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Somebody here convinced me that you could get steady income and lower taxes without relying on divis if you buy a company with a solid growth rate in a relatively low risk manner. I.e.,

$100 holding of T peels off a 5% divi but has a price of $100 at the end of the year.

Brk-b is worth $100 at the start of the year, and worth $110 at the end of the year. You peel off $5, giving you the same amount of cash as the T divi, but you pay taxes only on the capital gain, and you have a $105 holding instead of a $100 holding going into the following year.

Over the course of 10 years you have just as much cash, lower taxes, and a higher priced stock if Brk consistently outperforms the T.

I think.
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Does anyone have a public Stable Value or Fixed Income fund they would recommend? I'm looking for a very safe/conservative fund that will just earn 1.5% - 2.5%.

Thanks for any suggestions.


When I left Boeing, I was looking for a "safe" stable mutual fund. My wife's advisor suggested the American Fund's Income Fund of America. It's a mixture of bonds and dividend paying stocks. It has served me well. In time I also got their New Perspectives, which seeks capital gains. At this time that fund (NP)is about 33% of the No Count portfolio.* https://www.capitalgroup.com/individual/

CNC
*Most of the other 67% is in other American mutual funds. Of late I have been dabbling in actual stocks. Big plunger that I am, my stocks are about 1.2% of the portfolio.
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Does anyone have a public Stable Value or Fixed Income fund they would recommend? I'm looking for a very safe/conservative fund that will just earn 1.5% - 2.5%.

Sorry, stable value funds (aka Guaranteed Investment Contracts or GICs) are not generally available outside of employer plans like 401(k)s. Despite their name, GICs are generally insurance company products, rather than true 'investments'. You may want to look into short term bond funds.

AJ
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This is likely incorrect but are stable value funds kind of like MYGAs? 3 yr MYGAs pay around 2.4%.
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This is likely incorrect but are stable value funds kind of like MYGAs? 3 yr MYGAs pay around 2.4%.

Well, MYGAs (Multi-Year Guaranteed Annuities) are similar in that they are both insurance company products. But MYGAs often require you to leave the money in the annuity for the full term or pay surrender fees. Even those that allow partial withdrawals without paying surrender fees only allow them on a schedule, so they aren't very flexible. Stable value funds generally allow you to move money in and out at any time, without surrender fees.

AJ
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At least take a look at good old AT&T stock(symbol T), which pays dividends like clockwork every quarter, and yields a good 5% or so.

GL

Vermonter
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I kept some T that I inherited a little over 5 years ago. On one hand it is now yielding 7%. On the other hand it is my worst holding from the standpoint of stock price. Down roughly 14% over 5 years in a raging bull market.

If you want dividend income and are confident that they are safe from bankruptcy, the stock is cheaper and yielding more than when I inherited it 5 years ago.

I focus more on total return than dividends these days.
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iampops5:

Agreed -- it all depends on what you want to do with your money. You want growth? Or steady income?

I used to "play" a lot more in my IRA. A lot of people don't know about the fact that you can make all the profit you want IN the IRA, and pay no taxes on that profit, until YOU WITHDRAW it, and then you pay just your personal rate. (However, you can also LOSE in there, of course!!!)

In my case, I have some money in there that I still dabble with, and another chunk that sits in BGS and T and some others that pay nice dividends, despite growth or no growth.

People need to figure out what they want to do -- and how much they can perhaps lose, too.

Vermonter
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Somebody here convinced me that you could get steady income and lower taxes without relying on divis if you buy a company with a solid growth rate in a relatively low risk manner. I.e.,

$100 holding of T peels off a 5% divi but has a price of $100 at the end of the year.

Brk-b is worth $100 at the start of the year, and worth $110 at the end of the year. You peel off $5, giving you the same amount of cash as the T divi, but you pay taxes only on the capital gain, and you have a $105 holding instead of a $100 holding going into the following year.

Over the course of 10 years you have just as much cash, lower taxes, and a higher priced stock if Brk consistently outperforms the T.

I think.
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iampops5 writes,

Somebody here convinced me that you could get steady income and lower taxes without relying on divis if you buy a company with a solid growth rate in a relatively low risk manner. I.e.,

$100 holding of T peels off a 5% divi but has a price of $100 at the end of the year.

Brk-b is worth $100 at the start of the year, and worth $110 at the end of the year. You peel off $5, giving you the same amount of cash as the T divi, but you pay taxes only on the capital gain, and you have a $105 holding instead of a $100 holding going into the following year.

