My Father (Age 56) recently sold the family land that he had inherited about a year ago. He has come into about $750k. Once everything finalizes he plans to have that money sit in his bank account. I don’t believe he has ever invested in stocks, mutual funds, ETFs before.
Some more background about him: He is a self-employed truck driver (living in North Dakota) that makes decent money, but I don’t really know how much he currently saves, if any. He has always had the philosophy that he can just work to make more money if he needs it. He’s socially connected, so he always seems to find trucking jobs when needed. And so far, he has always found a way to make money to live comfortably for his needs. Since he is getting older, I doubt this will always be the case.
He currently has 2 children who still live at home (each 14 years old) and about 5k worth of monthly expenses. He owns his house and his semi outright. He also plans to spend 50-100k on developing 100 acres of rural ND lakefront property he hung onto from the family land(adding gravel road, boat dock, plumbing, electricity).
What would be your savings and investment strategy for him?
Sounds like quite a few things going on and honestly probably best to seek out a financial advisor in the area.
That being said generally speaking it’s a good idea to maintain about 6 months to a years worth of living expenses in cash and also known large expenses (like the 50k to 100k for land development you mention).
For the remainder, that can be invested. Allocation is critical here and is going to depend on how comfortable he is with taking risk and staying invested even during market downturns. I can’t really recommend an allocation since I don’t know the full situation but this is where an advisor can really help.
Save a portion of the proceeds for taxes. Invest in broad market ETFs. There is a book you can borrow from your local library. The Little Book of Common Sense Investing by John Bogle. This book was written for beginner investors emphasizing investing in broad market ETFs like VTI or VOO for their simplicity. Just set it and forget it even during market corrections until you retire. This book is a game changer!!!! Broad market ETFs for the win!!
I’m guessing he has a pension. Ask.
Also, ask his life goals… when does he want to retire?
Yes, I’d encourage him to invest at least some of the money long term in the stock market (through mutual funds). Maybe not the money he wants to invest in the land, but certainly the other money.
The problem is: asking somebody who has always just used a bank to invest is sort of like asking a truck driver to use a train to deliver packages. or maybe a helicopter. It’s just way outside his wheelhouse.
It’s also hard for him to hear a kid of his give him advise like this. I’d find somebody more his age to teach him about all this.
I’m about his age… so he probably remembers the gas lines in the 70s. 21% home mortgage rates. you know how they’re talking about now being the highest inflation we’ve seen in 40 years? He remembers inflation from 40 years ago. So unless he believes in the stock market, getting him to invest is going to be a hard sell.
Fellow North Dakotan here, so I feel like I know 3 or 4 guys exactly like him.
I’d personally be pretty leery of managing a brokerage account for family like that, just because if you lose some money that’s not what I want to talk about at Thanksgiving. However, if it’s something you could do together (come up with predetermined amounts that you want to put into different asset classes) and you just do the button pushing, fine.
I’d also have the conversation with him of what he wants. I’m guessing he’s the kind of guy who’d prefer to live in that house and work until he dies but what if that isn’t possible? Once the other kids are out of the house and he’s in his early 60’s what do his expenses look like? I’m not personally a huge fan of annuities but he might be the exact person that they are designed for to give him a base income for when he wants to slow down some day.
Without a retirement plan or pension it would be really beneficial if your Dad would make an appointment with a fee based financial advisor (you only pay the advisor for his time).
Does your Dad want to invest?
Even though interest rates for CDs are low maybe he should consider a CD ladder. You might be able to find some better CD rates with a high yield online bank, maybe even around 2 to 2.5% if the money is locked up for 5 years. That would earn $15K-$18,750 a year without touching the principal.
He could invest in dividend paying ETFs. SCHD is currently yielding just under 3%. Whether he invests in funds, ETFs, or individual dividend paying stocks or ? with the current market conditions I would **not** invest it all at once. Put 15-25% into the market now and then put an additional 8 to 10% into the market every month in order to dollar cost average until he is all in. He could earn 3 to 4% yearly in dividends he could spend without touching the principal. Earning a higher yield than 4% would require much more risk to the principal amount.
Good luck getting him on board with doing something with his money.
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