Lost Job Temporarily -- Sell Brokerage?

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Topic Author
kevin86
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Joined: Sun Aug 19, 2018 3:05 am

Lost Job Temporarily -- Sell Brokerage?

Post by kevin86 »

I'm a 34 year old professional entertainer, and unfortunately, that line of work is completely out the door right now (and likely so for at least ~18 months). I don't anticipate work getting back to my normal stream for a solid 2 - 3 years. I have about $70k in the bank right now, but I have an additional $215k in my Vanguard Brokerage account (obviously taxable).

I have a pretty good risk tolerance, but without ANY current income stream, I'm a bit concerned about markets crashing and the brokerage account losing quite a bit, and then being forced to make withdrawals as I'm living on savings right now. Any thoughts? Would you move to tax-free muni bonds, keep as is, or move pulling out some of it while keeping the rest invested?

Normally this wouldn't even be a thought, but I'm not positive that the small gains that may happen will be worth the risk of losing quite a bit. I'm leaving all my retirement accounts untouched (although I am funding them at a reduced rate to at least participate in the market).
terran
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Re: Lost Job Temporarily -- Sell Brokerage?

Post by terran »

How long will the $70k cash last you if you tighten your belt and account for unemployment?
Topic Author
kevin86
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Joined: Sun Aug 19, 2018 3:05 am

Re: Lost Job Temporarily -- Sell Brokerage?

Post by kevin86 »

I think I can do some side hustles and make do for about a year without needing to touch the brokerage.
delamer
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Re: Lost Job Temporarily -- Sell Brokerage?

Post by delamer »

If you anticipate 2-3 years before your regular income stream comes back, then you need to keep about 18 months of net expenses (total expenses minus side hustle income) in cash equivalents in your brokerage account.

I’ll also state the obvious that you really need to cut expenses to the bone.
tashnewbie
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Re: Lost Job Temporarily -- Sell Brokerage?

Post by tashnewbie »

I'm assuming you've filed for/are collecting unemployment? Also sounds like you live in a HCOL area. Would it be possible to move to a lower cost area and not hurt future job prospects?
gclancer
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Re: Lost Job Temporarily -- Sell Brokerage?

Post by gclancer »

Have you applied for a PPP loan?
Topic Author
kevin86
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Re: Lost Job Temporarily -- Sell Brokerage?

Post by kevin86 »

Thanks all. Relocating isn't really an option. I own a home in San Diego, and don't plan on leaving. Work WILL come back as I'm not tied to an employer, it'll just be a bit. I received a PPP and that's adding a bit to my cushion. My mortage is about $4k a month, and I pay all health insurance, etc out of pocket since I'm my own employer.

I think I'm going to do the 18 months of expenses in cash route for now and keep the brokerage account going.
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arcticpineapplecorp.
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Re: Lost Job Temporarily -- Sell Brokerage?

Post by arcticpineapplecorp. »

kevin86 wrote: Thu May 14, 2020 1:33 pm Would you move to tax-free muni bonds, keep as is, or move pulling out some of it while keeping the rest invested?

Normally this wouldn't even be a thought, but I'm not positive that the small gains that may happen will be worth the risk of losing quite a bit. I'm leaving all my retirement accounts untouched (although I am funding them at a reduced rate to at least participate in the market).
I found these comments interesting.

1. what makes you think tax free muni bonds would be warranted in your situation? Reason I ask is tax free muni bonds are usually for people who are in higher tax brackets and looking for income from investments that aren't taxable. If your income is now low, and you're not in a high tax bracket, why consider tax free munis?

By the way, tax free with munis is not a free lunch. My understanding is they are more costly because you're paying extra for an extra benefit (tax savings). So you have to determine if the extra cost upfront is worth the tax savings in the end. If you're in a low bracket now, what high amount of taxes are you trying to save? Therefore, buy cheaper bonds, not more costly tax free munis (which may also be less diversified too).

2. Are you finding that your risk tolerance has changed since the risk actually showed up?
What I mean is, you assumed a level of risk when times were good, but now you're not thinking it's "worth the risk". So think about this carefully. Recently I heard someone say it's better to do a risk assessment when the risk has shown up, rather during bull markets when it's likely you'll overestimate your ability/willingness to handle risk. So whatever your risk tolerance is now, stick with that, rather than go changing based on market fluctuations. That's a recipe for disaster because it leads people to take on more risk when times are good, but sell in a panic after the risk returns.

3. It's possible to have different allocations in brokerage vs retirement accounts, but you should really try to look at your overall desired asset allocations rather than different accounts individually. What I mean is you seem to take more risk in retirement accounts but aren't sure you want that level of risk in taxable. But what allocation do you get to overall when you add them together? Because your portfolio is one thing, despite it having different types of accounts, or assets in each, etc.

So think about what allocation you want overall and then determine how to get the different accounts to match what you want overall.
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
Topic Author
kevin86
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Re: Lost Job Temporarily -- Sell Brokerage?

Post by kevin86 »

Thanks for the thoughts below. Historically, I've been in a high income position, about $500k/yr for the past few years. My asset allocation is fairly consistent across the board and still works for me, IF I were able to work. But the thought of not being able to go perform for live people unfortunately wasn't on my radar.

