Small business owner here and have been rocked by COVID market effects and some other external forces. I am trying to build some passive income aside from my business that I can access, if need be, prior to retirement age.
My wife and I are 46 and 47 respectively. We have an office rental that cash flows nicely.
I am wondering if I could begin putting money away in some market investments that could produce more and more income that we could access before 59.5 years if needed. We have saved strongly for retirement when things were going better and prior to any downturn.
Could an option be to pour money into VFIAX and VHYAX, or something like this, and reinvest all dividends and gains for now, but be able to switch to withdrawing them if business times got tough? Basically, generating a few hundred dollar per month as another small passive income stream?
Simply thinking out loud here and any insight would be very much appreciated. Business is steady for now, which is why I am thinking this way while I have the means.
Income investments prior to retiring?
Re: Income investments prior to retiring?
Bogleheads aren't super into income investing, or drawing any connection between the passive income stream on your 1099-DIV and what you can sustainably take from your portfolio.
Supposing you're going with a sustainable withdrawal rate of 4%, the S&P 500 dividend yield is low enough such that it means you'll be redeeming shares ("principal") in addition to collecting the dividend, and that's totally ok.
Total Stock (VTSAX) and Total International Stock (VTIAX) are the standard taxable stock fund recommendations around here.
Supposing you're going with a sustainable withdrawal rate of 4%, the S&P 500 dividend yield is low enough such that it means you'll be redeeming shares ("principal") in addition to collecting the dividend, and that's totally ok.
Total Stock (VTSAX) and Total International Stock (VTIAX) are the standard taxable stock fund recommendations around here.
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Re: Income investments prior to retiring?
I am early-retired and younger than age 59.5.
I make efforts NOT to have steady income that would cost me unnecessary tax.
I make efforts NOT to have steady income that would cost me unnecessary tax.
Credibility ... some posters have it.
Re: Income investments prior to retiring?
You can always defer consumption and save money to be consumed later. What you might invest that money in depends on the trade-off between how much return you earn vs how uncertain actually getting that return is. Stocks such as you mention are at the higher return, higher risk end of investing. At the opposite end would be depositing the money in savings accounts, CDs, money market funds or the like. It is always an option to hold a mix of both.
As far as income, you can take whatever withdrawals you want from investments at any time. The only issue is that the future growth of the investment is simply determined by compounding the returns less the withdrawals. The former you try to control by investment selection as stated above and the withdrawals are completely under your control at all times up to withdrawing all of the asset at some point.
As far as income, you can take whatever withdrawals you want from investments at any time. The only issue is that the future growth of the investment is simply determined by compounding the returns less the withdrawals. The former you try to control by investment selection as stated above and the withdrawals are completely under your control at all times up to withdrawing all of the asset at some point.
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Re: Income investments prior to retiring?
As a pre age 50 retiree, real estate provided the easiest cash machine (with plenty of deductions).
For incremental income, it takes lots of dollars in conventional investments.
Consider other options....
Hard lending,
High yield business notes.
Short term investments (high risk, but high(er) returns.)
None of the above are BH avenues. But can work well for many entrepreneur types.(Those Used to dealing with risk)
PT employment and consulting are other options for filling cash flow needs.
As we approach our slow go years, we're converting our personal held RE to owner financed rRE notes @ ~7%. A benefit is stretching out significant gains over the term of the notes. But.... There go all those beneficial deductions (which are not as necessary when your wage / business income is no more.)
Actually, I'm looking for alternative business / cash flows / deductions in later retirement. I better understand why franchises and partnerships in commercial storage are very popular with retiree friends who previously held RE as cash flow.
In retrospect, I would have built a family RE empire to bequeath to my kids. (The empire would need to be big enough to be professionally managed, by an internal entity, not contracted to a management company). A coworker friend did just that. He has several silent investor partners, and his (11) kids run it and handle the day-to-day details. They buy and sell about 80 properties per month in surrounding 6 counties.
For incremental income, it takes lots of dollars in conventional investments.
Consider other options....
Hard lending,
High yield business notes.
Short term investments (high risk, but high(er) returns.)
None of the above are BH avenues. But can work well for many entrepreneur types.(Those Used to dealing with risk)
PT employment and consulting are other options for filling cash flow needs.
As we approach our slow go years, we're converting our personal held RE to owner financed rRE notes @ ~7%. A benefit is stretching out significant gains over the term of the notes. But.... There go all those beneficial deductions (which are not as necessary when your wage / business income is no more.)
Actually, I'm looking for alternative business / cash flows / deductions in later retirement. I better understand why franchises and partnerships in commercial storage are very popular with retiree friends who previously held RE as cash flow.
In retrospect, I would have built a family RE empire to bequeath to my kids. (The empire would need to be big enough to be professionally managed, by an internal entity, not contracted to a management company). A coworker friend did just that. He has several silent investor partners, and his (11) kids run it and handle the day-to-day details. They buy and sell about 80 properties per month in surrounding 6 counties.