Personal Investments • Friend Inherited Large after-tax $$. How to invest Tax-efficiently

Hi Bogleheads,

[edited to add more Social Security details]

My friend has inherited a large After-Tax amount from her mother. I'm looking for advice on how she should invest the After-Tax portion in a tax-efficient way.

Age: 62 (will be 63 12/1) Single. currently NOT working
IRA: 500k (personal)
After-tax: 1,500,000 (inheritance)
Social Security FRA (67). Lives in CA (no state tax on SS)
65 = 38,892
67 = 44,880
70 = 55,656

Wants:
Retire now and live on 100k to start
Hands-off investing changes (doesn't want to manually re-balance or tweak the portfolio)
Low-Medium risk tolerance

I suggested the following:
1. Convert her IRA to Roth using the After-Tax dollars over a few years
2. Spend down the After-Tax account to fund retirement 100k (to start)
3. Start collecting Social Security after finishing the Roth conversion (reasoning: why pay higher tax on the SS while converting)
4. Invest in a 60/40 asset allocation vanguard fund VSMGX (since she doesn't want to re-balance manually)

Question: How should she best invest the $2M portfolio
Converted Roth account: ??
After-Tax account: ??

Thanks in advance!

Statistics: Posted by luv2invest — Sat Sep 28, 2024 3:19 pm — Replies 11 — Views 763

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