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jschmidt
1-20-11, 3:43pm
A hugely wild question - especially since I don't have it (haha!) But, I am thinking a little outside the box here. If I sell my business, and someone actually comes up with the money, I'm wondering, as a 30 year old, what should I do with 500k cash? We live off of about 30-35k a year. Any ideas?

bae
1-20-11, 4:11pm
Pay off your debts, sell everything, invest the proceeds prudently, move to Colombia, and kick back on the beach for the rest of your days.

jschmidt
1-20-11, 4:25pm
i'd much rather stay in the states :) Oh, and I don't have any debt at all.

rosarugosa
1-20-11, 9:35pm
Buy lots of socks - always a good investment!

Hattie
1-20-11, 9:42pm
As a retirement income, $500,000 will provide you with $20,000 per year income. With a balanced portfolio over long periods of time, you can generally expect 4% indexed to inflation. Withdrawing more than that, will pretty much guarantee you will run out of money.

Rogar
1-20-11, 11:15pm
Probably not enough information for a good call by my accounting. Would you like to keep working full time, or scale back immediately and start living off the investment income would probably be the big one for me. But since it's a little bit rhetorical, I think I might consider putting about half aside for a later retirement and go 2/3 quality index mutual funds and 1/3 in bond funds and inflation protected securities. I'd find something really fun to do that isn't too demanding, maybe seaonal work with the parks service or with a non-profit of your passion. Maybe writing or photography. I'd use the other half to supplement what would probably be a loss of income and ladder a mix of high quality corporate bonds, treasury bonds, and bank CDs out to about 10 years duration. You could always go back to school and learn a new and exciting career. Nice to think about.

Socks, and jeans too.

loosechickens
1-21-11, 12:53am
What we did when we "dropped out" at 42 and 50 was that we mostly left our savings alone, and reinvested the dividends and interest and let them grow. The money was always there in case of need, but our preference was to scale our life expense needs down to where some seasonal or short term contract work during the year off and on kept us afloat. Usually, we could work less than half the year, and being nomadic RVers, that kind of work was easy to find, and when we weren't working, we could live very, very cheaply.

Having the investments gave us freedom from anxiety, and we had fun with the projects we took on.....gradually, over time, by reinvesting the income from the investments and capital growth as well as a few other things that added to our savings, (a little over 2/3 in stocks and stock funds, and a little under 1/3 in fixed priced investments), we found that our nest egg had grown enough so that the income was sufficient for us to retire fully, so in recent years, we've taken on very little other than the occasional volunteer gig.

At the age of 30, since you have lots of years left......I'd look at doing at least some kind of fun, part time work to provide for most of your needs, and just supplement with income from your investments, or if possible let them reinvest and grow for awhile.

Life is for living........we went for the "living" part, while still trying to be responsible and conservative financially, and at least for us, it worked very well. We haven't had to work "real jobs" since ages 42 and 50, we're now 61 and 69, and have had some amazing adventures and lived and traveled in several dozen countries. It's hard to think that any consumer goods we might have been able to have accumulated would have been worth having worked all those years instead.

It's fun to think about......now get busy and find a buyer for the business and get ready to go off to adventure......

Jonathan
1-21-11, 9:50am
For the moment, put it in short-term investments (like CDs, etc.) that return some interest. Won't be much. Live off the interest and find a part-time job to make up any lacks. $500K at 1.25% (going rate for CDs at the moment) is $6250.

When Tbonds pass 5-6% at issue, then consider dumping the money into tbonds. 5% yields $25000 for 30 years. You'll still need to supplement that, but you can do it on your own pace and with your interest more firmly in mind than someone with no income except the day job...

kib
1-21-11, 3:36pm
It really depends on where you think the world is going, and where you think you want to go! Yes, the latest yield on new treasury bonds is hovering around 4%. Assuming you think the us banking system and economy is stable enough to keep their promise, you could buy half a million in T bonds, never lift a finger about finances again, and have 20K annual income for life, or as Jonathan said, hold out for a slightly higher rate and make $25-30K. You could make a living out of playing with the money and possibly earn twice that much (or lose it all). If you have doubt about the stability of the banking system, invest in the security/stability of your personal infrastructure - move to a transition community with a lot of involvement, go learn a useful skill or two, get partially inflation proof with solar panels, water cachement, some chickens, a wood stove and your own patch of forest to manage for wood.

