When did you start drawing profits from taxable?

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NextMil
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When did you start drawing profits from taxable?

Post by NextMil » Mon May 07, 2018 1:50 pm

Looking for some guidance. I don't want to get into particulars of positions/amounts, but I want to get a sense on when people start drawing from their taxable account. I am still accumulating, and have been investing heavily for a few years, but when do you start pulling some of the fruits of your investments on the taxable side to start enjoying it? I am not anywhere close to retirement (still throwing tons into retirement), but starting to have that feeling of I want to realize some of my "wins" probably just because I am tiring of just investing for the long term. Does that make sense?

And when you did, did you start with just dividends or cash out part of your yearly returns to enjoy it? Did you earmark it for different things like vacations etc? I suspect most people on here will say they do not and just keep putting cash away, but there has to be a few folks that are starting to enjoy some of their investments pre-retirement.

Any thoughts or guidance?

magicrat
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Re: When did you start drawing profits from taxable?

Post by magicrat » Mon May 07, 2018 1:56 pm

I'm saving/investing for retirement, so no, haven't done this and don't plan to.

mega317
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Re: When did you start drawing profits from taxable?

Post by mega317 » Mon May 07, 2018 1:58 pm

I buy things that I want (vacations, furniture, property taxes, underwear) when I want them as long as I can afford it. It really has nothing to do with my investment returns or realizing wins.

Are you saying you want to spend more money? Go ahead if you can afford to. Or are you saying you want to sell some investments because they have gone up and you want to protect against loss?

livesoft
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Re: When did you start drawing profits from taxable?

Post by livesoft » Mon May 07, 2018 1:59 pm

I could say in our 30's when we decided to buy a house. :)
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DaftInvestor
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Re: When did you start drawing profits from taxable?

Post by DaftInvestor » Mon May 07, 2018 2:03 pm

I never have, nor do I plan on ever, drawing from my taxable investment accounts prior to retirement.
If I want to enjoy life I do so from job income cash-flow.
The only exception that I would allow is if my 529s ran dry and I didn't have enough cash-flow to make up the difference.

MotoTrojan
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Re: When did you start drawing profits from taxable?

Post by MotoTrojan » Mon May 07, 2018 2:05 pm

It would be more tax-efficient to just stop taxable contributions and cash flow a splurge vacation etc instead of withdrawing.

GoldenFinch
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Re: When did you start drawing profits from taxable?

Post by GoldenFinch » Mon May 07, 2018 2:11 pm

We will just cut back on saving when we need/want money.

Don’t feel bad about spending some savings if you are on track for retirement. Saving money is for both security and enjoyment, not hoarding.

mega317
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Re: When did you start drawing profits from taxable?

Post by mega317 » Mon May 07, 2018 2:12 pm

MotoTrojan wrote:
Mon May 07, 2018 2:05 pm
It would be more tax-efficient to just stop taxable contributions and cash flow a splurge vacation etc instead of withdrawing.
Safer maybe, depending on the investment. But tax-inefficiency (paying more taxes) means you made more money, so I would call that a good thing.

ionball
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Re: When did you start drawing profits from taxable?

Post by ionball » Mon May 07, 2018 2:25 pm

mega317 wrote:
Mon May 07, 2018 2:12 pm
MotoTrojan wrote:
Mon May 07, 2018 2:05 pm
It would be more tax-efficient to just stop taxable contributions and cash flow a splurge vacation etc instead of withdrawing.
Safer maybe, depending on the investment. But tax-inefficiency (paying more taxes) means you made more money, so I would call that a good thing.
I agree that making money is more important than avoiding taxes. But you could defer the taxes longer and make even more money by following MotoTrojan's suggestion!

mhalley
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Re: When did you start drawing profits from taxable?

Post by mhalley » Mon May 07, 2018 2:45 pm

I was maxing retirement accounts and saving in taxable for future unknown needs for about 15 years. My wife decided we should upgrade our house, so I sold one of my funds (I think it was Janus ww, before I became a boglehrad of course) to add to the down payment.
I have now been retired for three years, those have been funded by a private equity position from an old
Company I worked for. That should continue to cover my expenses until 3020, at which point I will start withdrawing from my vanguard account. I shouldn't have to withdraw from my IRAs until rmds kivk in, doing Roth conversions till then.

avoidingdumbmistakes
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Re: When did you start drawing profits from taxable?

Post by avoidingdumbmistakes » Mon May 07, 2018 2:46 pm

For my primary one, only when I need to and I try very hard to avoid needing to. Even though the taxable account is liquid, I don't treat it like a liquid asset. I have a play account that I tinker around with occasional swing trades and individual stocks. I do use that money (when I get lucky. lol) sometimes for pure fun.

Ultimately, if you want to spend money on something just do it. Life is short and you only get one trip on the planet. If fear or reluctance in tapping your taxable account is the only thing standing in your way of having fun, getting something done to your house, or traveling, or whatever and you don't have the money anywhere else to do whatever it is, you should listen to your gut and do what makes you the happiest.

I used to think that I would try and leave as much as possible to my kids. I'm evolving away from that as I get older. Wife and I have worked hard for a long time. We deserve to do whatever we want as long as we won't be a burden on our family. I'm shelling out a small fortune putting 4 kids through college so they can have the same opportunity as I did in being successful. That in itself is probably enough but I'll still leave behind something nice for them. But not ALL of it. haha

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unclescrooge
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Re: When did you start drawing profits from taxable?

