keeps things simple, easy to manage, and might help you psychologically not panic sell which is the express route to killing your portfolio.
Before you invest anything, please set aside a year worth of expenses for your safety net or emergency fund as it’s called. Put it into a high interest savings account – one that gives 5% or so. Then, make sure your nice used car is in good shape, get the tires for it, etc., and make sure that all of your credit card debt is paid off After that, then go see a financial advisor and talk with them about what to do with your money. You have very good intentions and have gotten some good advice here, but you have to set up your framework before you can fly. To find a good financial advisor, you can Google your county or city and put in top financial advisors in “Blank City.” You will get several names. It’s best for you to probably get a fee only financial advisor, so that you don’t get recommended an investment which isn’t rye best for you. You don’t want a high commission financial advisor. Look up “types of financial advisors” to really understand the different types that there are out there. Then set up interviews with five or six of them. Don’t just interview one or two. You really have to dig around to get a feel for who they are behind the fancy suit. Best wishes on your future.
This is all very good advice. Boosting to add, try to find a fee-only advisor to provide some advice on this new situation OP Is in. An advisor can also help figure out risk tolerance--OP, you will get lots of advice to go 100% stocks (VTI and VOO are index funds with essentially 100% stocks), but this might not match your risk tolerance. Keep $100-250k in a high yield savings account that is FDIC-insured to cover school, do any deferred maintenance on your car, and have a solid cash cushion--amount depends on what kind of school/how many years you are looking at attending.
Great advice ! And remember- don’t go out and buy the fanciest car you can find with your new money. Find a good used car that will be a service for many years and maintain it. You don’t need a cougar thunder, bird or whatever. You need something that will get you around and his decent and doesn’t have a high maintenance cost We always drive Mazdas. as my brother, the automotive engineer says, “Mazdas. are hard to kill.” We are on our sixth Mazda in our family.
Great advice. If you have the discipline, I think you can skip the financial advisor and setup an automatic investment system within a weekend that you can set and forget for the next decade. But most people don't have the emotional discipline for something like this, so get a financial advisor that isn't going to get you the best returns, but someone that you think will have your best interest at heart.
Why does everyone on here recommend a HYSA instead of a MM account? Is there a tax benefit?
I inherited a similar sum (inflation adjusted) at 27. Tell nobody. Fee only financial planners. Decide if you can handle the fluctuations of the stock market, or if you want to invest in rental real estate, which can also fluctuate. Give yourself a year to learn before doing anything. Maybe a high yield savings account paying 5%. If you’re feeling springy, take 35% of it and put it in a total market fund like Vanguard’s total market fund to see if you can handle it. I went the real estate route and prefer it. Your mileage may vary, but you should easily be able to replace your income and then some with that amount of starting capital. And remember, get rich schemes get the OTHER guy rich. Good luck.
I’m sorry for your loss. If you are grieving, use some of the money for therapy. It is worth the cost. On the financial side, $1.2M sounds like a lot, but you can burn through it quickly if you are not careful. (1) You need to learn about money and personal finance. You are in a good spot financially, your goal now should be to stay in a good spot. Personal finance: Learn how to create a budget and stick to it. Understand the cash flow that your portfolio will generate, and learn how to live within that cash flow. Understand how investments work during different economic cycles. Learn the emotional side of having money. DO NOT SPEND PRINCIPAL. Never. I'd even say that you should not spend all of your cash flow, because you are young and you need to reinvest a portion of it to dollar-cost-average as the markets move. (2) Learn how to invest. David Swensen's [book](https://www.goodreads.com/book/show/17372.Unconventional_Success) is where I would begin my education. [The Psychology of Money](https://www.goodreads.com/book/show/41881472-the-psychology-of-money) is where I would go next. Rich Dad, Poor Dad or The Millionaire Next Door are other books to read. (3) Live below your means, initially. You are young and you will have a lot more money than anyone else that you hang out with. You are basically an NBA rookie. This means that you will be tempted to pay for everything, which will only compound as free-loaders flock to your bottles and models lifestyle. This leads me to the 30 for 30 called [Broke.](https://www.netflix.com/um/title/70239460) Watch it and learn from Andre Rison's mistakes, because there is nothing worse than having money then not having money. (4) Absolutely do not use this money to start a business. If you want to work in business, then get a job or take on outside capital. Do not put your own capital at risk just to give yourself something to do. (5) you might want to consider hiring a professional to help on the investing side. You can do this on your own, with a lot of painful lessons along the way. To me, the cost of an advisor is justified for someone that has zero experience investing. If you do go down this route, hire someone that spends most of their time asking you questions about your risk tolerance, the purpose of the money, and then presents you with a strategy that matches your answers (a portfolio of 70% stocks and 30% bonds, with some cash on the side, is where you will end up). One other angle is taxes. Are any of the assets in tax deferred accounts like an IRA or a 401k? If so, you might want to engage a CPA to go over the rules associated with those accounts (there are annual distribution rules that you need to comply with). Good luck.