I'm primarily trying to avoid being forced to draw from my brokerage account. I don't plan on changing allocations, especially when work comes back online. I'm pretty happy with the results I've had with my current allocation, and if I could work right now, I would just weather the storm. But the big change is that my job literally doesn't exist in it's current form at the moment.
arcticpineapplecorp. wrote: Thu May 14, 2020 3:39 pm I found these comments interesting.

1. what makes you think tax free muni bonds would be warranted in your situation? Reason I ask is tax free muni bonds are usually for people who are in higher tax brackets and looking for income from investments that aren't taxable. If your income is now low, and you're not in a high tax bracket, why consider tax free munis?

By the way, tax free with munis is not a free lunch. My understanding is they are more costly because you're paying extra for an extra benefit (tax savings). So you have to determine if the extra cost upfront is worth the tax savings in the end. If you're in a low bracket now, what high amount of taxes are you trying to save? Therefore, buy cheaper bonds, not more costly tax free munis (which may also be less diversified too).

2. Are you finding that your risk tolerance has changed since the risk actually showed up?
What I mean is, you assumed a level of risk when times were good, but now you're not thinking it's "worth the risk". So think about this carefully. Recently I heard someone say it's better to do a risk assessment when the risk has shown up, rather during bull markets when it's likely you'll overestimate your ability/willingness to handle risk. So whatever your risk tolerance is now, stick with that, rather than go changing based on market fluctuations. That's a recipe for disaster because it leads people to take on more risk when times are good, but sell in a panic after the risk returns.

3. It's possible to have different allocations in brokerage vs retirement accounts, but you should really try to look at your overall desired asset allocations rather than different accounts individually. What I mean is you seem to take more risk in retirement accounts but aren't sure you want that level of risk in taxable. But what allocation do you get to overall when you add them together? Because your portfolio is one thing, despite it having different types of accounts, or assets in each, etc.

So think about what allocation you want overall and then determine how to get the different accounts to match what you want overall.
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arcticpineapplecorp.
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Re: Lost Job Temporarily -- Sell Brokerage?

Post by arcticpineapplecorp. »

did anyone else catch that the OP went from "kevin86" originally to now [old name removed by admin LadyGeek, see next post]?

why the name change kevin86, I mean [old name removed]?
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
Topic Author
kevin86
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Joined: Sun Aug 19, 2018 3:05 am

Re: Lost Job Temporarily -- Sell Brokerage?

Post by kevin86 »

Sorry, changed my name a while back here for more anonymity since it's discussing finances and I'm publicly searchable . . . for some reason my phone was logged into the old account :(.
ralph124cf
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Re: Lost Job Temporarily -- Sell Brokerage?

Post by ralph124cf »

With a low income year or two, now is the time to take capital gains (if any) in your brokerage account.

Also convert tax deferred retirement accounts to ROTH up to whatever tax bracket you choose.

Consider what different earnings levels would mean to health care government assistance for Obama-care.

Ralph
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samsoes
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Re: Lost Job Temporarily -- Sell Brokerage?

Post by samsoes »

kevin86 wrote: Thu May 14, 2020 4:10 pm Sorry, changed my name a while back here for more anonymity since it's discussing finances and I'm publicly searchable . . . for some reason my phone was logged into the old account :(.
I suggest you ask the mods to clean-up the posts you made under the wrong name before a Google search spills the beans!
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Re: Lost Job Temporarily -- Sell Brokerage?

Post by LadyGeek »

^^^ Request received, I cleaned up the posts.
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jjface
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Re: Lost Job Temporarily -- Sell Brokerage?

Post by jjface »

Work on some kind of youtube presence.

Take unemployment which is currently available for self employed.

Or get a ppp loan (i suggest via paypal loan builder as they are quick) which can be mostly forgiven and not paid back so it is essentially a grant. m
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arcticpineapplecorp.
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Re: Lost Job Temporarily -- Sell Brokerage?

Post by arcticpineapplecorp. »

kevin86 wrote: Thu May 14, 2020 4:10 pm Sorry, changed my name a while back here for more anonymity since it's discussing finances and I'm publicly searchable . . . for some reason my phone was logged into the old account :(.
well it's a good thing I pay attention to details and caught that slip up. Your welcome!
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
TIAX
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Re: Lost Job Temporarily -- Sell Brokerage?

Post by TIAX »

Any reason you're only investing in taxable and not a solo 401(k) or IRA?
Topic Author
kevin86
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Joined: Sun Aug 19, 2018 3:05 am

Re: Lost Job Temporarily -- Sell Brokerage?

Post by kevin86 »

LadyGeek wrote: Thu May 14, 2020 6:41 pm ^^^ Request received, I cleaned up the posts.
You're great!
Topic Author
kevin86
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Re: Lost Job Temporarily -- Sell Brokerage?

Post by kevin86 »

TIAX wrote: Thu May 14, 2020 8:11 pm Any reason you're only investing in taxable and not a solo 401(k) or IRA?
I max out my solo 401(k) for myself and my wife each year ... I was only concerned about the taxable as that may have to provide some living expenses.
printer86
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Re: Lost Job Temporarily -- Sell Brokerage?

Post by printer86 »

These are trying times. especially for those with travel and entertainment tied income. My advice would be to have about 18 -24 months worth of expenses out of risk assets. If 18 months expenses total $100k, and you have $70k in the bank, move $30k to a money market fund in your brokerage account during this pandemic. When you start working again, put it back to work in an at risk fund.
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