Post by unclescrooge » Mon May 07, 2018 2:49 pm

livesoft wrote:
Mon May 07, 2018 1:59 pm
I could say in our 30's when we decided to buy a house. :)
Ditto

jebmke
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Re: When did you start drawing profits from taxable?

Post by jebmke » Mon May 07, 2018 2:50 pm

I retired in December, 2007. In January, 2008 I started withdrawing from taxable.
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KlangFool
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Re: When did you start drawing profits from taxable?

Post by KlangFool » Mon May 07, 2018 2:53 pm

OP,

1) My retirement/FI is fully funded. So, I am paying my kid's college education out of my annual savings. I am living paycheck to paycheck now.

2) What is your FI number? I do not believe in retirement. I think it is overly optimistic for most folks to believe that they can be fully-employed until retirement age. So, my plan is to save 1 years of annual expense every year. Then, I spend the rest. You should calculate your FI number and decide how much to save. Then, you can spend the rest.

KlangFool

wolf359
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Re: When did you start drawing profits from taxable?

Post by wolf359 » Mon May 07, 2018 2:57 pm

I have two savings streams in taxable. One goes to a brokerage account, and one goes to a high yield savings account. That second one is used for current spending needs, vacations, planned purchases, etc. Some amount of it is reserved for emergencies (as a floor.)

If we want to splurge, we use the savings account. The brokerage account is for money that isn't to be touched for more than 5 years. I'll touch it in a big enough emergency, but what you're describing isn't an emergency.

The reason I split it like this is precisely so I could keep my family on track. What's the point of saving for the future if you never have fun with it? This gives us money to spend without throwing financial independence off track.

mortfree
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Re: When did you start drawing profits from taxable?

Post by mortfree » Mon May 07, 2018 3:02 pm

The answers would be mostly “sell now” if you said these are individual stocks.

MnD
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Re: When did you start drawing profits from taxable?

Post by MnD » Mon May 07, 2018 3:10 pm

We built up a $70K taxable 100% equity account between 1987-1990 (double-income no kids years) and never added another dime to it.
We've never had a cash emergency fund so that account was a combination emergency fund plus an occasional source of extra spending money for big ticket items.

We first tapped some in 1991 for part of a house down payment, bought 2 new cars with funds from it in 1997 and 2005, paid for at least 1 year of college for one kid, and i think we used funds from the account to replace all 36 windows in our house right before the great recession. Some other smaller stuff too like gifts and vacations, but those are biggies I can remember. Haven't taken any out since both kids were in college at the same time which would have been around 2013-14. i wish I had exact figures for what we took out as it was probably quite a bit more than what I detail here. I know we never added to it after 1990.

We've never touched a dime of our retirement account savings and that original $70K, after taking out far more than the original amount saved has been a very handy money tree to have around. Balance is about $160K now, so even inflation-adjusted its a bit larger than the original balance. We've met all our retirement savings $$ goals for a mid 50's early retirement in a few months, so I guess it worked out. No-one knows if they will get even one day of retirement so it doesn't hurt to enjoy (in moderation) the fruits of your saving and investing before older age. :beer

Seems like everyone i know just has their risk investments in accounts that they treat as untouchable until older age plus low-return cash-type accounts that they do allow themselves to spend out of periodically. I think an all-stock taxable account, started early in life and enjoyed throughout, is something to consider.
Last edited by MnD on Mon May 07, 2018 3:20 pm, edited 1 time in total.

DetroitRick
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Re: When did you start drawing profits from taxable?

Post by DetroitRick » Mon May 07, 2018 3:19 pm

Over the years, I've drawn both pre and post retirement. I've always drawn profits and harvested losses based on overall wants, needs and convenience. I've not withdrawn big dollars and don't do it often, but every few years it seems. Last few years, I've tended to draw out dividends.

The last couple of years, early 60's, I've drawn a bit more than my "normal", but in the next few years I will reverse that trend. My taxable account value has gone up substantially, in spite of withdrawals. This all has had no effect on my aggregate savings rate. The only rule I employ - don't let a withdrawal force an investment move that I wouldn't otherwise make anyway. My taxable is comprised of about 85% individual stocks and, unlike my retirement accounts, no fixed income.

mega317
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Re: When did you start drawing profits from taxable?

Post by mega317 » Mon May 07, 2018 3:26 pm

ionball wrote:
Mon May 07, 2018 2:25 pm
I agree that making money is more important than avoiding taxes. But you could defer the taxes longer and make even more money by following MotoTrojan's suggestion!
How does cash flowing an expense defer taxes?

Dandy
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Re: When did you start drawing profits from taxable?

Post by Dandy » Mon May 07, 2018 4:26 pm

It always made sense to me to have a bit of a life balance. I was frugal (even cheap sometimes :oops: ) but I always made sure the family had a nice vacation, that we ate out (cheaply) once in a while, etc. I didn't buy new cars, did all the painting, wall papering, landscaping, oil changes etc.

I saved for retirement and upped my savings every time I got a raise so that by my mid 30's I had low double digits. My goal was and is to gradually raise our standard of living. In retirement bought a new car a few years ago, and a better used one later, added a winter vacation, bought season tickets to the theater. Always, keeping an eye on how my savings/investments were doing and if I needed to save more.

