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??? for the financial wizards.

Discussion in 'Chit-Chat' started by LabRat11, Jul 19, 2005.

  1. LabRat11

    LabRat11

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    So it seems that the company I've worked for for the past 15 years is about to be sold. It's actually looking like it's going to be a good deal for the employees - cash sale for everyones ESOP plus we keep our jobs and the management structure remains the same.

    So here's my situation....

    38 years old - approx. 20 years more to work
    15 years with the company = mucho senority.

    My ESOP buyout is going to be in the area of $500,000 (yes - half a mil)
    ESOP represents about 1/2 my retirement strategy (have my 401K going good - plus another thing or two)

    My delima..... Need advice on what to do with the money. I'd like to put 400 of it somewhere long term (15 years) - tax deferred - making 10% a year - and I don't have to watch it everyday. Like to put the other 100 somewhere I can get at it in case of emergency but still making a decent return.


    So what advice can all y'all offer this admited financial novice....
     
  2. Deep South Cruisers

    Deep South Cruisers 1978 FJ40 ~ 283 V8

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    step one: hire a real financial advisor. ;)

    step two: keg party.

    step three: invest in property.
     
  3. TJDIV

    TJDIV Back in The U.P.

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    My Edward Jones guy is exactly what I would do.


    with the other $100.









    Don't know how property is up by you, but the interest earned on the 100 could cover taxes on the 400 if you invest it wisely into property, etc. There is no better savings account than property.....(ok, maybe not this hurricane ridden waterfront stuff down here though...... :doh: )


    Man, with $500K........no limit to what can be made right now....
     
  4. PabloCruise

    PabloCruise

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    No brainer would be to max out IRA and Roth for the year.

    Then go get the above mentioned financial advisor.

    Isn't Eric a finance guy, w/ cred?
     
  5. Bama_B

    Bama_B

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    I gotta say Id pay off the house (or buy one with cash) and any other loans I had with the loot. Its amazing how much you can save if you arent making huge payments every month. Its also nice not to have to worry about being thrown out on the street if you were to get cut in the ownership change. You can live without power but living under a bridge just sucks!

    Since you are already accustomed to making rent/house payments, keep making those payments to yourself by putting them in a good growth stock mutual fund. You can find established ones that average 10-12% easy. Ask for referals to local financial advisors from friends and family (but not the ones living in a trailer)!

    Dont forget taxes are going to eat up about 30% or more. Go see a tax accountant as well to help you plan for that.

    Lastly, keg party!
     
  6. Junk

    Junk

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    Talk to your local friends and find a local financial planner you like and trust - also one that will not be retiring in the near future.

    I used to work on Wall St and have a lot of experience running the financial future of companies etc, but do not have the time to devote to managing my personal financials - I let someone else do that.

    Do not listen to the guy above saying pay off the house. Talk to several planners and pick the one you like and trust.
     
  7. stinkyfj60

    stinkyfj60

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    Dont just settle on a financial planner, make sure you look around and find someone you TRUST. Those guys work for commision so some of them sell products that may not be best for you. I am an insurance agent and I see it all the time with life insurance products, agents see the $$ of the commision and not the needs of the client.

    Jason
     
  8. wsdavies

    wsdavies

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    Yea, I wouldn't pay off the house either...Figure your mortgage is 6%...You should be able to get at a min. 10% in a long term equity investment..whether it be stocks or real estate...I'd look for a smaller investment company that specializes in value stocks, that only make money when you make money(This is how Warren Buffett did it in the early years) He promised a return a certain % better than market and of that amount above he got to keep 25%...but he promised at least a return as good as the market or he would cover the diff...If the person is making commision of the initial investment then forget it..find one that works by the hour or from the profit....
     
  9. wsdavies

    wsdavies

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    Oh...and quit bitching about the humid heat! You can afford a nice A/C ;p
     
  10. LabRat11

    LabRat11

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    Oh - come on - I need something to bitch about....


    Everyone - so far some good thoughts. I have no plans of paying off the house. Mortgage interest is one of the few significant tax breaks left I can take easy advantage of. Do have a few small debts I plan to knock out first. Dont want to go into property / real estate. Personally I think it's WAY over valued right now and the pin is pushing in on the side of that bubble. Still need some more ideas to ponder - keep them comming.
     
  11. Scamper

    Scamper

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    Rat - having gone thru something very similar recently, the first thing to do is dissuade yourself of netting $500K (unless that's the amount you will net based on a much higher gross). You will not qualify for a Roth and if this is in fact a ESSOP (i.e., you don't actually own the stock at this time), then this will all be reportable as straight income. No capital gains in other words. You may also (read likely be) "eligible" for the AMT which would apply to all your income and not just this windfall. Talk about watching your money fly out the window... :crybaby:

    If on the other hand you have taken custody of the stock (or a big chunk of it), you may be able to declare that income as capital gains so long as you've held it for at least a year.

    If you are faced with taking this as straight income, I would discuss options with your employer about deferring this so that you can take possession of the shares upon the deal closing, then hold them for a year so you take it as capital gains and avoid the AMT. That would be the best advise I can give you. If that's not possible, then suck it up and just remember that a gross of $500K is better than no gross at all :D

    On investment opportunities, invest as much as you can of the proceeds. Hire a pro to do it for you (as others have said, someone you can trust). You'll never have the time or ability to devote to doing the right thing--that's why you'll pay some hotshot a small percentage of the amount invested to do it for you. By the way...the more you invest, the lower their commission should be. Good luck.
     
  12. Outback

    Outback

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    Yes, invest in property / real estate... Just not "houses". Invest in condos / apartment complex and rent them out. When this housing bubble bursts, those that are ill-prepared may be forced out of a "house" and into "liquid housing" that they have no investment in and can hop around in as their income changes.

    Secondly, you say that mortgage interest is an easy tax break and you should keep it... Well, I'd rather have a paid for house that nobody can take away in a bad economy tomorrow than a tax break today. That being said, we make up for it with all the HUGE tax breaks a small business provides :grinpimp: Everyone should have a samll business of some sort to help with tax deductions. Get a good small business accountant/tax person and listen to their advice. It has helped us immensely!!

    There are other ways to ensure your financial future than the "traditional" way -- save, save, save and retire to live on a chunk of money relying on a good interest rate to make it last. I'll take a small business that I can run at any age that is mostly not seasonally or economy-driven. Think about it...

    Jody.
     
  13. OZCAL

    OZCAL

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    LabRat, sounds like the ESOP is terminating. You are aware distributions prior to age 59.5 are generally subject to a 10% penalty, plus current income tax, unless you roll it over to an IRA or another qualified plan like the 401(k). This pretty much rules out direct real property investment. Never take a distribution when you can deflect it to a lower tax liability year.

    Sit down with a financial planner or three, get opinions from each, compare, ask questions, don't rush into anything. Long term decisions require a lot of thought. Definitely do not ever feel pressured to "get in now" to a particular investment -- a good deal today will still be there tomorrow. Or another one just like it. Educate yourself.

    What industry are you in? You might not be financially savvy, but maybe you know the industry and can spot trends/products before the rest of the investors? Don't rely too heavily on this, though. But if you can apply personal knowledge, it's better than investing blind.

    By the way, congratulations!

    David