How should I invest the $200,000 I received from the sale of my house?
I am a 63-year-old single woman with no children, and I plan to retire at age 65 and go back to Peru. I sold my house and I received $230,000 and I want to invest 200,000, but I will need $100,000 in one or two years. How should I invest this money?
First, you need to have a reasonable estimate of your monthly expenses in Peru. Second you need to subtract your fixed income sources, and lastly figure out how to receive a reasonable income stream from the money you invest.
So, for example, if your monthly expenses in Peru will be $2000*, and your income (presumably from Social Security) is $1200/ month, then you will need $800/ month from your $130,000 portfolio (if you need $100k in one or two years, that money should remain in a CD or money market).
If you need $800/ month from your $130,000 investment portfolio, that represents a 7.4% distribution rate. If your portfolio is invested in mostly bonds and some stocks, you might return 5%/ year. Assuming a 5% growth rate, you would then run out of money after 22 years. If you don't have any beneficiaries, and expect to be 'too old to enjoy your money' by the time you turn 87, that might be completely acceptable to you. Of course I simply gave you an example with broad assumptions (and not factoring inflation).
You can use the calculator attached to this link to help you hone in on the right answer.
To answer your question about investing more directly, I would urge you to look at a balanced mutual fund from Vanguard or Fidelity. The costs are low, and unlike a stock or ETF (Exchange Traded Fund), you can set up a systematic distribution plan without incurring transaction costs (in this example $800/ month that would be direct deposited into your bank account).
*I did a quick google search for cost of living, and on average, if your expenses in the United States were $5000/ month, then you can expect the same lifestyle will cost about $2000/ month in Peru.
Good Luck and remember the famous Peruvian Proverb: Fortune and Olives are alike: sometimes a man has an abundance and other times not any.
Honestly if yo uare going back to Peru the likely best case scenario is just putting it into a high yield savings account. Not sure the short term risk is worth it for you. Additionally, if you live in Peru full time keeping an investment account state side can become very cumbersome and tricky. A lot of institutions will require you to have a US bank and address at very least. My recommendation would be to sit on the dollars figure out what your need and where can you put these dollars once you move back home. Exciting stuff by the way and hope you found this helpful.
I like your plan-stretching your dollars further by returning home with a low cost living. The only problem with that is not many financial institutions will continue to maintain your account if you’re not physically here in the States. You may be forced to close the account, including selling all positions of investments. That’s the anti-money laundering law that all financial advisors must abide.
Thus, your options are maintaining your legal status and residency in the U.S. so you can conduct financial transactions here or find a financial institution at Peru to guide you for your goals. Best!
If you don't have longer than a five year time horizon, you should not invest in anything that could be subject to loss. So, your other choices are CDs or money market accounts. Right now, those are your two best choices for short term money.
Because you will need $100,000 1-2 years, you can't take on a lot of risk with this half of the money. The reason is if a stock market crash happens, you won't have time to wait for the market to go up again. For the first $100,000 the most aggresive you should invest is in short-term Treasury Bills or Notes. When I say short term, I mean they should mature in 1-2 years, around the same time as you might need the money. Another alternative is to invest in a money market account, or 1- or 2-year Certificates of Deposit at a bank or credit union. Any of these options are backed by the full faith and credit of the U.S. Government, either directly or through FDIC/NCUA insurance.
For the other half of the money, where you invest will depend on when you think you might need the money. Other factors include how much income you need during retirement, what sources of income you have, and how much other money you might have saved.