I rarely sold any taxable investments but always had a nice allocation to cash. Since most of my TIRA is fixed income I find that I need to sell some taxable investments to keep my equity allocation in line. Last year at age 69 was the first in recent memory.

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Re: When did you start drawing profits from taxable?

Post by Grt2bOutdoors » Mon May 07, 2018 4:49 pm

I don’t sell investments for cash, I will sell to tax loss harvest though. Similar to another poster, I keep a decent chunk of cash like equivalents available to spend from when making expenditures. If the cash isn’t available, I will save for it in a cash savings account, I do this by living beneath my means. I don’t raise my standards of living dramatically if the value of investments has risen, values rise and fall daily. Let the gains compound, compounding is reduced if you decrease the size of your account due to withdrawals.
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catdude
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Re: When did you start drawing profits from taxable?

Post by catdude » Mon May 07, 2018 4:57 pm

I've been retired for a few years now, and late last year -- in lieu of doing a Roth conversion -- I tapped my taxable account. Not because of any concern about the bull market running out of steam; I just needed the $$$ to buy my niece's car. I sold my holding in Vanguard 500 fund for a nice tax-free capital gain (I was in the 15% fed / 0% LT cap gain bracket).

I think it's fine to tap one's taxable account to pay for something you'll really enjoy. But no market timing please!
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bengal22
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Re: When did you start drawing profits from taxable?

Post by bengal22 » Mon May 07, 2018 4:59 pm

I tapped into my "taxable" portion of my portfolio when the kids went to college. I was able to self-fund their college through their contribution, my salary, and my taxable assets.

Now that I am retired but not drawing S.S.(other than spousal through my wife) or doing RMD's, I use my taxable assets to supplement my pension. Even at that my non-taxable is still growing at a faster pace than my taxable is shrinking. Since at my retirement income is low enough, I do not pay capital gains so it is a good time to use it. Once I tap into my S.S. and do RMD's, I will probably never touch my taxable portion of assets.
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NotWhoYouThink
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Re: When did you start drawing profits from taxable?

Post by NotWhoYouThink » Mon May 07, 2018 5:06 pm

We had 529s, but not quite enough for college (by design) so we used money from the after tax accounts to pay for college. But I thought of it as spending money for the purpose for which we had saved it, not "cashing in." Since most of our money was saved in tax deferred accounts we really didn't have much to dip into to fund lifestyle splurges. Guess we just saved less the years we spent more.

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vitaflo
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Re: When did you start drawing profits from taxable?

Post by vitaflo » Mon May 07, 2018 5:45 pm

When my taxable dividends got to >$5000 per year I started sweeping them into munis. I use this muni fund to pay for new cars.

Yes I could just save up for a car over time the same way but for me it just seemed easier to use the dividends. Then I can just keep my contributions on auto pilot and not have to think or worry about it.

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ruralavalon
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Re: When did you start drawing profits from taxable?

Post by ruralavalon » Mon May 07, 2018 6:01 pm

NextMil wrote:
Mon May 07, 2018 1:50 pm
Looking for some guidance. I don't want to get into particulars of positions/amounts, but I want to get a sense on when people start drawing from their taxable account. I am still accumulating, and have been investing heavily for a few years, but when do you start pulling some of the fruits of your investments on the taxable side to start enjoying it? I am not anywhere close to retirement (still throwing tons into retirement), but starting to have that feeling of I want to realize some of my "wins" probably just because I am tiring of just investing for the long term. Does that make sense?

And when you did, did you start with just dividends or cash out part of your yearly returns to enjoy it? Did you earmark it for different things like vacations etc? I suspect most people on here will say they do not and just keep putting cash away, but there has to be a few folks that are starting to enjoy some of their investments pre-retirement.

Any thoughts or guidance?
We started withdrawing from our joint taxable account when I retired, to pay retirement living expenses. We sold shares, all capital gains were long-term gains, we didn't just withdraw dividends.

Before that we paid for vacations, saved for home down payment, paid for college educations for our 4 children, etc. out of income from my employment.
Last edited by ruralavalon on Mon May 07, 2018 6:07 pm, edited 1 time in total.
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goingup
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Re: When did you start drawing profits from taxable?

Post by goingup » Mon May 07, 2018 6:07 pm

MotoTrojan wrote:
Mon May 07, 2018 2:05 pm
It would be more tax-efficient to just stop taxable contributions and cash flow a splurge vacation etc instead of withdrawing.
^Yes. Cash flowing your "wants" is (probably) more efficient than withdrawing from a taxable account and paying capital gains.

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Clever_Username
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Re: When did you start drawing profits from taxable?

Post by Clever_Username » Mon May 07, 2018 7:10 pm

2012 or so, started taxable portfolio via stock funds. I didn't really have a plan for that money at the time, so long term it is. 2015 or so, decided I'd be buying a house soon, cashed out and took the profit. 2017, bought the house. Late 2017, started putting taxable investments again, this time muni bonds. Might cash out part of it for a car at some point, probably three or so years away.
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remomnyc
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Re: When did you start drawing profits from taxable?

Post by remomnyc » Mon May 07, 2018 9:09 pm

Until now, I have only sold in taxable to tax loss harvest or change my asset allocation. I will start drawing profits next month when I retire. For big purchases and vacations, we tap our emergency fund, which holds a year of expenses, and replenish it from cash flow when it gets low. As others have pointed out, if you're still working, use your cash flow for spending instead of selling in taxable and incurring capital gains.

