That seems like a suspiciously high amount of money, but I can engage in good faith…
I recommend the wiki pages on managing a windfall and investment priorities.
My information might be dated, but I thought one needed to serve 20 years in the military to get a full pension. If so, you would probably want to serve the extra couple years and get that pension. I know a guy who did this, and then got bored and got another job while still drawing his military pension, and he did very well for himself. That being said, many people hate their military careers and leave ASAP, so it’s a bit early to talk about how many years you’ll be putting in. While you are in the military, contribute as much as you can to your TSP, which you can think of as identical to a 401k (just for government employees). You can grab one of their Target Date Funds or build your own portfolio. Looks like you would want to do a Four Fund Portfolio rather than a Three Fund.
As for what to do with your 600k, you probably want a target date fund or a Vanguard Lifestrategy fund, or build your own 3-fund portfolio. I’ll note that bonds are pretty inefficient in a taxable brokerage account (interest is taxed) so you may find it worthwhile to put the money entirely in stock funds. I don’t love the volatility of that strategy, but if you are coming from crypto, I wouldn’t imagine that it would be much of a problem for you…and you should be compensated for the volatility with higher returns over time.
This all-stock method would be either (a) purchase VT or (b) purchase VTI (60% recommended) and VXUS (40% recommended) or their equivalents from other brokers.
Edit: With the plans you currently have, and your current stage of life, I don’t recommend purchasing a house. It adds a much higher level of complexity to your life than anything else I’ve mentioned. I don’t believe a house makes sense except as a personal residence that you plan to live in for a minimum of 7 years. If you ever go the route of buying property to rent out, that’s more entrepreneurship (I.e., running a business) than investing, and Bogleheads can’t help you with that.
I followed the link, but I think those results are off by an order of magnitude. 80% return per year just isn’t real.
And that’s my cue to talk shout the un-sexy miracle of Target Date Funds. “People who don’t know”—assuming they get advice from someone who does know—should stick to target date funds like SWYOX from Schwab or VLXVX from Vanguard, etc. These are “funds of funds” that can be your entire portfolio, and get more conservative as you get older.
I’ve been an Electrical, Instrumentation, and Controls Engineer at a plant that needed all three but only wanted to hire 1 person. There’s usually quite a bit of overlap, but lemme tell you what I think these 3 roles should look like based on my experience in Chemicals and Pulp & Paper industries:
Electrical Engineer: Has a degree in electrical engineering. Is responsible for electrical power and reliability, transformers, and motors…anything with enough power to kill a man. VFDs might belong to either the controls engineer or the electrical engineer. The electrical engineer will blame the controls engineer for everything that’s actually his own fault.
Instrumentation Engineer: I mean…this is the engineer in charge of speccing, installing, maintaining, and upgrading the instruments. This can get complicated with chemical processes, because you have to make sure the materials are all compatible. For example, nothing copper or brass can be in an ammonia pipe…ammonia eats “yellow metals” like they’re candy. 95% of the instrument engineers job is breaking complicated instruments like gas chromatographs and then tossing it over the fence to the controls engineer while saying “it must be a code problem.”
Controls Engineer: Usually has an electrical or chemical engineering degree, but sometimes a degree in mechanical engineering, computer science, or no degree at all…the guy with no degree is an electrician or E&I Tech who figured out that he could troubleshoot ladder logic because “green light means coil is energized” and his career just kind of took off from there. The controls engineer is generally the one responsible for implementing code changes, and also maintains and/or upgrades the controls system as a whole. Most of the job description is sarcastically explaining to everyone that “code doesn’t change itself” and the rest is being a miracle worker who solves the problems created by the other engineers…and by operations. And by maintenance. And by IT.
With regard to the 401k match: I would still put in enough to get the match. When you withdraw the money early, there’s a 10% penalty, but that’s 10% of what you put in, not 10% of your paycheck. In other words, the 401k match is still free money. Depending on employer, you may be able withdraw immediately or you may have to wait until you leave, but that’s fine.
I would personally keep working as long as I could. Many SSID benefits, such as payments to any children you might still decide to have, are based off the number of years you have worked. I think 10 years are necessary, if I remember correctly. I do not remember how many years are necessary for you to receive disability payments, but it may be similar.
I’m ambivalent about housing. My own analysis from my own living area is that it takes about 7 years to break even on owning a house. However, there is also the added stress of repairs and whatnot—and needing to keep more money in an emergency fund—which you don’t need. I guess it’s more a “personal preference” thing.
It’s money well spent for people with little investment knowledge. Compare that to getting a “reasonable” advisor with 1-2% fees per year, and the target indexes are a bargain. Hell, it’s still a better deal by far than what’s available in my 401k.
