Cash Influx [invest for tax-efficient income]

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lauberge49
Posts: 28
Joined: Wed Oct 21, 2009 9:48 pm
Location: Nevada

Cash Influx [invest for tax-efficient income]

Post by lauberge49 » Mon Feb 11, 2019 12:35 am

We are 70, no debt, and coming into $1,000,000. We want to conservatively invest to create cash flow and be tax efficient.
Starting RMD’s of approx 25000, plus SS of 20,000, amd a bit of fluctuating farm income, call it 15K. We want to travel a bit so maybe create 40 K in cash flow........any ideas, suggestions?

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David Jay
Posts: 6250
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Cash Influx [invest for tax-efficient income]

Post by David Jay » Mon Feb 11, 2019 12:00 pm

Conservative and tax efficient don’t line up too well: taking capital gains (selling an appreciated stock fund) will be most tax efficient, but bonds will give stability (but taxes are paid at regular income rate).

Maybe you can split the difference, say 50% Total stock Market fund and 50% Intermediate Term treasuries fund. Keep the first year - 40,000 - in cash (Money Market) because the stock fund needs 1 year before it is long term capital gains. Withdraw from the stock fund and keep the bonds just to cushion the stock ups-and-downs that are always a part of stock investing. If stocks go down to less than 40% of portfolio that is an indication to rebalance back to 50/50 because stocks are “on sale” (after a big drop).

I don’t know your personality - If you feel you can’t stomach any stock variability, then just put it all in Intermediate Term bond funds (maybe 50% IT investment grade and 50% IT Treasuries) and call it good. Taxes will be a bit higher but if that is what it takes to sleep soundly at night, it is worth the peace of mind. You can easily withdraw $40,000 a year for the next 25 years without any issue (but likely leave less to the estate).
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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