Where to put proceeds from sale of home for dividends/interest?

SandraWisdom

I will be receiving about $250,000 as proceeds from the sale of my home in October. I will moving in with my sister so I will not need the principal any time soon. I would like to invest for interest or dividends. So many investments look very pricey now. I have PONDX, DSL, and PREMX on my watch list. I got them from reading the posts here. I was wondering if there are any other investments I should be watching.

MikeM2

Your funds kick off goodly amounts of income, some of it with leverage. It will be taxed at regular income rates as you probably already know. PCI can still be had at a discount. I am also looking into NJ municipal closed end funds. (NJ resident) God knows what will happen when interest rates rise...probably not good in the short run but good for bank interest and CDs. I think you can get CDs at 2% if you lock in 5years. Sam Lee has noted in the past that CDs are likely preferable to short term bonds since they are FDIC insured and a 2% yield is similar to CDs. If you can fully fund Roth IRAs or regular IRAs/401k etc, do that if possible. Age, work history, taxes will all play a part; just by two bits as a non professional. Good luck.

Mark

I think many dividend payers have gotten ahead of themselves but if you'd like to play just a little bit Cracker Barrel (CBRL) currently has a blue light sale going on with their shares. Yield is currently 2.96% and they toss in a special dividend every now and then. Note, I am in no way suggesting that you buy this as I have no clue with respect toward your financial situation whatsoever. Due diligence is required.

slick

Sandra, it would be helpful if you provide a more complete picture as to age, whether you need the income from the 250K for living expenses and if you have any retirement accounts and how its allocated and when you plan to start withdrawals. You would likely receive many more responses once a clearer overall picture is known. Lots of other questions, but its a start.

SandraWisdom

Mark said:

Cracker Barrel (CBRL) currently has a blue light sale going on with their shares.

Thank you but I don't buy individual stocks.

SandraWisdom

slick said:

Sandra, it would be helpful if you provide a more complete picture as to age, whether you need the income from the 250K for living expenses and if you have any retirement accounts and how its allocated and when you plan to start withdrawals. You would likely receive many more responses once a clearer overall picture is known. Lots of other questions, but its a start.

I am in my early 60s and will be collecting SS soon. My living expenses are low and taken care of by a small pension and other investments. I would like to invest the 250K and start to give the interest to some nieces,nephews and other family members.

SandraWisdom

MikeM2 said:

PCI can still be had at a discount.

Thank you, I will look into PCI

I also agree that dividend and interest instruments have gotten ahead of themselves. And with the FED talking a raise I can wait for a pull back to the end of the year. But, I still feel that over the next 5 years at least they will be a good investment.


"From 1945 to 2001, and 10 cycles, recessions lasted an average 10 months and expansions an average of 57 "

https://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States

The Great Recession ended June 2009, so maybe we are due for a recession when interest rates will fall again. This is something I have not read about anywhere - that this expansion is getting old. That could be because most do not feel like a robust expansion.

From reading some of the posts on this board I've become less fearful of general inflation. The factors just don't seem to be there; except for an oil embargo or war.

bee

Thanks for the question. It made me rethink and remind myself of the importance of having a plan when it comes to the use of discretionary money.

If the goal is to meet future retirement needs (income) I suggest the following:

Year one:
-Consider using some of this money to "treating" yourself and others with a "gift". You would be amazed at how great it feels to give to a charity or a loved one.
-If you haven't yet funded an emergency fund:
Determine what 6-12 months of living expenses would be and create an emergency fund (cash/near cash).
-If you have earned income, fund retirement accounts:
1st - Match employer contribution (401K/403b/457/etc)
2nd - Fully fund a Roth IRA (Roth IRA)
3rd - Max out employer offered retirement plans or, if self employed, max out SDIRA
-Health insurance wise, Are you eligible to contribute to an H.S.A (Health Savings Account). If so. use some of the money to max out your contribution?

Make it a point to continue funding the above accounts until you are no longer eligible. The remaining balance could be divided in three investment pools.

1-3 years
-The goal with this money is to meet the needs of what was laid out in year one each year going forward, but could also serve as a good plan for supplementing retirement income needs. It should be invested conservatively and replenished (re-balanced) using funds from the other two pools once a year. ST bond, IT bond, and MS bond funds work well here. Maybe even conservative allocation funds like VWINX.

4-10 years
Find a few good Balance funds...CBALX, VTMFX, VWELX, FBALX, etc. Re-balance once a year by redeeming some of these shares and replenishing your 1-3 year pool funds.

10 years +
This pool is home Moderate Allocation funds like (PRWCX), Aggressive Allocation funds like (POAGX) and well as any Alternative Allocation (RE, Utility, PM, HY Bonds, etc) funds. It will serve the purpose of long term growth as well as the occasional place to re-balance with the other two pools.

What is the purpose of your goal of achieving dividend and interest?

Good Luck!

SandraWisdom

bee said:

Thanks for the question. It made me rethink and remind myself of the importance of having a plan when it comes to investing non-discretionary money.

Thanks, our post just missed each other. See my reply to Slick.

00BY

I might look over seas GAINX, MAINX, MACSX, or SFGIX
Food for thought

B

MikeM2

Make sure to fund your Roth annually while working (as noted by Bee). If you are going to give money to (lucky) relatives you can bequeath the Roth IRA to them and their withdrawals will be tax free; they will have to pay taxes on Traditional IRA distribuitons. I also own sfgix/mainx and some of the VG funds mentioned but in IRAs.

BTW push back SS as late as possible. I think every year of delay adds 8%ish to the SS money annually. There is much literature on this; Sam Lee laid this out in a M* article several years ago but it might only be available to newsletter subscribers.

davidrmoran

Yes, if feasible do push back SS start date; indeed, any CFP or CPA or similar would almost certainly tell you to live on this $250k instead. If you can push it back to age 70, all the better. The cashflow difference is very large.
That said, I would put at least some of the nut into div-paying US LC equities, as others have promoted, the usual suspects being DVY, NOBL, OUSA, SCHD, SPHD, HYD, and there are others of course. I also like the value etn CAPE and the fund based on it, DSENX / DSEEX, which includes special bond sauce.
For diversification, add FRIFX. I see no need to look overseas.

JohnChisum

I like the role income funds could play here.

STB65

I like MCRDX for bonds and VMVFX for stocks. Both reviewed here in past issues. Read the analysis and do as you wish. I did buy PONDX recently, however, which many would view as a "sell" signal.
If you are in your early sixties, unless you have serious health issues, your life expectancy is probably over 25 yr (if you exercise regularly). Send your nephews and nieces clever cards for their birthdays and hold on to your money.