Author Topic: Best investment strategy for monthly withdrawals?  (Read 1357 times)

inthemountains

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Best investment strategy for monthly withdrawals?
« on: March 05, 2017, 08:07:28 AM »
We are selling a home soon and will have about $165,000 in cash after the sale. I'd like to invest that money, then use the earnings to pay the monthly mortgage on the next house. With a mortgage rate around 3.75%, I'd rather earn money on that cash than use it to pay off or down the next house. In some months, we might not even touch the invested money - just use normal income to pay the full mortgage. It's more of a mental thing - "Hey look! If we invest that cash at X%, we could withdrawal $Y every month and our remaining mortgage would only be $200!"

I have a Betterment account but look at that as long-term saving/investing.

What's a good way to invest if you want to make monthly withdrawals or even just one annual withdrawal? I want to minimize the tax impact but the thought of earning 1% in a savings account is just gross.

(I know we'll pay taxes on the investment earnings but we'll also have a deduction from the mortgage interest. I still work and so am a fan of deductions, so long as my investment is out-earning the cost of the mortgage interest. I also know having a mortgage at all is kind of anti-Mustachian but since I'm still working and enjoy what I do, I think this is the right plan for us.)

Thanks for any thoughts!

Edit: Or is the whole thing crazy and we should just use the equity towards the mortgage on the next house, even though the interest rate is low?
« Last Edit: March 05, 2017, 08:18:45 AM by inthemountains »

geekette

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Re: Best investment strategy for monthly withdrawals?
« Reply #1 on: March 05, 2017, 08:50:02 AM »
If you want to take advantage of low mortgage rates, invest the money.

If you want to use the money to pay down the mortgage, do that.

There are strong opinions on both sides, but if you're depending on the market beating your mortgage rate, you may be disappointed in the short term, which is what you're considering.

inthemountains

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Re: Best investment strategy for monthly withdrawals?
« Reply #2 on: March 05, 2017, 08:54:23 AM »
That's a good point - short term vs. long. The original plan was to invest the money for 7-10 years (about when I expect to stop working), then use the earnings to pay the mortgage. Maybe that plan made more sense? Get 7-10 years of earnings out of it before hitting it for withdrawals?

I can see pros and cons to both sides. One big benefit of investing versus paying down the mortgage is flexibility. If we invest conservatively, we can use the cash for emergencies or other expenses, since we aren't really counting on it for the mortgage payment.

I guess we could always invest it, track it, and see if we're really coming out ahead after a couple of years and if not, pay down the mortgage.

okobrien

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Re: Best investment strategy for monthly withdrawals?
« Reply #3 on: March 05, 2017, 09:20:18 AM »
I like the idea but don't have any suggestions to do exactly that.  Have you looked into buying a duplex or house with a MIL suite or basement you could rent out? This would have the same outcome on your finances - actually could work out even better.

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inthemountains

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Re: Best investment strategy for monthly withdrawals?
« Reply #4 on: March 05, 2017, 09:58:07 AM »
We're actually building a home in the mountains so not a great rental opportunity. (This is not a super-wise financial decision - this is more of a dream we've always wanted and can afford now so we're doing it.)

The monthly expenditure (mortgage) isn't really the issue. I just don't want to put too much down if I could be earning more money than the mortgage interest rate.

chasesfish

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Re: Best investment strategy for monthly withdrawals?
« Reply #5 on: March 06, 2017, 05:13:13 AM »
There aren't a ton of investments that pay monthly and 3.75% is tough to get in just regular dividends.

I think your only option that would give you the mental soundness is buying a portfolio of REIT stocks that pay monthly/quarterly dividends.  You'd probably get around 5% on yield and they slowly grow their dividends.

The only warning I have is the underlying price you pay will move a lot every time some bureaucrat at the Federal Reserve makes an off-hand comment about interest rates.

I own EPR personally and its my only monthly payer.  Its price will move by 2-3% when someone starts gabbing about rates.

inthemountains

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Re: Best investment strategy for monthly withdrawals?
« Reply #6 on: March 06, 2017, 05:00:22 PM »
Thanks for the insight!