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wander
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Re: When did you start drawing profits from taxable?

Post by wander » Mon May 07, 2018 11:09 pm

We withdrew the money from taxable account a few years ago when we decided to payoff our only mortgage.

Fishing50
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Re: When did you start drawing profits from taxable?

Post by Fishing50 » Tue May 08, 2018 2:04 am

NextMil wrote:
Mon May 07, 2018 1:50 pm
And when you did, did you start with just dividends or cash out part of your yearly returns to enjoy it?
We take dividends in cash. Every couple months we decide to spend the cash or reinvest. :beer
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Re: When did you start drawing profits from taxable?

Post by Sheepdog » Tue May 08, 2018 5:18 am

I retired in October 1998 and started withdrawing from taxable the next month to meet expense needs to add to Social Security receipts, not just from their profits, but the taxable investments themselves. At that time, in my future tax planning, my goal was to reduce much of my taxable accounts. I did that by converting traditional IRAs to Roths as much as practical over the next 5 years. I paid the taxes for that from taxable. And, I purchased those great 3.0% to 3.6% plus the inflation component I bonds from taxable accounts in those first 5 years so that taxable accounts and taxes were drastically reduced in that time period. I did not take anything from my IRAs in those 5 years.

edit comment: If I had waited to take Social Security (past age 65) I could have reduced taxable even faster.
Last edited by Sheepdog on Tue May 08, 2018 7:34 am, edited 1 time in total.
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scrabbler1
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Re: When did you start drawing profits from taxable?

Post by scrabbler1 » Tue May 08, 2018 6:57 am

I took some profits from taxable in 1997-98 to pay down and pay off my mortgage. It got to the point where I was playing with the house's money for a while because the total withdrawals I had made from one fund roughly equaled the total amount of money I had invested in the fund from 1992-1996, yet I had withdrawn only about half the fund's total value by 1998. That meant what was left in the fund was from reinvested dividends, cap gain distributions, and unrealized gains.

I have indirectly withdrawing profits simply by rebalancing from stock funds into bond funds, the latter used mainly for income generation in my early retirement.

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Re: When did you start drawing profits from taxable?

Post by ionball » Tue May 08, 2018 8:45 am

mega317 wrote:
Mon May 07, 2018 3:26 pm
ionball wrote:
Mon May 07, 2018 2:25 pm
I agree that making money is more important than avoiding taxes. But you could defer the taxes longer and make even more money by following MotoTrojan's suggestion!
How does cash flowing an expense defer taxes?
Was thinking that it would probably be better to avoid triggering an additional capital gains tax. Granted there are circumstances where it would not defer taxes. One example would be if the OP's tax bracket is low enough that capital gains tax would be zero.

Answering OP-
I did not draw profits from taxable until after I retired and needed cash to spend.

NextMil
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Re: When did you start drawing profits from taxable?

Post by NextMil » Tue May 08, 2018 8:52 am

Great responses so far, and they all run the spectrum for sure. I guess what I am struggling with is the idea of investing in taxable for the future. I sort of view that account as helping to build passive income eventually, but the only time I took out cash was to refinance to a lower rate and reducing the principal on our mortgage.

The tension I am feeling is between plowing cash away for retirement/plowing cash into reducing the mortgage/plowing cash into taxable, and wanting a passive income stream to enjoy. Maybe the answer is to pull back on the investing throttle to enjoy money a little more, but intellectually that seems hard to do especially considering continued mortgage debt. Maybe I will feel much different when the mortgage is gone....

What is odd to me, is that when I started out and was deeply in debt I was much more carefree and clearly in a higher risk pool, but now knowing that there is still debt outstanding I feel more anxious, despite being in a financial position that is 180 degrees from where I was a few years ago. I guess its true that ignorance is bliss. Sorry for the rant, but when you look around and everyone is spending cash left and right, its hard to soldier on without enjoying the fruits of your labor.

Maybe the better question is when did you feel like you were at a point when you could relax a little?

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Re: When did you start drawing profits from taxable?

Post by KlangFool » Tue May 08, 2018 9:12 am

NextMil wrote:
Tue May 08, 2018 8:52 am

Maybe the better question is when did you feel like you were at a point when you could relax a little?
NextMil,

1) I do not save for retirement. I save for FI.

2) I have a saving target. I decide how much to save each year. I do "Pay Yourself First" saving method. I auto-deduct all the savings from my paycheck and spend the rest.

3) I do not budget and my fixed expense is low by not overspending on the big purchases: house, car, and college education. I have plenty of money for discretionary spending.

4) I am relaxed and spend whatever I want.

KlangFool

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ruralavalon
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Re: When did you start drawing profits from taxable?

Post by ruralavalon » Tue May 08, 2018 9:30 am

NextMil wrote:
Tue May 08, 2018 8:52 am
Great responses so far, and they all run the spectrum for sure. I guess what I am struggling with is the idea of investing in taxable for the future. I sort of view that account as helping to build passive income eventually, but the only time I took out cash was to refinance to a lower rate and reducing the principal on our mortgage.

The tension I am feeling is between plowing cash away for retirement/plowing cash into reducing the mortgage/plowing cash into taxable, and wanting a passive income stream to enjoy. Maybe the answer is to pull back on the investing throttle to enjoy money a little more, but intellectually that seems hard to do especially considering continued mortgage debt. Maybe I will feel much different when the mortgage is gone....

