Author Topic: FIRE - Where to invest for monthly cash flow  (Read 2285 times)

sonnys

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FIRE - Where to invest for monthly cash flow
« on: April 20, 2014, 08:58:44 AM »
Hello all,

I recently came across this site and wanted to ask where the early retirees are investing to receive monthly payments?  I have my 401K and Roth IRA in an Index fund so there are no monthly payments.  It seems that this is what most articles on this site are also suggesting so should I continue to follow what I have been doing and then take any savings that are left over into either a rental property or stocks that pay dividends?  Should I change my 401K and Roth IRA allocations?

Thanks,
Sonny. 

tomsang

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Re: FIRE - Where to invest for monthly cash flow
« Reply #1 on: April 20, 2014, 10:06:33 AM »
Are you asking what funds kick off dividends for cash flow or are you asking how to get money out of your IRA/401k without penalties?

You can have growth portfolios that have no or minimal dividends and still take money out each month. You just set it up to sell a few share each month to get the required cash flow needed. If you are taking out a safe amount each month then the growth will fill in the share sales. Ie 4% or less. You will need to research and figure out your safe withdrawal rate.

If you are asking how to get the money out before younreach 59.5 years old. You will need to research Roth ladders, 72t distributions and other means. Use the search engine as there are many threads on these.

Good luck!!

arebelspy

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Re: FIRE - Where to invest for monthly cash flow
« Reply #2 on: April 20, 2014, 01:50:47 PM »
Keep a multi-month buffer and replenish it every few months (or once a year, or whatever).
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sonnys

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Re: FIRE - Where to invest for monthly cash flow
« Reply #3 on: April 20, 2014, 06:16:03 PM »
Thank you both.  I am currently in my late thirties and hope to retire in less than 15 years so I was wondering if I need to be in dividend paying stocks (ETFs?).  So Tom, you are suggesting that I could simply sell some of my shares each month to generate that cash that I need.  I want to make sure that I am only using the interest income and not touching the principal.  Would that be possible if I am selling my shares?  Sorry if I misunderstood, still trying to learn.

arebelspy

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Re: FIRE - Where to invest for monthly cash flow
« Reply #4 on: April 20, 2014, 07:06:43 PM »
Some months you may touch principal.  Others you won't. As long as your net worth is keeping up with or outpacing inflation, you're fine.

See this recent thread as to why searching specifically for monthly dividends is not a good idea:
http://forum.mrmoneymustache.com/investor-alley/monthly-paying-dividends/
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Badass by 41

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Re: FIRE - Where to invest for monthly cash flow
« Reply #5 on: April 22, 2014, 03:55:26 PM »
Some months you may touch principal.  Others you won't. As long as your net worth is keeping up with or outpacing inflation, you're fine.

Doesn't specific lot identification (SLID) weigh in the decision?  If I'm already being taxed on my portfolio yield, wouldn't it make sense to spend that first, minimize realized gains?

And what about the impact on the diversification of your cost-basis?  Does it actually make sense to sell highly appreciated lots, just to reinvest your yield at a higher cost-basis?