The Money Mustache Community
General Discussion => Post-FIRE => Topic started by: freeatlast on April 11, 2019, 02:01:24 AM
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So, I have basically 3 "buckets" of money - two rental houses and a 401(k). My FIRE plan was always sell one house at 50 years old, live for ten years on the proceeds plus the rent from the second rental house. Then at 60 tap either the second rental house or the 401(k), and repeat at 70 with the last bucket - all this should, hopefully, outlast me :)
I just turned 50 and executed step #1 - I sold a rental (no face punches for having to pay cap. gains - its painful enough as it is!) I will clear $300,000. This money needs to last 10 years, although it will be supplemented with about $1200 a month after taxes and expenses from the rental I kept.
So my dilemma is where to put $300,000 to make it last while I slowly draw it down? CD ladder? Treasury Bonds? Stock market? I can't afford to lose much principle since I'll just be meeting my monthly expenses so the stock market scares me .... Any ideas are very welcome! My husband is still working and so taxes are a concern because he drags me into a higher tax bracket even though we do not share finances....
Thanks all!!!!!!
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So your FIRE plan doesn't have a withdrawal strategy... I wouldn't facepunch over your capital gains tax payment, that is a cost of selling a rental. I'd facepunch over not considering where to put that amount of money before you actually did the action.
It depends on how much you need to draw down per year. You haven't mentioned that. I can make 300k last infinitely long or only a day depending on how much I need/want to spend.
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Good point!!!!!!
My thought is, if this stash doesn't earn a dime, I can take down $2500 a month and be at $0 after ten years. This, plus the income from the second rental would work for me. So... I would like to draw down $2500 a month, but maybe I can structure this so I can have a balance left at 10 years, or some extra to do some travel?
And yes, I am actively seeking drawdown options - I don't close til later this month and I do have an appointment with fidelity advisor tomorrow to discuss options. But I do trust this community as much or more than a commercial finance company that has its own agenda....
Thanks!!!!!!
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AA for the decumulation phase of life should be very carefully thought out. While some folks do not really like Christine Benz's "bucket" strategy for decumulation, I realyl think it is well crafted and am using it for my mom's retirement. Go over to morningstar and review it, there are several articles detailing the strategy. What you will need to know (as others point out above) is what dollar amount you will need to draw from the account at a minimum each year, and determine how much risk you are able, willing, and need to take. Sounds like from your post above, you need to take zero risk to meet your objective. If true, then determine how much risk you want or are able to take. Having some proportion in equities seems prudent, but only you will know how much is right for your circumstance.
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Ten years is a long time. I would invest at least half of it in the market to get some decent returns and probably do CD's with most of the rest of it.
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My thought is, if this stash doesn't earn a dime, I can take down $2500 a month and be at $0 after ten years. This, plus the income from the second rental would work for me. So... I would like to draw down $2500 a month, but maybe I can structure this so I can have a balance left at 10 years, or some extra to do some travel?
Don't forget about inflation. For long time frames inflation a bigger risk than stock market crashes.
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If you don't need/want the additional, ladder it into CDs and you're all set. Most are over 2% now.
The odds the balance goes up over 10 years in the stock market is still extremely high - but that's just about whether you want the risk for the reward.
I would just leave it in the stock market, but CDs accomplish your stated goals just fine.
Just FFS don't buy an annuity.
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"FFS" must mean For Financial Sake, right? Love it. :)
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I would do a CD ladder. You can easily find CD's over 3% without much if any hassle. I just put 100k in one for 18 months over 3%. And even though the fed has said as of now interest rates will hold steady I would take the chance they will be going up over time during your ten year period.
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Thanks all - Soccerluv - could you share which institution offered the plus 3 percent.... fingers crossed we close this week :) Currently I'm thinking 50/50 between CDs and the market.
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Here's the most recent roundup of high CD rates https://www.depositaccounts.com/blog/cd-rates-survey/ (https://www.depositaccounts.com/blog/cd-rates-survey/). He always discusses pros/cons/requirements to join the financial institution, etc.