What is odd to me, is that when I started out and was deeply in debt I was much more carefree and clearly in a higher risk pool, but now knowing that there is still debt outstanding I feel more anxious, despite being in a financial position that is 180 degrees from where I was a few years ago. I guess its true that ignorance is bliss. Sorry for the rant, but when you look around and everyone is spending cash left and right, its hard to soldier on without enjoying the fruits of your labor.

Maybe the better question is when did you feel like you were at a point when you could relax a little?
I understand.

With a solid investing long-term investing plan, on target for your retirement goals, in my opinion it's fine to "pull back on the investing throttle" (on contributions to taxable investing) in order to enjoy life more now. It's always a personal choice on how to balance enjoying life now versus having more to enjoy life later. It's always current needs versus future needs, and current wants versus future wants.

But don't spend a lot of time comparing yourself to people "spending left and right". Make your decision on how to enjoy your life independent of the overspending you notice in others.

What is the interest rate on your mortgage? There are situations where it makes good sense to pay off or pay down a mortgage rather than invest in a taxable account. Also becoming completely debt free has psychological benefits, it feels great. So my feeling is that it can be good to reduce or eliminate contributions to a taxable account to pay off the mortgage. We did just that at about age 50, and I was surprised at how great it felt to be debt free.

Likewise a nice vacation, a nicer car, or some luxury item can be a good reason to reduce or even stop contributions to a taxable investment account. I just don't see a lot of sense in maintaining high levels of contributions to taxable investing, then selling the investment to take a vacation, etc. instead you could just add to a FDIC insured savings account or use a fund like Vanguard Prime Money Market Fund (VMMXX), current SEC Yield = 1.84%, to accumulate cash to pay for that. We vacationed in Hawaii every other year, starting at about age 50.

We still maintained contributions to tax-advantaged accounts.
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wrongfunds
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Re: When did you start drawing profits from taxable?

Post by wrongfunds » Tue May 08, 2018 9:43 am

Isn't money fungible? I am not sure I understand the original question. I mean if you *need* the money, your only choice would be "do I take it from my retirement account" or "do I take it from my non-retirement account".

If you need that $20K right now and if your bank account does not have it or you will not have enough in the bank after taking that $20K, then your choices would be
- get it from your parents
- visit loan shark
- put it on the credit card
- take loan from 401K
- liquidate 401K
- take from brokerage aka non-retirement investment account

If you are BH member, I think the choice seems to be obvious.

What am I missing? Don't tell me you are treating the mutual fund annual (or periodic) distribution as different type of money :oops:

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Re: When did you start drawing profits from taxable?

Post by David Jay » Tue May 08, 2018 10:04 am

NextMil wrote:
Tue May 08, 2018 8:52 am
The tension I am feeling is between plowing cash away for retirement/plowing cash into reducing the mortgage/plowing cash into taxable, and wanting a passive income stream to enjoy. Maybe the answer is to pull back on the investing throttle to enjoy money a little more, but intellectually that seems hard to do especially considering continued mortgage debt.
What is your goal? If you don't have a goal it is hard to stay motivated.

For many (most?) here in BH, the goal is financial independence. We save and invest so one day we have the option to stop working or perhaps take a job with less pay that is more fulfilling.

What matters is YOUR goal, not anyone else's goal.

For example, if your goal is to drive nicer cars and take nicer vacations and you love your job - do some rebalancing. Reduce your retirement savings withholding and have more cash flow every paycheck. If your goal is to own your home free-and-clear, start putting additional money on the mortgage every month. And so on...
Last edited by David Jay on Tue May 08, 2018 11:28 am, edited 1 time in total.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

avoidingdumbmistakes
Posts: 101
Joined: Thu Mar 29, 2018 11:38 am

Re: When did you start drawing profits from taxable?

Post by avoidingdumbmistakes » Tue May 08, 2018 10:53 am

NextMil wrote:
Tue May 08, 2018 8:52 am
Great responses so far, and they all run the spectrum for sure. I guess what I am struggling with is the idea of investing in taxable for the future. I sort of view that account as helping to build passive income eventually, but the only time I took out cash was to refinance to a lower rate and reducing the principal on our mortgage.

The tension I am feeling is between plowing cash away for retirement/plowing cash into reducing the mortgage/plowing cash into taxable, and wanting a passive income stream to enjoy. Maybe the answer is to pull back on the investing throttle to enjoy money a little more, but intellectually that seems hard to do especially considering continued mortgage debt. Maybe I will feel much different when the mortgage is gone....

What is odd to me, is that when I started out and was deeply in debt I was much more carefree and clearly in a higher risk pool, but now knowing that there is still debt outstanding I feel more anxious, despite being in a financial position that is 180 degrees from where I was a few years ago. I guess its true that ignorance is bliss. Sorry for the rant, but when you look around and everyone is spending cash left and right, its hard to soldier on without enjoying the fruits of your labor.

Maybe the better question is when did you feel like you were at a point when you could relax a little?
Just like the wide variety of posts in this thread...only you can decide for yourself. It's hard "going backwards" isn't it? lol. I struggle too. I lost a small fortune (actually not so small) when the financial meltdown happened. I lost my business, savings, tapped retirements, and on and on. MAJOR setback. Then I got on a roll (finally) and socked away a pile of cash in a short period of time on top of maxing out retirement accounts. It's all mostly invested now but I was emotionally attached to my cash after suffering through such a calamity. I didn't want to spend an extra nickel on anything for YEARS. And this was after living a bit high on the hog. Quite a reverse in psychology/emotions.

Now my wife and I have a rock solid plan to retire in 12 years right when we both hit 60. Or at least semi retire. It's all on paper and well thought out. We probably already have enough saved/invested to hit our 10-12 year goal right now so we are beginning to have fun again with our excess money. But we still have mixed emotions. It's really weird honestly. Sounds like you have mixed emotions about reaping some rewards too. Nobody can answer these questions.

I will say this, the most profound "event" in my life was seeing my father retire perfectly at 68 with not a financial worry in the world only to get sick and pass 18 months after his last day of work. That was 9 years ago and I still haven't gotten over how "ripped off" he got. The thing is, he could have mathematically retired 8 years earlier but he was so old school he just couldn't do it. I tried talking him into it many times but there was no changing his mind. I'm not going out like that. Even if it means a modest life in retirement, I want to spend my final 10-20 (hopefully 30) years enjoying hobbies and a relaxed lifestyle. In the meantime I'll stick to my plan and enjoy things where I see value. If that means I tap my taxable account to see Ireland or whatever then sobeit.

NextMil
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Re: When did you start drawing profits from taxable?

Post by NextMil » Tue May 08, 2018 10:59 am

ruralavalon wrote:
Tue May 08, 2018 9:30 am
I understand.

What is the interest rate on your mortgage? There are situations where it makes good sense to pay off or pay down a mortgage rather than invest in a taxable account. Also becoming completely debt free has psychological benefits, it feels great. So my feeling is that it can be good to reduce or eliminate contributions to a taxable account to pay off the mortgage. We did just that at about age 50, and I was surprised at how great it felt to be debt free.
I cut your response to save room. I appreciated the full response though. It has me thinking a bit more, especially about the "joneses" which is family and friends in some cases.

Mortgage is 2.9%, on a fifteen year with increased principal payments that has me just under 10 to go. I am also throwing some extra cash thrown at it every once in a while. I sort of split the difference between money above and beyond what is allocated to maintain the 10 years to go, and taxable to hedge on making more money in the market vs low interest rate on mortgage.

I budget down to the last penny every month, and I know we are making great headway, and please don't get me wrong, financially we are in great shape in comparison to my peer group (non-BH) of course. Intellectually I know we are leaps and bounds ahead, but some days watching friends and family go on these extravagant vacations, with larger/newer houses on a 30 year fixed and probably on plastic they won't pay off, you start to ask yourself when is the pay-off going to come for doing it the right way? Sometimes reading on here it seems that people don't start enjoying their cash until retirement age - which is another 25+ years for me....

I don't know, maybe I am just complaining, and being whiny, and impatient. Its not like we don't go on vacations, and we have cash for some renovations later this year, have a house, and nice cars etc. Maybe I just need to not have too many goals at once and pick one like charging at the mortgage...or just go read more celebration threads....

NextMil
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Re: When did you start drawing profits from taxable?

Post by NextMil » Tue May 08, 2018 11:03 am

David Jay wrote:
Tue May 08, 2018 10:04 am
What is your goal? If you don't have a goal it is hard to stay motivated.
Maybe that's just it. I think its FI. Not necessarily FIRE, but maybe, who knows? Maybe I need to define my overarching goal better, and sub goals better. When it was just de-leveraging through the snowball it was almost easier, because you would have periodic wins, now that I am on the other side, it feels harder to slog away, because I know we are not taking weeks or months, but years to realize "success."

NextMil
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Re: When did you start drawing profits from taxable?

Post by NextMil » Tue May 08, 2018 11:10 am

avoidingdumbmistakes wrote:
Tue May 08, 2018 10:53 am
Just like the wide variety of posts in this thread...only you can decide for yourself. It's hard "going backwards" isn't it? lol. I struggle too. I lost a small fortune (actually not so small) when the financial meltdown happened. I lost my business, savings, tapped retirements, and on and on. MAJOR setback. Then I got on a roll (finally) and socked away a pile of cash in a short period of time on top of maxing out retirement accounts. It's all mostly invested now but I was emotionally attached to my cash after suffering through such a calamity. I didn't want to spend an extra nickel on anything for YEARS. And this was after living a bit high on the hog. Quite a reverse in psychology/emotions.

Now my wife and I have a rock solid plan to retire in 12 years right when we both hit 60. Or at least semi retire. It's all on paper and well thought out. We probably already have enough saved/invested to hit our 10-12 year goal right now so we are beginning to have fun again with our excess money. But we still have mixed emotions. It's really weird honestly. Sounds like you have mixed emotions about reaping some rewards too. Nobody can answer these questions.

I will say this, the most profound "event" in my life was seeing my father retire perfectly at 68 with not a financial worry in the world only to get sick and pass 18 months after his last day of work. That was 9 years ago and I still haven't gotten over how "ripped off" he got. The thing is, he could have mathematically retired 8 years earlier but he was so old school he just couldn't do it. I tried talking him into it many times but there was no changing his mind. I'm not going out like that. Even if it means a modest life in retirement, I want to spend my final 10-20 (hopefully 30) years enjoying hobbies and a relaxed lifestyle. In the meantime I'll stick to my plan and enjoy things where I see value. If that means I tap my taxable account to see Ireland or whatever then sobeit.
This really resonated with me. Sorry about your father, but thank you for sharing.