</snip>


I've long minimized dividend and interest income in favor of funding my annual retirement living expenses with capital gains and tax-free returns of capital where possible. (Note 1) No sense paying taxes on dividend income that I'm not going to spend in the current year, if I can just leave it in a vehicle like BRK, let it grow tax-deferred, and just sell a few shares when I need to.

Note 1: Let's say I fund this year's retirement spending by selling a $100,000 block of stock in my taxable account I bought for $80,000 two years ago. I'll need to pay taxes on the $20,000 capital gain, but the other $80,000 I'm withdrawing from the account is a "tax-free return of capital". And if your taxable income is just $20,000/yr, you'll be eligible for a large enough refundable tax credit to make Obamacare "free".

intercst
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Let's say I fund this year's retirement spending by selling a $100,000 block of stock in my taxable account I bought for $80,000 two years ago. I'll need to pay taxes on the $20,000 capital gain,...

Only if your ordinary income is over $78750 (couple filing jointly), correct? Otherwise the cap gains are tax free. (Table 4-4, publication 550...plus I'm pretty sure I read that on your website.)

https://www.irs.gov/pub/irs-pdf/p550.pdf
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1poorguy writes,

Let's say I fund this year's retirement spending by selling a $100,000 block of stock in my taxable account I bought for $80,000 two years ago. I'll need to pay taxes on the $20,000 capital gain,...

Only if your ordinary income is over $78750 (couple filing jointly), correct?

</snip>


Actually you need to add the $24,000 standard deduction to that, so a married couple is tax-free on dividends and capital gains up to $102,750/yr in income. Sadly, it's half that if you're single.

And even if you're not paying income taxes on it, it still counts towards your MAGI for the purposes of getting the Obamacare refundable tax credits.

intercst
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getting the Obamacare refundable tax credits.

It's funny you keep harping on this. On a Retirement board.
Because most retirees are over 65 and therefore on Medicare hence Obamacare is a non-issue for them.

Sure, YOU retired very (very, very) much younger than 65, but few people do.
Your situation is unique, but you keep acting as if it was common.
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So what is the MAGI for getting the credits? I thought the issue was taxable ordinary income, and that by using the cap gains instead of ordinary income you kept your taxable income near-zero and therefore qualified for subsidies. Apparently I'm missing something.

1poorguy (investigating insurance options since I want to retire this year)
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It may be rare to retire at age 38, but roughly 1/4 of the workforce retires before age 60. So it's not THAT rare to have to span the gap between retiring before age 60 and being Medicare-eligible. Information on how to invest for retirement pre-Medicare-eligible I think is a valid topic here.
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Just out of curiosity I did some searching on average retirement age.

It varies by state. According to the US census data quoted in the below link, it is 65 for men and 63 for women.
https://www.thebalance.com/average-retirement-age-in-the-uni...

I guess the good news it that it means on average people may not be taking social security until 65.

And since health insurance is a problem for many, they probably wait until Medicaid starts at 65.
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"It's funny you keep harping on this. On a Retirement board.
Because most retirees are over 65 and therefore on Medicare hence Obamacare is a non-issue for them."

I would think that a "Retirement Investing" board could be of great utility for people investing and planning for retirement - as opposed to waiting until they are retired to do the thinking and planning.

If Obamacare can be utilized to cut insurance costs for people nearing retirement, especially those who might qualify for it and need it, but fail to do so due to ignorance of the possibilities...

In fact, I think that retirement planning discussions would be putting the board to its highest and best use.

But what do I know?
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It's funny you keep harping on this. On a Retirement board.
Because most retirees are over 65 and therefore on Medicare hence Obamacare is a non-issue for them.


Did you not yourself retire at age 58?

PSU
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Replying again, I think I got it. Just had a "senior moment".

I was reminded here:
https://www.healthcare.gov/income-and-household-information/...

Cap gains are included, but ONLY the gains. So if I sell $100K worth of stock, unless the gains exceed the limit of $78K (plus the $24K) I won't pay tax on them. But I cannot exceed 400% of the FPL if I want to receive subsidies. For a couple that is about $69K (FPL is $17240 for two people).

Of course that seems to compete with the preference to tap into 401K/IRA funds at age 59.5 so as to reduce the eventual mandatory RMDs (i.e. the less you have in those accounts the lower the RMDs will be when you hit that point). Because ALL of the 401K/IRA funds are taxable, unless in a ROTH.

