300K - how and when to invest it?

[WingsOnFire]

So my house will be empty this weekend and after a couple of quick fixes (paint entrance hall floor, swap one panel of wallpaper in the living room) I can put it up for sale. Spring is the best time to sell houses, and I wasn't expecting it to be empty so fast, but now I'm thinking that there is no point maybe waiting until spring? I haven't decided yet.I'm not in a particular hurry, though I do have to pay for the heating of the house. Maybe beginning of March would be a good time..but then the cellar door is usually frozen shut so people can't go in there to see it.. Eh.

Anyway, when it sells, I will have all the money from it to invest. I currently live with my daughter in an apartment she owns, and we will stay here for at least 2 1/2 more years, and after that it depends on where she is going to study etc. But I'm not buying anything new now. I also own a large woodsy lot which is for sale, and the money from that would, or would almost buy me a studio apartment if and when that eventually sells. That money I could keep in a high yield savings account where I could access it for the purpose of buying a small home for myself when that becomes necessary. Or something similar where the capital is being preserved. DD is just turning 16 so it could be many, many years in the future, as she doesn't seem like the type to want to live alone very soon after turning 18. But who knows for sure. It could be in two years, or it could be in ten years. And I can always rent a place too (one option is to ask if DD's dad would want to buy an apartment and rent it to me).

When the house sells, I will have around 300K to invest. How would you allocate it, and what timeline would you use for buying stocks etc?
For two years from today I could let it compound, but after that I may need to start withdrawing, depending on what the situation is then (DD turns 18) when it comes to the living situation, income from work and so on.

I don't need to necessarily preserve the capital as an inheritance, DD already owns an apartment and will inherit quite a bit from her dad, and perhaps something from her granddad pretty soonish (he is not doing well :/ ).
I'm 49 and I would use the income from the assets to live between ages 51 to 68 so 17 years (19 years from today), after which the social security benefits kick in (but who knows, they may raise the age again before that) and it will be the minimum for me, something around 600 e net / month.

I do have some income from my work (I'm an artist) and I'm trying to be more productive, thus being able to sell more of my work, but right now I'm not counting on that, or any other business income. So for the purposes of this, let's not count my work income at all

In total, my assets are about 80-100K in the woodsy lot, 300-330K in the house and lot and 30K invested elsewhere. So 410-460K total. I'm going to sell my car after the house is sold, but it's only worth about 4K or so and I will keep some of that in emergency cash (and probably take a combined business and vacation trip).

I'm thinking mostly low cost index funds and dividend stock picks, but I'm not sure about the purchase schedule. Is it better to get the money invested pretty fast for maximum compounding, or spread it out to reduce the effect of market highs and lows? Any other advice?

[chenda]

I'd be inclined in your position to create a relatively conservative income portfolio. Say 50% government bonds and 50% blue chip high divided yielding companies. If you're a nervous investor you could gradually build up you equity holdings for more psychological peace of mind. I'd keep the woodsey lot money in property of whatever sorts.

[WingsOnFire]

The bonds would be good in that I could not sell them before maturity In the past, I have been a nervous investor, and also it's good for me to have a barrier against having access to the money.

What comes to the woodsy lot, it's hard to sell, it's been up for sale for a while, so if we get an offer that is acceptable, we will sell it. There is someone asking about it and going to see it every once in a while, but no offers yet. I'd rather keep the half of the lot that is separated from my house, as that would be much easier to sell when needed, as it is in a popular area close to everything. So unless the buyers of the house want to buy the whole thing, it would maybe be a good idea to keep the lot for diversification. The lot is worth about 60K now. It's value will keep going up I presume, since the location is good, but of course it doesn't pay anything to keep it (but there is also no work or stress associated with unbuilt property -no maintenance, tenants etc).

[Scott 2]

I read your question as - I'm planning retirement in 2 years. I need to select a withdrawal strategy. How do I do this?