This is the tension front and center. On the one hand, you want to position yourself to protect against risk, on the other hand, you don't want to hoard money to the point you never get to really enjoy life. That is the soul searching (cannot believe I just wrote that I am "soul searching") I am currently engaged in.

delamer
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Re: When did you start drawing profits from taxable?

Post by delamer » Tue May 08, 2018 11:35 am

NextMil wrote:
Tue May 08, 2018 10:59 am
ruralavalon wrote:
Tue May 08, 2018 9:30 am
I understand.

What is the interest rate on your mortgage? There are situations where it makes good sense to pay off or pay down a mortgage rather than invest in a taxable account. Also becoming completely debt free has psychological benefits, it feels great. So my feeling is that it can be good to reduce or eliminate contributions to a taxable account to pay off the mortgage. We did just that at about age 50, and I was surprised at how great it felt to be debt free.
I cut your response to save room. I appreciated the full response though. It has me thinking a bit more, especially about the "joneses" which is family and friends in some cases.

Mortgage is 2.9%, on a fifteen year with increased principal payments that has me just under 10 to go. I am also throwing some extra cash thrown at it every once in a while. I sort of split the difference between money above and beyond what is allocated to maintain the 10 years to go, and taxable to hedge on making more money in the market vs low interest rate on mortgage.

I budget down to the last penny every month, and I know we are making great headway, and please don't get me wrong, financially we are in great shape in comparison to my peer group (non-BH) of course. Intellectually I know we are leaps and bounds ahead, but some days watching friends and family go on these extravagant vacations, with larger/newer houses on a 30 year fixed and probably on plastic they won't pay off, you start to ask yourself when is the pay-off going to come for doing it the right way? Sometimes reading on here it seems that people don't start enjoying their cash until retirement age - which is another 25+ years for me....

I don't know, maybe I am just complaining, and being whiny, and impatient. Its not like we don't go on vacations, and we have cash for some renovations later this year, have a house, and nice cars etc. Maybe I just need to not have too many goals at once and pick one like charging at the mortgage...or just go read more celebration threads....

I grew up in a frugal family. My parents were classic millionaire-next-door types (who came of age during the Depression).

It took me to a surprisingly advanced age to figure out that lots of people who had the trappings of affluence were not, in fact, high net worth. When you grow up with people who avoid debt and save their pennies, you assume that everyone else does too.

Even now that I am older and wiser, I still have the occasional thought of “wow, I wish I could afford to buy what the Joneses buy.” Even though truth is that the Joneses are paying down student loans for their kids, are not close to paying off their mortgages, and are really sweating retirement — all while they are in their early 60’s.

We live a less frugal financial life than my parents. They were still saving 1/3 of their income during early retirement. We spend more on luxuries like high-end cars (although we buy them used :happy) and travel. But most people that we know would be shocked about how much we have in the bank.

That seems about the right balance to me. But I still turn off all the lights when I leave a room...

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ruralavalon
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Re: When did you start drawing profits from taxable?

Post by ruralavalon » Tue May 08, 2018 11:40 am

NextMil wrote:
Tue May 08, 2018 10:59 am
ruralavalon wrote:
Tue May 08, 2018 9:30 am
I understand.

What is the interest rate on your mortgage? There are situations where it makes good sense to pay off or pay down a mortgage rather than invest in a taxable account. Also becoming completely debt free has psychological benefits, it feels great. So my feeling is that it can be good to reduce or eliminate contributions to a taxable account to pay off the mortgage. We did just that at about age 50, and I was surprised at how great it felt to be debt free.
I cut your response to save room. I appreciated the full response though. It has me thinking a bit more, especially about the "joneses" which is family and friends in some cases. [emphasis added]

Mortgage is 2.9%, on a fifteen year with increased principal payments that has me just under 10 to go. I am also throwing some extra cash thrown at it every once in a while. I sort of split the difference between money above and beyond what is allocated to maintain the 10 years to go, and taxable to hedge on making more money in the market vs low interest rate on mortgage.

I budget down to the last penny every month, and I know we are making great headway, and please don't get me wrong, financially we are in great shape in comparison to my peer group (non-BH) of course. Intellectually I know we are leaps and bounds ahead, but some days watching friends and family go on these extravagant vacations, with larger/newer houses on a 30 year fixed and probably on plastic they won't pay off, you start to ask yourself when is the pay-off going to come for doing it the right way? [emphasis added] Sometimes reading on here it seems that people don't start enjoying their cash until retirement age - which is another 25+ years for me....

I don't know, maybe I am just complaining, and being whiny, and impatient. Its not like we don't go on vacations, and we have cash for some renovations later this year, have a house, and nice cars etc. Maybe I just need to not have too many goals at once and pick one like charging at the mortgage...or just go read more celebration threads....
We always enjoyed ourselves. We started focusing more on current enjoyment of life at about age 49-50. I retired at age 66, so that was 16-17 years before retirement. By age 49-50 3 of our 4 children had finished college, which we had paid for out of my employment income. (We paid for college for all 4 children, without student loans.)

That was the point where it felt like we could "pull back on the investing throttle". We paid off the mortgage note, and began spending more on ourselves.

You haven't mentioned your age. But at 25 years to retirement, "in financially great shape" already, in my opinion you can "pull back on the investing throttle" if you wish.

