Author Topic: Where to invest after retirement  (Read 3481 times)

Dawn

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Where to invest after retirement
« on: March 05, 2015, 04:47:34 AM »
After I retire early @ 45 y/o and can no longer put money into a 401k at work or my Roth IRA - where do I put my monthly automated investments - for money I won't need until after 65? Regular index fund?
My retirement income will come from rentals.

boarder42

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Re: Where to invest after retirement
« Reply #1 on: March 05, 2015, 05:31:25 AM »
i guess i dont understand the question.  once your rentals are enough to cover your expenses you dont need to work anymore so where is the "extra" money coming from.

RexualChocolate

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Re: Where to invest after retirement
« Reply #2 on: March 05, 2015, 06:44:35 AM »
Why can't you put money in your Roth? You don't have to use the 401k Roth or any employer account, you can just set up your own. The same maximum of 5500 a year persists until 55? i think? when you can do 6500.

Vanguard can set these accounts up for you. If your 401k plan sucks (like most at small companies and some at large ones) then you can also roll over your 401k into a traditional IRA at vanguard.

Additionally, you can set up taxable accounts after you've used up all of your advantaged space.

aj_yooper

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Re: Where to invest after retirement
« Reply #3 on: March 05, 2015, 06:55:31 AM »
Since you are good at being a real estate investor, I would post this in the Real Estate area and see what your peers do.  I am not a landlord, but I would look to a self-employed 401k or simple IRA as a start, e.g. https://investor.vanguard.com/what-we-offer/small-business/individual-401k

Way to go!

Exflyboy

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Re: Where to invest after retirement
« Reply #4 on: March 05, 2015, 11:17:17 AM »
So you can still contribute to a Roth.. or if you want the tax deduction you can contribute to a traditional IRA.

Limits are $5500 currently and $6500 in the year you turn 50.. Not 55 as listed above.

I was told that rent is not self employment income.. rather it is a passive investment.. so you don't pay the double whack (employer AND Employee) SS tax on rental income... At least thats what I was told.

So in theory a self employed 401k doesn't apply if you just have a rental business???

aj_yooper

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Re: Where to invest after retirement
« Reply #5 on: March 05, 2015, 11:50:03 AM »
I don't know how rental income would be characterized, but I thought he might have other real estate ideas for earned income.

PawPrint53

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Re: Where to invest after retirement
« Reply #6 on: March 05, 2015, 09:24:11 PM »
I don't think rental income is considered earned income for purposes of contributing to a Roth IRA.

Dawn

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Re: Where to invest after retirement
« Reply #7 on: March 08, 2015, 04:41:34 AM »
Thanks for your replies. From what I understand, I can't invest in a 401k or IRA without a "paycheck" and rental income doesn't count. So my only option is investing directly in the market in taxable funds?

lakemom

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Re: Where to invest after retirement
« Reply #8 on: March 08, 2015, 06:05:56 AM »
Could you become a corporation (I'm thinking s-corp.) that holds rental real estate and have the corp. cut you a paycheck weekly/monthly and disburse a dividend quarterly?  I would say this is the kind of question to run by a local CPA/financial planner/tax expert.  Getting everything in place and running smoothly before retirement would certainly ease your transition. 

Another Reader

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Re: Where to invest after retirement
« Reply #9 on: March 08, 2015, 09:11:06 AM »
In your shoes I would not put the rentals in a business just to be able to put earned income in tax deferred or Roth accounts.  Your real estate likely is already providing you with substantial tax shelter and you would pay FICA on the "earned" income and have other expenses you don't need.   I'm much older than you and have pensions and IRA's as well as real estate rental income and I pay very little in income taxes.  "Earned" income is never on the table here.

Instead, I would focus on investing in paper assets in taxable accounts that did not generate taxable events, such as high turnover within a mutual fund.  I would buy low ER index funds and possibly some stocks that retain their earnings, similar to Berkshire Hathaway.  Depending on the tax picture, I might add in some dividend paying stocks, as long as I was not giving a lot of that income away in taxes.  As rates go up, I would also consider tax advantaged municipal bonds.  In other words, investments that don't throw off a lot of taxable income beyond what is tax efficient.

You should look carefully at your current and anticipated tax rates during FIRE.  You may find you can take some dividend income and capital gains and pay no taxes on those cash flows, especially early on, if you can stay in the 15 percent bracket.  Two younger bloggers that write about FIRE and minimizing taxes with a high income are http://www.gocurrycracker.com/ and http://rootofgood.com/.  They are both very knowledgeable and their blogs are good reads anyway.