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58

"Safe short term" and "pay almost nothing" go hand in hand. Anything that is safe for the short term will not pay much in interest/appreciation. If you don't know what to do, putting it in a savings account is the safest thing. The purpose of that isn't to earn money, it's just to store the money while you figure out where to move it to earn money.


32

The paper you are referring to is likely the Vanguard report Dollar-cost averaging just means taking risk later. The thrust of the paper is that lump sum investing outperforms dollar cost averaging the majority of the time (which makes sense; if the market, on average, goes up, then on average, it will go up after you invest, so investing earlier captures ...


20

I am sorry for your loss, this person blessed you greatly. For now I would put it in a savings account. I'd use a high yield account like EverBank or Personal Savings from Amex. There are others it is pretty easy to do your own research. Expect to earn around 2200 if you keep it there a year. As you grieve, I'd ask myself what this person would want ...


19

Contributions to 401k plans have to come from the wages that the employer is paying you, and cannot be made from external funds. Many plans will allow for a large percentage to be withheld from a single paycheck or from the remaining paychecks for the current year, and for that time, you can live off the surplus of cash from the sale.


14

According to some research conducted by Vanguard: We conclude that if an investor expects such trends to continue, is satisfied with his or her target asset allocation, and is comfortable with the risk/return characteristics of each strategy, the prudent action is investing the lump sum immediately to gain exposure to the markets as soon as possible....


14

I actually think your boss is creating a problem for you. Of course it's taxable. The things IRS will look at (and they very well might, as it does stand out) what kind of payment is that. Why did it not go through payroll? The company may be at risk here for avoiding FICA/FUTA/workers' compensation insurance/State payroll taxes. Some are mandatory, and ...


11

The answer you link, and the Vanguard paper it references, implicitly define dollar-cost averaging (DCA) as an execution strategy where you acquire a large amount of cash all at once, and then decide to not invest all of it right away. They contrast this with lump-sum investing, where all the cash is invested immediately when you receive it. This is not a ...


10

Yes, it's taxable. If anyone suggests it's a gift, they are mistaken. There's a line on the 1040 for "other" and as long as you claim it, you're fine with the IRS. It's 2012 income as you already got it. Edit - mhoran makes two good points I'm not really able to address. (a) does a late bonus such as this effect one's penalty? (b) since it skipped payroll, ...


9

I agree with the other answers but I think the confusion comes from the phrase "lump sum" and can be explained much more simply: In a market that is on average increasing, you want to get your money into the market as soon as possible. Based on this, if you plan to put $1200 into the market in a particular year, if the market is on average increasing, ...


6

The decision regarding lump sum and vs annuity will depend on your exact situation, and the market at the time you "retire". It will also depend on how comfortable you are will managing your own investments. If you investing plans were all on autopilot during your career the monthly pension check might be what you are comfortable doing. Factors to consider ...


6

To start, not "after taxes". This payout from a lump sum pension is transferable to an IRA, with all the flexibility that affords you: Ability to withdraw at your own pace after 59-1/2, not the fixed payout of the pension. Ability to convert to Roth if you wish, at any time (e.g. in lower bracket years or to 'top off' your bracket as you wish. Ability to ...


6

The product you seek is called a fixed immediate annuity. You also want to be clear it's inflation adjusted. In the US, the standard fixed annuity for a 40year old male (this is the lowest age I find on the site I use) has a 4.6% return. $6000/ yr means one would pay about $130,000 for this. The cost to include the inflation adder is about 50%, from what I ...


6

Unless the values of Medicare and SS went up as a percentage of your income, then the values are probably correct. Your employer pays half of your medicare and SS tax, and the amount you see on your stub is the other half (you do not typically see the employer's amount on your paystub). They are NOT paying a portion of your federal or state/local income ...


5

Dollar cost averaging performs better in an oscillating market. Lump sum investing performs better in an up trending market. So what's the market going to do going forward? No one knows so it's impossible to know which method of entry you should employ. Then there's the issue of your internal conflict. You feel that you should be invested but you are of ...


5

The unfortunate absolute facts are Lump sums are a huge particular problem1 2 for people with spending problems 3. People with spending problems burn through lump sums instantly. People with spending problems never change. It's impossible to fix the behavioral problem.4 As OP has already stated, OP's option 2 will not happen. There are only two ...