As mentioned before don't focus too much on family or friends overspending on extravagant vacations, cars or homes. The are setting themselves up for low enjoyment later on. And they are not likely enjoying life now, instead are likely anxious about debt and straining to keep up appearances.

I suggest that you read Stop Acting Rich, by Thomas J. Stanley. Among other things, the book indicates that people who act rich (spend as if rich, before they are rich) are actually not enjoying themselves.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Lynette
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Re: When did you start drawing profits from taxable?

Post by Lynette » Tue May 08, 2018 12:00 pm

delamer wrote:
Tue May 08, 2018 11:35 am
But I still turn off all the lights when I leave a room...
Get Led lights :D I had an electrician install some more lights outside of my house. They are all LED - some are motion detector and others only come on at night. It seems one triggers the other and they all seem to be on at night. Its probably illusion but I feel safer though I have not had an intrusion in 25 years and this is not a high crime area.

When I was working, I took money out of current savings to travel extensively. I am retired now and my SS and pensions cover expenses and discretionary savings.

gowest
Posts: 38
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Re: When did you start drawing profits from taxable?

Post by gowest » Tue May 08, 2018 12:04 pm

NextMil wrote:
Tue May 08, 2018 11:10 am
avoidingdumbmistakes wrote:
Tue May 08, 2018 10:53 am
I will say this, the most profound "event" in my life was seeing my father retire perfectly at 68 with not a financial worry in the world only to get sick and pass 18 months after his last day of work. That was 9 years ago and I still haven't gotten over how "ripped off" he got. The thing is, he could have mathematically retired 8 years earlier but he was so old school he just couldn't do it. I tried talking him into it many times but there was no changing his mind. I'm not going out like that. Even if it means a modest life in retirement, I want to spend my final 10-20 (hopefully 30) years enjoying hobbies and a relaxed lifestyle. In the meantime I'll stick to my plan and enjoy things where I see value. If that means I tap my taxable account to see Ireland or whatever then sobeit.
This really resonated with me. Sorry about your father, but thank you for sharing.

This is the tension front and center. On the one hand, you want to position yourself to protect against risk, on the other hand, you don't want to hoard money to the point you never get to really enjoy life. That is the soul searching (cannot believe I just wrote that I am "soul searching") I am currently engaged in.
Just to share an analogous story: My parents did not focus on saving for retirement. Instead, while still working, they bought a motor home and toured the country and had a great time. I was always worried about their lack of savings, and I encouraged them to save more and to plan ahead. Then my dad passed away unexpectedly. I'm so grateful that he and my mom got to spend their retirement together, traveling the country, even though they weren't retired.

I guess the moral of the story is to live life to its fullest now. Well, maybe not its "fullest," but sufficiently full! :D Yes, save and plan for tomorrow also. But don't forego today. It's a balance. Good luck.

trueblueky
Posts: 1267
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Re: When did you start drawing profits from taxable?

Post by trueblueky » Tue May 08, 2018 12:04 pm

mhalley wrote:
Mon May 07, 2018 2:45 pm
I was maxing retirement accounts and saving in taxable for future unknown needs for about 15 years. My wife decided we should upgrade our house, so I sold one of my funds (I think it was Janus ww, before I became a boglehrad of course) to add to the down payment.
I have now been retired for three years, those have been funded by a private equity position from an old
Company I worked for. That should continue to cover my expenses until 3020, at which point I will start withdrawing from my vanguard account. I shouldn't have to withdraw from my IRAs until rmds kivk in, doing Roth conversions till then.
Hoping my funds last until 3020 also!
:wink:

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ruralavalon
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Re: When did you start drawing profits from taxable?

Post by ruralavalon » Tue May 08, 2018 12:09 pm

gowest wrote:
Tue May 08, 2018 12:04 pm
NextMil wrote:
Tue May 08, 2018 11:10 am
avoidingdumbmistakes wrote:
Tue May 08, 2018 10:53 am
I will say this, the most profound "event" in my life was seeing my father retire perfectly at 68 with not a financial worry in the world only to get sick and pass 18 months after his last day of work. That was 9 years ago and I still haven't gotten over how "ripped off" he got. The thing is, he could have mathematically retired 8 years earlier but he was so old school he just couldn't do it. I tried talking him into it many times but there was no changing his mind. I'm not going out like that. Even if it means a modest life in retirement, I want to spend my final 10-20 (hopefully 30) years enjoying hobbies and a relaxed lifestyle. In the meantime I'll stick to my plan and enjoy things where I see value. If that means I tap my taxable account to see Ireland or whatever then sobeit.
This really resonated with me. Sorry about your father, but thank you for sharing.

This is the tension front and center. On the one hand, you want to position yourself to protect against risk, on the other hand, you don't want to hoard money to the point you never get to really enjoy life. That is the soul searching (cannot believe I just wrote that I am "soul searching") I am currently engaged in.
Just to share an analogous story: My parents did not focus on saving for retirement. Instead, while still working, they bought a motor home and toured the country and had a great time. I was always worried about their lack of savings, and I encouraged them to save more and to plan ahead. Then my dad passed away unexpectedly. I'm so grateful that he and my mom got to spend their retirement together, traveling the country, even though they weren't retired.

I guess the moral of the story is to live life to its fullest now. Well, maybe not its "fullest," but sufficiently full! :D Yes, save and plan for tomorrow also. But don't forego today. It's a balance. Good luck.
My father died at age 47, my mother lived to age 98. The moral of that story is live for today but plan for tomorrow.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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