Cash to start funding ladders in a downturn

[HealthyFuture]

I used downturns to reduce or eliminate capital gains in my taxable account and put that money into a tax free ladder.

I don’t yet understand the tax implications well enough to do this, but I will put that in my “to learn” list as I suspect it’s not a single forum reply that will teach me. [emoji1]

I juuuust started to build a treasury ladder in the last 30 days to take advantage of the no state tax angle as our state tax is significant.

 

[HealthyFuture]

Before I retired, most of my income came from just one source, a salary that I could save and use in any way I wanted.

After I retired, my income started coming to me from not just one but a number of excellent sources such as dividends, mini-pension, social security, RMD's, and so on. My AGI has gone up, not down.

I don't really understand why being retired means people suddenly have no income and can't possibly save anything any more. But a lot of people do agree with you about that! Honestly I just don't get it. I'm sure I am missing something.

W2R, let me better explain. At this time we do not receive social security, and we do not (and will never have) pensions. Also not yet old enough for RMDs (I am about 20 years away!) So I merely meant that the only way for us to get income is to take money out of our retirement accounts or sell stocks as we have no ‘new’ money coming adding to our net worth.

I think of withdrawing less from retirement funds in a given year as “not spending it” rather than “saving it.” Still being mindful of what we spend!

 

[HealthyFuture]

What is your asset allocation? Do you have any allocation to bonds? If you have bond funds in your IRA you could consider selling them and changing to a CD ladder (you can purchase brokered CD's within an IRA at several institutions). Deciding to do that depends on whether you think bond funds will recover faster than what you can make with a ladder...YMMV.

Thank you simplegirl. I will go learn if I can buy brokered CDs in our 403/457 accounts. If so, this will be a great addition to the series of actions I’m seeing suggested here.

 

[HealthyFuture]

The peace of mind from making your own treasury/CD ladder where you can manage maturities to meet income needs will likely give the most psychological benefit. Good luck!

This is exactly why I’ve been anxious to get started with this. We bought $60K of iBonds in October (seemed so great then! Now can’t gift $20K until Jan 2024, when I’d love to stick that money elsewhere! Lots of learning!) And then I stuck $50K in a one-year CD last month (4.3% seemed amazing given I hadn’t learned to buy treasuries yet). And then I began putting $10K into various treasury bond terms. I have some additional cash in a money market to deploy, but it seems like it would be super to stick a ton o’ money in these instruments at this time to get ladders aggressively started.

 

[HealthyFuture]

There's no need to rush, although I also think equities are overpriced. Even with the recent drop. But over your remaining investing lifetime you will probably have times when you are not comfortable with your high equity AA. Those would be good times to sell some, locking in any gains, and freeing up cash that can be invested in bonds/CDs. If it doesn't happen, that means you're happy with your AA, so drive on.



I had been 100% equities (not counting real estate) for most of my life, but a couple of years ago I was getting itchy about stock prices and sold enough to drop my AA down to about 50/50. Of course, then I had to watch as the market rose by another 40% while my cash was sitting there at basically nothing, so I was kicking myself. But now that I've had a chance to buy some CDs at decent rates, I'm feeling more satisfied with my decision.



The secret to doing this sort of selling/reinvestment is to determine the AA you want, and only sell enough to get there. Don't panic sell. Just sell when prices are high or when you are ready to adjust your AA. This isn't a sprint, it's a marathon. Good luck.

Thanks, harley. Promise I won’t panic sell! [emoji2] It will feel like a major achievement when I permit myself to actually sell *something*— fortunately I am incapable of panic-anything with my money. I have analysis paralysis and think if I just learn more about X, all will become perfectly clear. [emoji854] But I am realizing this is a learn some, do some, then repeat situation (until I have my approach and ladders dialed in, then I’ll just go take the dog for a hike.)