Spartana
1-21-11, 4:44pm
For the moment, put it in short-term investments (like CDs, etc.) that return some interest. Won't be much. Live off the interest and find a part-time job to make up any lacks. $500K at 1.25% (going rate for CDs at the moment) is $6250.



This is what I did when I sold my house (didn't have $500K though - about half). Got good CD rates back then - enough to pay rent with the interest - but now only around 1%. So I am currently looking to buy a new house with that money (will be using only about half of my "house money" and keeping the rest in liquid CDs) rather than invest all of it. More practical for me at this time. I have a pension to cover all my other expenses. So I guess my advice would be to first determine what it is you want in life - a house, a bigger house, travel, retire early, work and save, be a stay at home parent, write the great american (or Columbian ;-) novel, whatever - and then decide where best to put that money for your lifestyle. Also, if you do decide to invest that money rather than use it for something, decide what amount of risk you are willing to take and how long you'd want to leave that money alone. Because I retired so young (42) I gravited towards "safe" investments and fairly liquid things like CDs and I-Bonds because I couldn't afford to lose that money and knew that I didn't want to lock it away for years and years.

REIGuy
1-23-11, 7:43pm
If you have a business that is worth $500k, I'll assume it is throwing off around $50k, year. Personally, I would try to keep the business going and focus more on growing and automating it as much as possible. Even if you do get a buyer, they will be more interested in a business that is more automated. It is hard to get a loan in this economy, so I will assume that your buyer will likely have a good chunk of cash and already be wealthy. That type of buyer doesn't want a job, they want an automated business.

If you do decide to sell it, I would look at buy and hold real estate as you can easily get 20% ROI in this economy, but I am a little biased.

jschmidt
1-26-11, 6:47pm
REIGuy, when you say "throwing off around $50k, year" what do you mean? Residual/passively it brings in 40k/yr and non-passively is 110-160k additionally.

ljevtich
1-30-11, 12:10pm
So I guess my advice would be to first determine what it is you want in life - a house, a bigger house, travel, retire early, work and save, be a stay at home parent, write the great american (or Columbian ;-) novel, whatever - and then decide where best to put that money for your lifestyle. Also, if you do decide to invest that money rather than use it for something, decide what amount of risk you are willing to take and how long you'd want to leave that money alone.

+1


Residual/passively it brings in 40k/yr and non-passively is 110-160k additionally. and
We live off of about 30-35k a year. Any ideas?
If you live off of the $30-35, then you should be raking in on conservative numbers $115K, then work 5 years and you will have the $500K already. While you are bringing in that money, start slowly investing the income in 30 year bonds. Right now they are at 4.5% and they are slowly creeping upwards: Treasury Bonds (http://www.bloomberg.com/markets/rates-bonds/government-bonds/us/). Research and read Your Money or Your Life...although it sounds like you have gotten your expenses down a ways.

DH & I are like loosechickens, we have retired too, somewhat. I work as a seasonal park ranger and DH is retired, he volunteers at the parks that I work. And during the winter, I volunteer too. But we had goals that we wanted to do, and then cut our expenses way down, and use the money from selling the house to make up a little more than half our income, the rest coming from a variety of sources, including working 6 months of the year.

Back when the CD rates were nice at 6% (4 years ago :( ), I put most of our money into 7 year CDs. But I laddered a bunch of money, because the financial gurus stated that I should. Slightly bad mistake, but at the time, I did not know if we would be using the interest or not.

As the CDs come due, I have been putting about $10K each time into a 30-year bond. Each month the 30 year bonds have been selling (you can go to Treasury Direct (http://www.treasurydirect.gov/) to buy bonds, I would suggest setting up an account there, it is free to do.) The interest pays out every six months. Having a money market that earns some interest like ING Direct is a good idea, as well as a stick and brick bank that you can rely on that has a no fee checking account. That bank is one that you will want to stay with for a long time, as the Treasuries will be deposited directly into that account.

The other question I have for you is this: If this business makes $40K a year passively, then once you have a nest-egg, why not just keep it going passively? You will continue to pay for your expenses, and will be making residuals with the interest. It could be a win win situation 5 years down the road.