And I still need to figure out the least stinky pile of poop in the barnyard of cow pies that is insurance plans. AZ is not replete with options. Cigna is in the mix, and I think BCBS, and a few I've never heard of (I forgot my password, so I'll have to call them...but some of our options were almost like "Bob's Insurance" or something like that...never heard of it).
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Hi 1poorguy,

If I understand it correctly,you can go to 399% of the poverty level and still get a substantial subsidy. For my wife and I to get a bronze plan for $38_per month with a $7150 deductible,our ACA income is about 250% of the federal poverty level.This is basically the minimal coverage.Kaiser has a good comparison tool on the web that can get you close to reality. Also Roth money is not included in the ACA calculations,which leads to topping off our income from the roths until medicare,then not touching them again until our eighties.

JK
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Did you not yourself retire at age 58?

I did. You beat me by 20 years, I believe. Good for us, eh?

Conveniently, Motorola had a post-retiree, pre-65 health insurance policy, so I didn't need to fiddle with any of that stuff.

I got a lot of google hits about average retirement age (65 men & 63 women) but didn't see anything about the distribution of ages at retirement. Surely the Census Bureau has that, but I didn't find it. I'm sure quite a few people retire 5-7 years early, but darn few retire 20-30 years early.

I think your situation is pretty rare. Retired very early, with many years to go until Medicare, AND with a large pot of money that you can fiddle around and take tax-free (or at least very low taxed). The situation would be large(ish) spendable income but most of it is untaxed. That's gotta be rare, and also rather difficult to achieve. Tax-free municipal bonds the easiest?
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I did. You beat me by 20 years, I believe. Good for us, eh?

Wrong person. I'm still working.

PSU
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Conveniently, Motorola had a post-retiree, pre-65 health insurance policy, so I didn't need to fiddle with any of that stuff.

Oh, my employer offers retiree coverage, too. They offer it to me for 167% of the price of an unsubsidized ACA policy in my area ($1167/month vs. $700/month). My employer's plan is more comprehensive and has lower deductibles, but comparing the total premiums plus the max out of pocket, the ACA plan is still cheaper. And for a better case scenario, the cheaper premiums more than cover the difference in premiums. So even though the ACA insurance is not as comprehensive, it's still a much better deal for me. As the benefits rep told me when I retired - 'most people can get cheaper coverage on the marketplace'.

I'm sure quite a few people retire 5-7 years early, but darn few retire 20-30 years early.

Even retiring 5 - 7 years early leaves a significant gap in insurance coverage before Medicare kicks in, and people need to plan for that. Just because you didn't have to cover that gap doesn't mean that other people don't need to. If you don't want to read about covering that gap, just scroll on, rather than bragging about the fact that you never had a gap to cover.

AJ
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If you don't want to read about covering that gap, just scroll on,

We are not allowed to have discussions?




rather than bragging about the fact that you never had a gap to cover.

Don't personalize things. I wasn't bragging, just stating a fact that was related to the issue being discussed.
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We are not allowed to have discussions?

Sure, but continually harping on how paying off a mortgage; making backdoor Roth contributions; doing Roth conversions; and looking for medical coverage after retirement, but before Medicare; aren't worth discussing doesn't seem to be having discussions.

I wasn't bragging, just stating a fact that was related to the issue being discussed.

Funny, but saying Conveniently, Motorola had a post-retiree, pre-65 health insurance policy, so I didn't need to fiddle with any of that stuff. to justify that the discussion about finding insurance after retirement, but before Medicare wasn't needed seemed a lot like bragging to me.

AJ
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Even retiring 5 - 7 years early leaves a significant gap in insurance coverage before Medicare kicks in, and people need to plan for that.

Sometimes it's not retirement and it can be a significant financial hit. In my case, I ended up with such a high deductible, health insurance became something I had but rarely used other than getting their price. However, that may also have fed into the quest to do as much as possible to stay healthy.
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Funny, but saying Conveniently, Motorola had a post-retiree, pre-65 health insurance policy, so I didn't need to fiddle with any of that stuff. to justify that the discussion about finding insurance after retirement, but before Medicare wasn't needed seemed a lot like bragging to me.

Poll:
"I bought a book from Thriftbooks{dot}com yesterday."

[ ] A brag.
[ ] A statement.



Things are going slow, eh, that we spend time on pedantic stuff like this. ;-)
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