freed2012
Confused about dryer sheets
Hello ER universe! DW and I are 64, retired since 2012 (it has far surpassed my very high expectations!).
$2.8 M IRA, $540 K Roth IRA, $3.6 M taxable mutual funds/ETFs, 800 K vacation rental property, no debt.
We found a beach-front property (2 BR around 550K, or 3 BR around 750K) that we really like and would buy as a vacation (i.e., use it more than 14 days/year) rental. With a mortgage, it would be cash-flow negative, which we really don't want. Without a mortgage, it would have a cash on cash return of about 4%. Factoring in our personal use, about 5%. So the question is how to fund an all-cash purchase. I am considering liquidating the Roth IRA to do that, but hesitate to give up the tax deferral and source of tax-free cash if needed. On the other hand, we should have plenty of income when we start SS at 70 and IRA MRDs at 72, so maybe keeping the Roth is not that important? Don’t want to fund it with IRA, nor with taxable investments as these have significant capital gains and am trying to make full use of lower income until age 70 to take capital gains, IRA distributions, Roth conversions strategically at lower income tax rates.
Another wrinkle: We wouldn’t mind getting out of ou existing vacation rental property (would probably bring about $800K) which has significant cap gains and depreciation recapture. This brings up the possibility of a 1031 exchange, but from the little bit of research I’ve done, this seems like it could be complex, difficult and risky. If we went this route, we would want to replace that rental property with a purely vacation property in the same area, so there would still be a need for 500-700K for a cash purchase.
I have gone round and round on this in my head and can’t seem to get anywhere. I’m sure there are options, pitfalls and consequences I am not considering, so hoping to get the collective wisdom of this esteemed group to point me in the right direction. Thanks!
$2.8 M IRA, $540 K Roth IRA, $3.6 M taxable mutual funds/ETFs, 800 K vacation rental property, no debt.
We found a beach-front property (2 BR around 550K, or 3 BR around 750K) that we really like and would buy as a vacation (i.e., use it more than 14 days/year) rental. With a mortgage, it would be cash-flow negative, which we really don't want. Without a mortgage, it would have a cash on cash return of about 4%. Factoring in our personal use, about 5%. So the question is how to fund an all-cash purchase. I am considering liquidating the Roth IRA to do that, but hesitate to give up the tax deferral and source of tax-free cash if needed. On the other hand, we should have plenty of income when we start SS at 70 and IRA MRDs at 72, so maybe keeping the Roth is not that important? Don’t want to fund it with IRA, nor with taxable investments as these have significant capital gains and am trying to make full use of lower income until age 70 to take capital gains, IRA distributions, Roth conversions strategically at lower income tax rates.
Another wrinkle: We wouldn’t mind getting out of ou existing vacation rental property (would probably bring about $800K) which has significant cap gains and depreciation recapture. This brings up the possibility of a 1031 exchange, but from the little bit of research I’ve done, this seems like it could be complex, difficult and risky. If we went this route, we would want to replace that rental property with a purely vacation property in the same area, so there would still be a need for 500-700K for a cash purchase.
I have gone round and round on this in my head and can’t seem to get anywhere. I’m sure there are options, pitfalls and consequences I am not considering, so hoping to get the collective wisdom of this esteemed group to point me in the right direction. Thanks!