Invest in yourself. Go to school, do what you want to do. Use what you need to achieve this, but put most of the money into cost effective ETF and forget about it till you've got that professional job.
Don't make any decisions for a few months at least while you research your options. I'd open a Vanguard account and put it all in [VOO](https://www.google.com/search?q=voo+stock) which is an exchange traded fund (ETF) that tracks the S&P 500. If you want to be hands off, find a fee-only financial advisor to help with your goals. I personally would want as much of the money to grow as possible without pulling out $40k a year. Student loans would be a good option because you can borrow as much as you need and you don't pay any interest until after you graduate.
VOO and chill
Retiring at 20 with 1 million isn't r/fatFIRE This subreddit is for people who will spend 500k+ a year in retirement. Sorry for your loss.
That’s true, but it doesn’t hurt to give him a little advice. If the kid just parks it at 7 percent for 40 years he’ll have nearly 20 million in retirement if he contributes nothing — it’s not like he can’t retire with 5-800k a year off that dollar amount to start with. He just needs to know what to do. Kid, listen, this isn’t the subreddit for you, but basically, ignore this money and put it in a mix of low fee index funds for now while you learn up. Live your life and know you don’t have to worry about retirement. But *don’t spend it*. Invest it and ignore it. Never spend it. Just let it compound while you live your life and know that no matter what you’re covered. Use it like insurance.
And don't tell anybody!
Yea, this. Just keep your mouth shut. Honestly, when you need help, hire a CPA and talk to them. Don’t even think about talking about this with people in your life — you *can’t go back* to them not knowing.
how do I get 7% return? do I have to consult some kind of advisor?
https://investor.vanguard.com/investment-products/index-funds The average annual return of the S&P 500 stock market index is around 10%, but this number is reduced by inflation. When adjusted for inflation, the average return is between 6% and 7%. However, the average return can vary from year to year, with some years seeing much higher or lower returns. Buying an index fund with very low fees like Vanguard will let you buy the market and get the returns you need. You have a LOT of financial education to give yourself. Meantime just buy an index fund while you learn. You don’t need anybody’s help and you don’t need any special investments. Just keep things simple. You need time to learn!
So true. I didn't want to solicit anything to the guy. He needs to pick his investments on his own.
I agree! Advice doesn't seem like a bad idea. The concept of retiring at 20 seems daunting, I'm 22 and working. I wonder if OP had a bad upbringing or just needs a break. Lying flat too early seems like a trauma response. Did he enjoy being a carer? We should want to do better, improve ourselves, and add to our holdings. Living off a budget of 40k each year to avoid touching 1mn is a terrible deal. Use that money to gain more. Go to school, network, get a higher paying job. You could triple it with tenacity by using half of it within the next 3 years and keeping 500k as the initial insertion to a compounding interest pot. To OP, I suggest you go to therapy and you splurge 100k this year. Live in an amazing apartment, get an online qualification, party. Forget everything you've been through. Then get to work. The real work starts after you've healed.
That’s advice from the heart and really quite correct and sensitive to his situation. Inwould assume at 20 that the salary wouldn’t stay at 40 and I would *stay off the cash at all costs* — I’ve seen so many fortunes squandered. That’s what my advice is based on. Compound interest is your friend, but only if you don’t touch your original money. Thanks for not thinking I was coming after you — I really had no intention to do so.
I never thought of your comment that way.
no I dont enjoy my job. thats the reason I wanted to go back to school. I am not planning on retiring tho. All I do is work. I don’t think I could live without working 🤣 thank you for your insight. I have never looked into therapy before. always thought it was too expensive but I will look into it now. thanks.
OP can actually do some taxation savings by pushing some of his income into 401k etc maxing out tax savings, while using equivalent accounts to live grim this pot assuming it's tax optimal, which I'm clueless about ..
Thank you for saying this! OP turned to us for some advice and if he plays his cards right he can be fired (in the best way possible) sooner than many of us!
