Investment withdrawal strategy for buying/upgrading to a nicer home

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Topic Author
GSW1730
Posts: 2
Joined: Fri May 14, 2021 8:46 pm

Investment withdrawal strategy for buying/upgrading to a nicer home

Post by GSW1730 »

Hello,
I am brand new to the forum and I am looking for some general advice that I think happens when most people want to move to a better home. I need to move to a better school district for our son and an area that I want to settle down in. My home, which I bought in 1996, is paid off and I have a couple of retirement accounts that are doing okay.
For the area that I’d like to move to I would need to sell a little over half my investments over the next 2 1/2 years (and my home of course) because the area (SF Bay Area) is so hot that most of the accepted offers are all cash offers. I’m recently retired as well living on a decent pension that should cover my families needs.
I have reached out to both of my financial advisors at Edward Jones and Fidelity and both of them always lean toward me leaving the money invested for the most part but I fear that this advice may be a little self serving on their part. I guess I really need to know the best way to withdrawal without getting over penalized taxes wises. I also don’t want to miss a possible market run up but I realize I can’t have it both ways😂. Any thoughts on the best way of navigating this situation? I’m really a novice in the investing world so no advice given will seem “too basic” for me. Thanks for reading!
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retired@50
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Location: Living in the U.S.A.

Re: Investment withdrawal strategy for buying/upgrading to a nicer home

Post by retired@50 »

GSW1730 wrote: Fri May 14, 2021 9:15 pm Hello,
I am brand new to the forum and I am looking for some general advice that I think happens when most people want to move to a better home. I need to move to a better school district for our son and an area that I want to settle down in. My home, which I bought in 1996, is paid off and I have a couple of retirement accounts that are doing okay.
For the area that I’d like to move to I would need to sell a little over half my investments over the next 2 1/2 years (and my home of course) because the area (SF Bay Area) is so hot that most of the accepted offers are all cash offers. I’m recently retired as well living on a decent pension that should cover my families needs.
I have reached out to both of my financial advisors at Edward Jones and Fidelity and both of them always lean toward me leaving the money invested for the most part but I fear that this advice may be a little self serving on their part. I guess I really need to know the best way to withdrawal without getting over penalized taxes wises. I also don’t want to miss a possible market run up but I realize I can’t have it both ways😂. Any thoughts on the best way of navigating this situation? I’m really a novice in the investing world so no advice given will seem “too basic” for me. Thanks for reading!
Welcome to the forum. :happy

I don't have a solid answer for you about how to withdraw the money without incurring taxes.
That would be a somewhat involved discussion where you'd need to know the cost basis and gain (or loss) for each investment you're willing to sell. Tax brackets, etc. Taxes could potentially be minimized, but probably not avoided altogether.

What did catch my eye was the fact that you're recently retired. Have you talked to a banker or mortgage company about the possibility of getting a mortgage? Depending on your pension income, you may still qualify for a loan. Unless you can easily afford it, paying all cash seems like you're being drawn into a real estate frenzy that you might do better to avoid.

The other concerning point is the TWO financial advisers. You can potentially save some money each year if you're willing to manage that money on your own, or you could move the accounts to Vanguard and pay the Vanguard Personal Advisory Service 0.30% to manage the money. I suspect you're paying Edward Jones 1.0% or more (maybe Fidelity too). You're correct in your assessment that the advice is self serving. No adviser earning an assets under management fee wants to see assets leave his/her control.

Regards,
This is one person's opinion. Nothing more.
Topic Author
GSW1730
Posts: 2
Joined: Fri May 14, 2021 8:46 pm

Re: Investment withdrawal strategy for buying/upgrading to a nicer home

Post by GSW1730 »

Thanks for responding! I think I will take your advice and move to Vanguard. I always felt that having 2 separate accounts would give me 2 different perspectives but my money has stayed invested in the same stocks and funds since inception. One person can do that for me 😊.
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retired@50
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Re: Investment withdrawal strategy for buying/upgrading to a nicer home

Post by retired@50 »

GSW1730 wrote: Mon May 17, 2021 2:37 pm Thanks for responding! I think I will take your advice and move to Vanguard. I always felt that having 2 separate accounts would give me 2 different perspectives but my money has stayed invested in the same stocks and funds since inception. One person can do that for me 😊.
Generally speaking, the best way to handle an account move is to contact the receiving institution, Vanguard in this case, and tell them about the type of account you have at EJ or Fido, then, they can do the dirty work of contacting the current custodian and getting the ball rolling. Most likely you'll want to do what is known as an in-kind transfer.

Post back to the forum if you have additional questions.

Regards,
This is one person's opinion. Nothing more.
fyre4ce
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Joined: Sun Aug 06, 2017 11:29 am

Re: Investment withdrawal strategy for buying/upgrading to a nicer home

Post by fyre4ce »

The right answer probably depends on numbers. Making a large lump-sum withdrawal that will bump you up in to a higher tax bracket for a year doesn't seem like a great solution. Then again, if you're already in the top bracket, or the extra withdrawals are small enough to fit inside your current bracket, this won't be a problem. Also consider state taxes. If you're moving from a low-tax or tax-free state to CA, and you can make a pre-tax withdrawal in your current state, you might come out ahead vs. making a series of withdrawals later on which you'll have to pay CA income tax.

A mortgage is probably the best solution if you can get one; interest rates are extremely low. It might be hard to qualify with just pension income, but then again if you have enough assets saved to cover the mortgage balance, you might find a lender who will lend to you. It would be worth asking around.

Have you looked into the cost for private school in your area? That may be a better overall value and less hassle than moving into a super-expensive city just for the schools.

You could also look into a margin loan, if you have enough taxable assets. Make sure you understand and can manage the risk of a margin call if you go this route.

I'm not in favor of timing the housing market. In my opinion, if it makes sense to buy (or move) and you meet the general criteria for buying (plan to stay at least 5 years, stable situation, etc.) then buy, regardless of whether the housing market seems hot or cold. That said, you do need to mentally calibrate to the risk that you could buy this property and it could lose a lot of value. In particular, with many tech workers now looking to work remotely and avoid the high housing prices and taxes of the bay area, there is a risk prices could fall, perhaps a lot. If you're not comfortable taking this risk, you should look for other options.
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