Reallocating capital is the last step. Don't start there. Maybe run your numbers through a calculator, to get a rough idea of what could happen:

https://engaging-data.com/will-money-last-retire-early/

Then make a year by year list of what you think you'll spend, and where the money will come from.

That could make what to hold much more obvious. Ones retirement portfolio is a very personal choice.


I do wonder - does your country's social security offer any spousal benefits? In the US, the lower earner is gets to choose between their accumulated benefit or an amount equaling half the higher earner's benefit. After 10 years or marriage, this is true even in the case of divorce.

[WingsOnFire]

That was helpful, thanks!
So I can see from the calculator that 460K would not run out in 40 years of retirement, if I withdrew 15K per year. It is not likely that I will live to past 90 years old though (mom died at 59 and dad at 71). But you never know so I put in 40 years.
If I withdraw 18K per year, there is a 0,5% chance that I run out of money at 75. But then there would be social security.

My own expenses now are under 14K per year (not including DD's expenses and the house and car insurance and taxes because those will be sold).
And since I do earn something from my work, 15K withdrawal should be enough.

Then I tried it with 430K but with 7K extra income (be it from work or social security in later years), and I could spend 21 K safely.
With 430K and 3K extra, I could spend 17K, with no extra, 14K
and with 360K and 7K extra income I could spend 19K safely.

In conclusion, yes I can live off of this amount of assets even if I earn nothing, which is not the case as I do earn something, just not much (though I'm trying to get more done and sold).

It certainly doesn't guarantee a lavish life, but I don't want a big home and lots of stuff to clean and take care of and I'm not into expensive "experiences" like traveling a lot. A lovely thing in the summer is to take a thermos of coffee and head to a quiet beach nearby, or go for evening swims (and in Finland you can go swim in the middle of the night in summer if you want to as it's so light). I live in a town by the sea and we also have several different types of lakes close by. I love it! In the winter I'm not very outdoorsy at all. I used to snowboard in my twenties but haven't done that in a long time. I also used to ride and do stable work when we had the horse. Now I mostly enjoy reading, knitting, sometimes baking, listening to podcasts, simple things that are mostly very cheap (though yarn can be expensive but I'm committed to only buying yarn for my next project and not hoard..)

I of course also enjoy my work when I get into it, and sometimes I do some work for free, like I recently translated a book and I'm an admin at one discussion group which includes writing something there about three times a month.

[Scott 2]

I notice the draw down percentage you are using is substantially lower than the time horizon in your initial post. It doesn't sound like you're comfortable running the portfolio to zero. Me either.

The other big question to answer, is what's your tolerance for volatility. My guess is low. But do you have a sense of what that means? The trade between returns and risk? The implications of current high US valuations, if you choose to invest there?

You might play with the portfolio charts site, to start feeling that out. Àn example:

https://portfoliocharts.com/portfolios/ ... erformance

Ignoring fluctuations in the portfolio is harder when you must sell some each year. Can you lose 25% in six months, then be chill with pulling another 3%? If not, what's the plan? When do you execute it? I took next year's cash out now, for instance.


There's a strong US bias towards much if the retirement material online. Dunno how that translates to Finland. I'd imagine it's especially weak when talking tax optimization. Where to hold each asset in that $450k portfolio, to minimize the cut your government takes? In the US, dividends and capital gains are taxed differently, beyond the variety of retirement accounts.

Many retirees are paying zero tax on their investment earnings. Can you?

[WingsOnFire]

I do get that high risk investments have more return potential, but not guaranteed of course. I'm not sure about my risk tolerance, but I don't think it is particularly high.

Dividends have 25,5% tax (for under 30k a year) and from sales the tax is 30% a year (for under 30K).
It seems like it would make sense to invest mostly in solid dividend stocks. The risk of having to sell at a loss would be much smaller.
(My work income would provide some flex as well.)
If I lived to 80ish, I think I would definitely be comfortable then to start running the portfolio down if needed, as I would not expect to live that many more years.