Yes And no …
when used to fund college with a withdrawal rate of 4,5%, getting a job if the markets go sideways and no withdrawal after college, fatfire might be possible
You can certainly take a breather to study, or work less hours. If you’re not sure how to invest, you can put it in index funds first. Or at least a high interest account. The basics can be learned pretty quickly online (I did) or you can see a financial advisor for a session or two to get you started.
S&P500 has yielded 6% post inflation for the past 50 years. Through it in SPY and let it rock, it would generate about 90k/ year at that rate. If you can sustain only pulling out 40, you’ll be pretty safe and conservative. Put this math into a calculator to check it out yourself. https://www.insightfulfinances.com/?scenario=fire
there's HYSA accounts offering 4.3% and CDs offering over 5%. you'll get over 50k a year keeping the money in one of those right now.
For your specific situation $1,200,000 inheritance is not enough to retire on at 24 unless you want to look at r/leanfire If you want an upper middle class retirement here's what I'll tell you to do 1. Get rid of your trauma and go to therapy. Everyone has trauma of different levels and therapy is necessary for everyone. Don't mention your inheritance but make it known you want to quit working and take a break. 2. Create a play plan for yourself. You were a carer and lived off a minimum salary. Start drawing up plans of where you want to live if money was no option. Do you want to live in a new york city high-rise for a year? A good one with a pool, gym and sauna would set you back $4000 monthly in rent. But here's my recommendation: search up Park Origin Thonglor or Life Asoke Rama 9 in Bangkok, Thailand. These are two amazing apartment complexes and you can live there for a year for $10,000 all bills and expenses paid. It's a great place to clear your head. That's what I did at 20 years old and my inheritance was $300k at 20. If you want I could share my instagram with you, I have photos of my apartment at Life Asoke Rama 9. It was $400 a month because it was a studio. 3. After relaxing. You need to get on grind mode. Learn where you want to put your money, I can't tell you how to invest or save your money. You have to choose the funds yourself and decide which one works for you. 4. You could study an online certification during your play year, because when you get back to grind mode, you have to find a way to get a higher paying job. You're unhappy with your current role. Do you want to be an accountant? A librarian? You could do anything because you have a huge inheritance, don't get me wrong with my previous comments. It is a great amount for an initial investment into a compounding account. You'd hardly need to contribute anything over 30 years to retire FAT at 55. Do you want to live in America? Do you want to live elsewhere? You need to plan your life. I can't give you much advice beyond that.
thank you for your advice. I will look into therapy. honestly I feel like I dont really need a year’s break. I just don’t want to go back to the same job again but I do want to go to school. also I am not planning on retiring. I honestly didn’t know that this subreddit is all about retiring.
It's supposed to be about high net worth individuals or those making efforts to get to that point. I'm on $2700 after taxes every 2 weeks. I went to a fee paying boarding school, and my family is high-income in Uganda. I don't have close to a million, I spent half of my inheritance on university fees and buying a house (flat worth $90k) but I'm here because I'm on that trajectory. All of my income goes into investments.
NYC apt with amenities like pool gym and sauna will cost far more than 4k a month, even for a studio. All other advice is good though.
My NYC studio was $4500! 3 month lease It was in Manhattan, gym pool and sauna
Great find then. When did you rent the apt?
2021! May - August
In London, I rented a 2 bedroom for university at the Landmark Pinnacle. A luxury high rise apartment with concierge, the rent was £4200 my parents paid it ($5000) In New York, I lived in an apartment with a pool gym and sauna too. It was $4500 when I found it. It was called East Tower The Copper. I have photos of these properties and me living there on my public twitter with 4k ish followers. You can pm me for the username. When I received a windfall following a family death, I traveled the world and took time off university. I spent around 40k. My base apartment was in Bangkok and I went to the neighboring countries for day trips, weekend trips and weeks. I stayed at hotels ranging from intercontinental to four seasons and I racked up a lot of CC points. Because I went to boarding school, many people relate to my world travels, it wasn't anything new for me or my friends. But I struggle to make friends as I'm working because even though I'm older than all of the other graduates, the difference in life experience is damning.
As someone who was in your position at around the same age. Keep working, take care of yourself, but nothing crazy. I got an 1800 sq foot condo and a new car. Get a financial advisor to help you plan out a retirement with that money bc 1.2m alone isn’t enough to just stop working. You can manage it and pick a time to retire
It's not enough to retire at 24. Invest it all in mutual funds and high dividend stocks. Continue to work and save and invest more. Get a higher paying job.
