05-19-2017, 04:39 PM
Wow, Rob. Congrats!
Choices, choices ... nice situation to be in.
I've been thinking about that a little myself lately as I get closer to that point. Here's just some of the thoughts that I would go through in MY situation:
1.) Do the 401(k) and IRA contributions put you into a lower marginal tax bracket? If so, maybe convert some of the tax-sheltered investments into a backdoor ROTH and pay the tax on it now? That could lower your RMDs required down the road. This would take a lot of thinking through (at least for me). I couldn't find anything that would prevent you from doing the conversion but everyone's situation is different.
2.) Assuming you could stomach the low return, put a little more cash aside for the first months of retirement to lower your sequence of returns risk. Of course, if you're only planning to use the income from your investments and not withdraw capital in the early days of retirement, sequence of return risk is a non-event. Who knows what the market is going to do over the next 4-5 years considering where we've come the last eight.
3.) Shorter term munis (at par or less) wouldn't be a bad idea, maybe in the 3-5 year range. You'll probably get a little more income versus a bank/MM account and holding to maturity doesn't put your capital at risk. I don't expect inflation to jump enough to dent the buying power of your principal.
4.) Pure growth would make me a little nervous at this point in the cycle. If dividend growth stocks are on the high side right now, I wouldn't think growth stocks are closer to a fair value. Probably the opposite for the most part.
5.) Paying down the mortgage a little more doesn't seem too bad to me but that is only because I'm of a mindset that I want to go into retirement with as few bills as possible that I HAVE to pay that would risk my living situation. I can live without cable, maybe telephone and lastly Internet. Housing, property taxes, heat & lights are the must haves for me. However, at 2.75%, you're certainly not going to beat the returns on many other investments.
Any of the above would be better that making an big, extravagant purchase to stroke your ego although I wouldn't fault you for it.
Good luck thinking that through.
Choices, choices ... nice situation to be in.
I've been thinking about that a little myself lately as I get closer to that point. Here's just some of the thoughts that I would go through in MY situation:
1.) Do the 401(k) and IRA contributions put you into a lower marginal tax bracket? If so, maybe convert some of the tax-sheltered investments into a backdoor ROTH and pay the tax on it now? That could lower your RMDs required down the road. This would take a lot of thinking through (at least for me). I couldn't find anything that would prevent you from doing the conversion but everyone's situation is different.
2.) Assuming you could stomach the low return, put a little more cash aside for the first months of retirement to lower your sequence of returns risk. Of course, if you're only planning to use the income from your investments and not withdraw capital in the early days of retirement, sequence of return risk is a non-event. Who knows what the market is going to do over the next 4-5 years considering where we've come the last eight.
3.) Shorter term munis (at par or less) wouldn't be a bad idea, maybe in the 3-5 year range. You'll probably get a little more income versus a bank/MM account and holding to maturity doesn't put your capital at risk. I don't expect inflation to jump enough to dent the buying power of your principal.
4.) Pure growth would make me a little nervous at this point in the cycle. If dividend growth stocks are on the high side right now, I wouldn't think growth stocks are closer to a fair value. Probably the opposite for the most part.
5.) Paying down the mortgage a little more doesn't seem too bad to me but that is only because I'm of a mindset that I want to go into retirement with as few bills as possible that I HAVE to pay that would risk my living situation. I can live without cable, maybe telephone and lastly Internet. Housing, property taxes, heat & lights are the must haves for me. However, at 2.75%, you're certainly not going to beat the returns on many other investments.
Any of the above would be better that making an big, extravagant purchase to stroke your ego although I wouldn't fault you for it.
Good luck thinking that through.
=====
“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan
“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan