I was given $200k, what should I do?

[jilleighan7]

I’m (M46) a married person with a kid. I was just given (after taxes) a little over $200,000. I’m not at all financially savvy. I’d like to grow this money in as safe a way as possible. CD? What advice do yall have for me? Thanks in advance.

Edited to add:

We have an emergency fund (3 months so could be larger). I have student loan debt but a super low interest rate (like 2.25 I think). I’ve got a 401k and a small trading account.

 

[lisab123]

@jilleighan7 Some starting points in this order:

• Six-month emergency fund
• Pay down debt (credit cards, high interest, cars)
• Contribute to retirement accounts
• Contribute to HSA if applicable
• Contribute to after-tax brokerage accounts

 

[alvin62]

@lisab123 Def what this guy/gal says! Also consider a 529 college savings plan after setting aside the six month emergency fund and paying down the high interest credit cards and car loans. Interest rates are good right now, a chunk of your six month emergency fund can go into laddered CDs.

If you don’t own, purchase a property for you and your child to live in, and stop paying rent. You should be able to put a chunky down payment depending on where you live and what you buy.

 

[breety]

@jilleighan7 Start with the r/personalfinance windfall wiki page and their prime directive:

https://www.reddit.com/r/personalfinance/wiki/windfall

https://www.reddit.com/r/personalfinance/wiki/commontopics

 

[kjv5738]

@jilleighan7 Do you have an emergency fund? What about debts? Do you have a Roth? A brokerage account?

 

[jilleighan7]

@kjv5738 Yes to emergency fund (3 months so could be larger). I have student loan debt but a super low interest rate (like 2.25 I think). I’ve got a 401k and a small trading account.

 

[kjv5738]

@jilleighan7 Okay, so you have a few options. I wouldn’t bother paying off the student loan debt. You can make more money investing. So you have to think about what you want to use the money for. Do you have a house yet? You could use some of it for a downpayment. If you do then I’d put it in your brokerage account. A broad spectrum ETF would be best if you have no idea about the stock market and do not want risk. Plenty of options but you can’t go wrong with spy or SCHD depending what you want to do

 

[jilleighan7]

@kjv5738 I do have a house with a reasonable mortgage. We owe about $300k at 3.something.

 

[kjv5738]

@jilleighan7 That’s a low rate. So it looks like it comes down to how comfortable are you with debt? Because if those rates don’t bother you then you’re better off putting it in the stock market and just letting it do its thing for at least 15yrs

 

[elite_jedi]

@jilleighan7 Put it in a HYSA and wait 3-6 months to make any large financial decisions.

If you have debts? Then this could get you in a better place with regard to them. Talk to a financial advisor that is a fiduciary, find one you’re comfortable with.

 

[hamuda]

@elite_jedi All great stuff. Also recommend starting a 529 college account for your kid.

 

[hikebikeeat]

@elite_jedi Wait not more than three months, because the deadline to put $6500 in a Roth IRA for 2023 is tax day April 2024

 

[catmom87]

@jilleighan7 High yield savings account asap

 

[maddmace]

@jilleighan7 Congrats! The answers depends on many factors including your current financial situation and future plans/goals. Here is my 2 cents:

1. Save 3-6 months of expenses and put it in a High Yield Savings Account (HYSA). This is your emergency fund.
2. Pay off any high interest debt. For example if you have any Credit Card debt, pay it off in full. On the other hand, if you have a mortgage at a low rate like 3%, do not pay this off. Just continue to make the min payments.
3. Depending on the age of your child, I would recommend setting him up a 529 plan to help pay for his college.
4. If you or spouse have a 401k with a match that you are not maxing out already, then max out your contributions to receive the full match.
5. Max out a Roth IRA. Your income must be below a threshold and I believe the max contribution for 2024 is $6.5k. Invest this in low cost broad based index funds such as the S&P 500.
6. Spend some of it on yourself! You don't have to break the bank, but go on a vacation with your family. You cant take it with you when you die and your kid won't be young forever!
7. Lastly, if you want to grow the money as safe as possible look into CD's or HYSA's. The advantage of a CD over an HYSA is that the rate is fixed. The disadvantage is that your money is locked up for a period of time.

 

[stephknce]

@jilleighan7 Very first question: how is it getting to you? Is it just straight cash? Is it a gift or inheritance, is it stock or IRA... a lot more detail is needed.

 

[silverbutterflywings]

@jilleighan7 Depends on your current assets and risk allotment.

HYSA or CDs short term 3 to 6mo while you figure this out.

Me I'd split it JEPI and SCHD. $100k in JEPI is a nice vacation for the whole family later this year without touching it. Could be an amazing learning moment for the child where the whole vacation is bought and paid for on money your money made you.

 

[laquacc]

@silverbutterflywings What I don’t understand about the JEPI love is that although the yield looks attractive, the underlying stock is depreciating, over the last 2 years it has lost about 13% in value.

Isn’t total return what should be optimized for, not dividend yield on a depreciating asset?

 

[silverbutterflywings]

@laquacc Up 10% all time, also has been totally flat the last six months while still paying that 10% monthly. If you had held the last 2 years you'd still be up, even more sonwith a DRIP.

DRIP compounding I think it what makes JEPI worth the risk, and there is a very high level of risk here. I balance this with SCHD, but I'm also willing to lose it all. I'm 34 with $80k annual, no debt, no kids, losing a year or 3 of investments is worth the risk of shaving 5 to 10 years off my work life.

 

[laquacc]

@silverbutterflywings But wouldn’t it just be more effective to just own VOO and DRIP into that?

I ran a back test re-investing the dividends of JEPI, SCHD and VOO, and VOO still came out on top.

From what I can tell, it seems the only advantage of JEPI and SCHD is a lower beta, which is nice to avoid major drawdowns, but overall, it seems VOO will have the total return edge.

https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=4uc6pxzdfOW7kUyZ2wWaSg

 

[silverbutterflywings]

@laquacc Not seeing how you setup JEPI at a monthly vs quarterly dividend?