4

I think you're not applying the right time scale here. ESPP (Employee Stock Purchase Plan) is usually vesting every 6 months. So every half a year you receive a chunk of stocks based on your salary deduction, with the 15% discount. Every half a year you have a chunk of money from the sale of these stocks that you're going to put into your long term ...


4

Since you want to maximize your gains but keep it accessible, I would rule out stocks and shares ISA as if the market goes down, you could lose money or be unable to take it out. Also a junior ISA has a limit just over 4K and is not really needed if you earn under about 17.5K a year (as you won't be paying taxes) I can imagine that the best idea for you ...


3

First of all, I agree with both the conclusion in the question and Ganesh’s answer – avoid funds or stockmarket based instruments, given the short timescale and need to draw an income. However I think looking at savings accounts only is missing a trick. At the moment there are several current accounts that pay >2% interest on balances the size of which you’...


3

First, bear in mind that you're talking about having an average of ~£2000 saved up at any given time (if you spend all your stipend every quarter at a steady rate you'll start out with all of it and have none left at the end of the quarter), along with any long-term savings you manage to build up over time. In today's low-interest rate environment of ~1% ...


3

Vanguard released an analysis paper in 2013 titled "Dollar-cost averaging just means taking risk later." This paper explores the performance difference(s) between a dollar-cost averaging strategy and a lump sum strategy when you already possess the funds. This paper is an excellent read but the conclusion from the executive summary is: We conclude that ...


3

There is not a lot that you can do to force your wife to spend this money appropriately, but since divorce is one of the options on the table, it may be a good idea to contact a lawyer to write up a postnuptual agreement before the lump sum is paid. This allows your spouse to put the all of her good decisions in writing before the temptation to spend the ...


2

Assuming for simplicity that the lump sum was due April 1 (start of the quarter), and payments would begin on June 30th and continue for 70 quarters, with 3.3% interest compounded quarterly (that is, 0.825% per quarter), the lump sum P corresponding to quarterly payment Q is given by P = (Q/0.00825)*(1 - 1/(1.00825)^70) = Q*53.01439... and so Q = 5,722....


2

There are a number of scholarly articles on the subject including a number at the end of the Vanguard article you reference. However, unfortunately like much of financial research you can't look at the articles without paying quite a bit. It is not easy to make a generic comparison between lump-sum and dollar cost averaging because there are many ways to ...


2

5 years is very short term, and since you are sure you'll need the money, investing it into the markets should probably not be done. You can toss it in Ally bank for 1% or consider a 5 yr raise your rate CD A decent write-up on time horizons: http://www.investopedia.com/articles/investing/110813/using-time-horizons-investing.asp If you want to go the stock/...


2

Typically your investments can be separated in to two buckets: Assets that are allocated already (cash is an asset allocation) The allocation of assets I receive on a going forward basis The issue with dollar cost averaging and the many other names for the same concept is that it addresses part 1 not part 2. Dollar cost averaging is about reallocation of ...


2

ByNo you cannot. You have to do this as part of your deductions from company. You can request upto 100% of your basic salary into EPF. This can be changed every year or as per your company guide guidelines.


2

Consider the following four options: (A) Invest $2000 now, hold for 12 months. (B) Invest $1000 now, another $1000 one month from now, and then hold 11 more months. (C) Invest $2000 a month from now, hold for 11 more months. (D) Don't invest anything. Option (B) is a simple DCA strategy. Note that it's basically a mix of (A) and (C). A pure (C) strategy ...


2

For people talking about investing $100 (or whatever) out of each check being LSI in relation to that one specific payment, how do you rationalize people electing not to do something like maintaining a large emergency fund and then going 100% of pay into 401k in month 1 and then 0% of pay into 401k in months 2 - 12 and then you refill month 1's drain on the ...


1

What are the options available for safe, short-term parking of funds? Savings accounts are the go-to option for safely depositing funds in a way that they remain accessible in the short-term. There are many options available, and any recommendations on a specific account from a specific institution depend greatly on the current state of banks. As you're ...


1

Here's what I suggest... For now, put the money in the bank. It'll keep. Find some better interest rates than your stupid bank. Move some around. Start studying about other investments. As you feel comfortable with something, put SOME into it. You can always add more later if you feel right about it. Debt? Set some aside to pay it off. Want to buy ...


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