Anyways, the math you performed is incorrect. It’s $24,000 if you maintain an account balance of $1MM for 24 years. If you are starting at 0 and working your way up to $1MM over 24 years, then it is much less.
Yeah, I used to do it for an SI/OEM before I went to a plant. They were a bit buggy, but they worked.
SWYOX only has a net expense ratio of 0.08%. That’s really not bad at all for a fund with international diversification. I can understand where you are coming from though. I went exclusively with VTI (or rather, with the equivalent SWTSX) for many years, and have only recently started to go international as the international funds’ expense ratios have dropped to something I consider reasonable.
Can confirm that’s about what it took for me to open my Roth IRA and roll it over from another brokerage. Schwab service is top notch.
For a noob, I would recommend one of Schwab’s Target Index Funds. SWYOX, for example, is the one you choose if you plan to retire around 2065. Schwab will automatically invest in…well…pretty much the entire world…and as you get closer to retirement they will automatically move you from a more aggressive asset allocation to a more conservative one (read: less stocks and more bonds/cash). This might be the single laziest portfolio possible, and it works well for the average person.
My own investing journey has been most positively affected by The Intelligent Investor by Benjamin Graham, The Simple Path to Wealth by JL Collins, The Bogleheads’ Guide to Investing by Taylor Larimore, et. al., and The Four Pillars of Investing by William Bernstein.
I have rolled over 401ks into my IRA three times. It’s kind of a pain in the butt, but worthwhile to keep my money in one place.
Magic book work on subconscious, make nethermancer go “Brrrrrr.”
If you can purchase the index funds in a tax-advantaged account (IRA, etc.) then I might do by that for the tax breaks. Otherwise, the guaranteed risk-free 6.375% from paying down the mortgage is hard to beat.
Pirate Freedom by Gene Wolfe is a time travel historical pirate fiction.
Oh, indeed. I remember the banker explaining to my parents why an ARM was superior. They said that if interest rates started to climb, my parents could quickly refinance before the rates got very high. Obviously, it didn’t work out like that.
Exactly this. Parents would have lost the house, but they lost it anyways. They would have kept their retirement savings. There were no other assets to be seized.
Sorry, I meant dropping to 70% of income. Like, if you make $100,000, consider a house you could afford at $70,000.
Get a fixed interest rate on the mortgage, rather than an ARM. Probably get a smaller house/mortgage as well. Refuse to withdraw money from the retirement accounts…better to stop paying the mortgage instead.
These are the actions that would have allowed them to get through the Great Recession relatively intact.
Agreed. It varies from state to state on whether creditors can go after your IRA, though.
I was an older teen, but lemme tell you what happened to my family: We had an adjustable-rate mortgage (ARM) and it went up so my parents couldn’t quite make payments. Then my dad lost his job at the same time that everyone else in his industry did, so he had to take a lower-paying job. My parents tapped their retirement funds to put food on the table for their children and keep the roof over their heads. It didn’t work, and they lost the house after all. In the course of 2 years, we went from middle class and house rich to working poor with nothing. My parents still haven’t fully recovered to where they were before the crash.
Conversely, I’ve done quite well for myself because I never forgot the lessons they were nice enough to model for me: Have a house that you can still afford if you drop to 70% of your current income. Never get an ARM. Have a deep emergency fund. Never spend retirement money on debt: Go bankrupt first. Be prepared for your investments to lose half their value overnight. Have multiple fungible skill sets.
Unfortunately, many people start to lose their critical thinking by that point in life. I’m so sorry for your loss, and hers.
Will Wight’s Of Sea and Shadow hit Morrowind vibes for me. It’s actually 2 trilogies that exist in tandem, told from the view of two groups that are antagonists to each other. I started with Of Sea and Shadow, though, rather than Of Shadow and Sea, so the story of the pirate-group seems more magical to me than the story of the assassin-group.
I also liked Iconoclasts a lot.
For epic fantasy with intricate histories, you would probably like Gardens of the Moon, and maybe Wheel of Time.
There are some studies that suggest lump sum (LS) outperforms dollar cost averaging (DCA) just over 2/3 of the time. However, DCA is better if it will help you avoid the mistake of selling during a market downturn.
I’ve seen an argument that even though LS is usually better, the lows of DCA are usually much higher than the lows of LS. Or put another way: DCA is a way to improve the volatility (risk) at the cost of expected return.
I’ve considered that if I were to LS into a taxable brokerage account, and the market took a sudden downturn, I could tax loss harvest the ETF.
That makes sense. The $1,000 going to $198,632 in 9 years is just hilariously wrong.
How can you plan for a significant downturn
Bogleheads