Large Windfall

BostonFI has brought the wisdom, and that Bogleheads windfall piece is a huge help.

I'm so, so grateful, OP, that you have received this windfall and you want to make the right-for-you choices with it. A windfall is exciting. Giving yourself time to adjust to having it there is a big early step toward making the choices that do right by your priorities.

Short-term, you mentioned the money being in an HYSA. That's a good parking spot initially. If you haven't already, if it were me I'd look into money market fund options such as Vanguard's VUSXX. Depending on your tax situation, funds like that are federally taxable but generally exempt from state/local taxes. That could decrease tax load while the money's parked and cooling.

Honestly, there's nothing about any particular sum that merits a financial advisor or anything else, whether that's $800K or $8M. There's only what you identify as the priorities. And that does not all have to be someday or far in the future. If there's a dream thing that current-you wants in the mix, that is valid too. You can do both.

When I read over your post, the first thing that came to mind to me is the framework Tyler Gardner put out a little while back. The focus is on identifying your needs for a sum based on timeframes, such as 0-2 years out, 2-10 years out, and 10+ years out. My wife and I have been using a version of this for a while, but I especially like the flexibility built into the 2-10 years scale.

Below is Tyler's framework; I stash it in our family's investment policy statement for easy reference:

Three-Bucket System to choose allocations

Usage timeframe:

• 0-2 years
• 2-10 years
• 10+ years

Every dollar you save goes into one of three buckets based on when you’ll need it:

Bucket 1 (0-2 years): Cash only. High-yield savings, money market funds. Zero stock exposure. If you need this money soon, you can’t afford a 30% drop.

Bucket 2 (2-10 years): Glide path. Here’s the formula: Years until you need it x 10 = % in stocks.

• 10 years out = 100% stocks
• 5 years out = 50% stocks / 50% bonds
• 3 years out = 30% stocks / 70% bonds

Bucket 3 (10+ years): 100% stocks. Let it compound. This is where real wealth gets built.

Outside of the financial logistics, the biggest, most important factor is you setting the goals this money serves. Dream trip? Kicking some bucks to a loved one's education? House? Startup? Donations? Cash-on-hand for the first year or two as you adjust to FI living? Whatever it is, you can focus on your FI, and you can break it down to a mix.

I'm thrilled for you. This is a huge opportunity. How you're already thinking through things is a sign you're making the right moves. Keep taking those deep breaths, let the money cool off, and set out what matters. You've got this.

Letting the money rest in a HYSA (or money market fund or other cash equivalent) is the correct thing to do while you take the time needed to figure out how best to deploy it. Don't feel you need to rush this. I find that rushing decisions leads me to make mistakes or to have regrets.

Here's a resource for working through what to do with an unexpected windfall. Rule #1 is to take your time.

www.bogleheads.org

What Frank says. That’s a great gift and good to be thinking differently with it, but be strategic. Here’s a good intro video to risk parity to check out. You can DCA if that will help your mind, 100k a month or something but make a plan first.

https://www.youtube.com/watch?v=4uV7axjXkX8

do you need to pay taxes on this gift?

Nothing wrong with a fee advice only advisor but research yourself first so you aren’t sold into something that isn’t right for you.

How close are you to your FI number? You probably want to move to your retirement portfolio soon, but you need to figure out what that is first and then use all of your accounts together as one big portfolio to tax optimize it. You don't want to be making decisions that you have to change and incur taxes on in just a few years.

It does not make sense to make ad hoc moves or be fiddling with "bond buffers". Get a real plan first and make sure you test it. Be apprised that calling things buffers, ladders, buckets or flower pots or whatever you want to label them does not make them perform any different or better, so focus on actual allocations and answering questions about why you are choosing to hold each asset. Not all stock funds are the same and bond funds vary even more widely.

What an amazing gift! Not sure what advice to give per se but I’ll tell you my current experience. My wife and I (both turning 40 this year) left our jobs in 2024. We built up a large taxable brokerage account, 100% stocks. Our plan is to pull from this until we hit 59.5 and tap into retirement accounts then. I wish I had more bond exposure now for sequence of return risk but I’m not worried. We are doing tax gains harvesting and what I reinvest is going into bonds now but that’s a relatively small percentage and I do not yet have a full year of expenses in a bond fund. I think putting most of that in stocks is a good idea - maybe just put 2-3 years of expenses in bonds?

Its like you want to Do two things at once. The investing strategy is sound for the large lump sum over the next five years. That’s the easy part investing… but your two years before hitting fire, you should be de-risk by having a lot of cash/bonds available. Also, this amount of money is large compared to your fi goal, so it might be worth reaching out to a fee only financial fiduciary to double check your math and work for second set of tax and math strategy before” landing the plane” and reaching the finish line.