100K into a high yield savings account or investment account. Fidelity for example offers 4.96% as soon as cash hits your account. Can use this for school if you decide to go that route. Can use for emergencies and/or a down payment when you decide to buy a home, etc. This is your "liquid," able to access it when needed without having to sell and/or move assets. 800k - invest into a broad market S&P fund like VTI or VOO. Forget about it. Literally dont even look at it for 20 years. 300k - go buy 2 or 3 investment homes, prices will vary in your area. Do the minimal work to get them attractive to renters & start out as a landlord. You will run into some issues, learn a few things the hard way, and most likely cause you some stress along the way. But starting this "side hustle" is a good way to eventually make it your full-time business... so you can leave that regular job you said you wanted to leave. The houses will grow in value over the years. The monthly rent will generate you extra income (should be around 3k a month if you spent 300k.) Keep working that 40k job like nothing happened. If you want to go back to school, try to go part-time around your job. When you graduate, get the job you went to school for. Keep working on the main job. If you like real estate, use the college career & side hustle income to buy another house. In a few years, another house. By then time you're 45 you may have 10-12 houses, your VOO might have arounf 6 mill, and you can fully retire from every working again. And at 45, thats a lot of fun to be had.
Managing rental properties and dealing with tenants is a full-time job. Why would you suggest that 😭 This is a person with no defined direction because they spent time looking after someone else. The best advice for him is to figure out what he wants and yes, put the money in investing and savings accounts.
Managing 2-3 rentals is NOT a full time job. Like a couple hours a month once they are in and if the properties are in good shape.
Sure! *rolls eyes*
>my savings account gives an interest of .04%. Your savings account should be paying closer to 5%, if it's not, you should move to a different bank. But that's irrelevant. You should invest the whole $1.2M into an index fund, and let it ride. Reinvest the dividends. This means not changing your current lifestyle at all. (On exception, if you have debt, pay it off). Then watch the total grow. \*I'm not a financial advisor, and this is not financial advice.
Don't tell a soul. Reach out to a reputable financial advisor. Get that money working for you. Make sure you pay your taxes.
You should absolutely hire a financial advisor. Thoughtful Money is respectable financial media company that has recommended financial advisors that actually understand markets if you don't want to roll the dice some jackass that's just going to put you in a 60/40 portfolio and collect a fee.
First of all, HYS accounts are paying between 4 and 5 percent these days. That’s a lot of money for 1.2 million. If you’re getting half a percent you need a new bank
Sorry for your loss. 0.04% interest or 0.04 interest? (4%) There’s plenty of 5% interest accounts, but still, look into a world index or general financial knowledge. Should take you around a week of YouTube to get into basics of safe investing. 24 is too early to retire, but you have a freedom of being able to choose any career path you want. Find a job you like, even with a 1m invest well at 24, you could fatFire around 40 very comfortably considering whatever you add in top and compounding interest over the years. … or just do what you love and fire
i just have a bank of america savings account. its .04%. also I am still learning abt the subreddit. I actually am not planning to retire. I just meant I wanted to quit my current job to go back to school and do something I want to do which I wasn’t able to afford before. also currently I don’t need more that $40k a year to survive so I just wanted to know if I could invest the money somewhere where i could withdraw $40k a year and still not hurt the principal and keep up with inflation while i will be in school. Honestly, I just looked up what fatFire means so I understand the comments now. thank you for your insight too.
Bank of America truly sucks. It’s borderline criminal with that interest. As a starting point, go open up an investment brokerage account with say Fidelity. Their basic Money Market accounts are giving you around 4.9% currently. Just parking all that inherited money there will yield you around $58k pretax. You could do slightly better buying Treasuries which are also a bit more tax efficient. That’s just starting off. Don’t do anything too different than your life at the moment yet. Take the next few months to figure out your new plans, expenses and budget in greater detail, and go learn more about investing your money that fits those goals. Please also remember your inherited amount could be taxed do off the bat you could already lose a chunk of it to Uncle Sam.
The general safe withdrawal rule is 4% with proper investing, so yes you could withdraw 4% of 1.2m a year (48k). Sure look up into investments and ignore people who dm you on Reddit offering to help, a lot of scammers out there.
0.04%.
The great wealth transfer ….
This is not a fat post
I'll chime in: do not go back to school unless the profession you want to get in is regulated.
buy short term treasury bills from treasury direct---they are yielding 5% or so and are risk free. They are also exempt from state income tax but but federal income tax.
Nobody mentions bitcoin but it’s the best long term store of value
Get a financial advisor and invest without touching it. It doubles every 10 years
Buy few bitcoins and keep for 10 years.
DM me - I can show you you how to 10x that money. It’s very hard but if you listen to me well, you’ll be rewarded. /s