Retirement income generation (RE and Others)

[GoodSteward]

Investing is my strongest subject yet..

*ISN'T! lol it is NOT my strongest subject

[LivingAlmostLarge]

The qualified dividend timing could be a little tricky but you could typically consider it as "qualified" if you own the stock 60 days before the ex-dividend date. After that all following dividends on that lot will be considered "qualified". There's a 121-day holding period and all that but if you plan on just holding the stock and keep collecting the dividend you wouldn't have to necessarily worry about that once you position is established.

A long-term capital gain would probably be easier because it's basically, "Have you held the stock for a year?"

Right but it's shorter than a year isn't it? If you are so involved in the portfolio timing wouldn't it be easier to watch the stocks and determine what positions you want to hold? I can see Feh point but I prefer holding the dividends because i'm lazy and don't want to sell the stock.

Plus with the selling of the stock that can cost you $10/trade. If you are constantly buying and selling it could eat into returns.

[sv2007]

Well, I'm retired.

We used to have a large amount of our assets in RE; it's not bad, but I wouldn't call it passive. Also, there are a lot of sudden expenses such as AC, plumbing repair, etc. that if you don't have good contractor contacts, you may end up paying a lot for subpar work.

While RE has done well for us, earning better than SP500 easily, one of the first things we did after I retired was to liquidate our RE holdings and move most assets into what I call "clean" investment. Clean as in less headaches/ less involvement (which is exactly what we wanted during retirement).

RE isn't risk free BTW. Whenever we have a long RE gain/bubble, people begins to feel RE is the safest investment around. Well, let me just say this: there are some markets (e.g. LV) that's still not yet fully recovered from 2008; and my parents are selling one of their RE investment at $150k loss. So, take care.

[GoodSteward]

The RE that my former boss was interested in was cheaper homes that pulled average rent. He just had a ton of them. I would imagine if you are in RE for rentals you are immune to the market issues, but not to rental issues (bad renters who won't leave or mess up a house)

[kv968]

What you're missing is that if the shares appreciate in price, the shares that did not pay a dividend are starting from a higher price. In your example, the price of a "dividend" share after appreciation is $20, and the price of a "non-dividend" share would be $20.62.

There is no free lunch. The value of dividends is not created out of thin air.

No, what I'm missing is the fact that we're talking about a stock that pays a dividend as to one that doesn't. All I'm saying is that with the need to sell shares to obtain that "dividend" you're losing out on future appreciation due to having less shares to appreciate over time.

Agreed, there are no free lunches.

[kv968]

Right but it's shorter than a year isn't it? If you are so involved in the portfolio timing wouldn't it be easier to watch the stocks and determine what positions you want to hold? I can see Feh point but I prefer holding the dividends because i'm lazy and don't want to sell the stock.

Plus with the selling of the stock that can cost you $10/trade. If you are constantly buying and selling it could eat into returns.

Yes a dividend becomes qualified basically within 60 days (technically 61).

Feh's point is valid in that, all things equal, a stock will fall the exact amount of it's dividend on the ex-dividend date (although it may not always look like it due to trading). And a stock that doesn't offer a dividend won't go down for a distribution since there are none.

As far as tax treatments go however qualified and long-term capital gains are taxed at the same rate so there are no advantages to either approach as far as that's concerned. Of course this is all assuming these are held in a taxable account. If in a 401k or IRA the tax treatment of both long-term capital gains and/or qualified dividends will be treated the same...either taxed at your marginal tax rate in the case of tax-deferred accounts or not taxed at all in the case of a Roth.

And besides being "lazy", there are also the trading costs involved with selling stock as you've mentioned which you wouldn't have with just collecting the dividend.

[james.hendrickson]

The RE that my former boss was interested in was cheaper homes that pulled average rent. He just had a ton of them. I would imagine if you are in RE for rentals you are immune to the market issues, but not to rental issues (bad renters who won't leave or mess up a house)

Yes. The value of rental housing ebbs and flows, but the advantage of real estate is that housing isn't technology dependent - it won't matter if people are using a PC or a Mac or what version of the iphone is currently in vogue. People always need a place to stay and they will pay you to use your housing.

Real estate also has returns which are comparable with the stock market.

[Fishindude77]

I would be very uneasy if stocks and bonds were my only source of income in retirement. We will have; proceeds from a buy out of our business over time, farm income, commercial rental property income, stock dividends from a tightly held company we hold a chunk of, directors fees from a board I serve on, social security when of age and a 401K at some point.

[disneysteve]

I would be very uneasy if stocks and bonds were my only source of income in retirement.

I would think that with the demise of pension plans, Social Security, stocks, and bonds are what the vast majority of Americans live on in retirement. In fact, a study released a few years ago showed that 34% get at least 90% of their retirement income from SS and 64% get at least 50% from SS.

Most people don't have other sources of income in retirement.

Personally, I expect SS and investments to be our only income once I stop working.

[LivingAlmostLarge]

I'm likely the same. We may start looking at RE as an investment if we have more time and money. Right now we have neither.

[Fishindude77]

Most people don't have other sources of income in retirement.

If you have the money to invest in the market, you have the money to invest in other things, just takes some effort.

[Jluke]

Most people don't have other sources of income in retirement.

If you have the money to invest in the market, you have the money to invest in other things, just takes some effort.

Is it really that simple? I can invest in the market on a weekly or monthly basis, but if I invest in real estate I need to come up with a 20% downpayment plus fees, immediately.

[disneysteve]

Is it really that simple? I can invest in the market on a weekly or monthly basis, but if I invest in real estate I need to come up with a 20% downpayment plus fees, immediately.

Of course it's not that easy.

Plus owning real estate is a lot more hands-on than traditional investing. Sorry but I have no desire to have to deal with or worry about tenants, get calls when things aren't working, or have to find myself a competent property manager. That surely not my vision of retirement.

The one thing that the real estate investors here don't seem to grasp is that not everyone is interested in doing it no matter what the financial benefit might be.

[GoodSteward]

The one thing that the real estate investors here don't seem to grasp is that not everyone is interested in doing it no matter what the financial benefit might be.

That is what keeps making me flip flop on even renting the one I'm in if I ever move. I have family who've had problems trying to do that and it was more headache than it was worth. Some do well, some do not. It will take a lot of years to work up enough to even know if it was worth it for me, so I just use the market instead. It's more likely to succeed without the overhead, even if the gains are not as good. If I had more capital I could afford to use I would try it. I just don't has no moneies for it. If the right opportunity came along I would like to at least try it one day.

[Fishindude77]

Plus owning real estate is a lot more hands-on than traditional investing. Sorry but I have no desire to have to deal with or worry about tenants, get calls when things aren't working, or have to find myself a competent property manager. That surely not my vision of retirement.


There are many other types of real estate besides residential rentals. I would agree that residential rentals could be a pain in the rear, however you can get into them pretty cheap.

Commercial real estate rental w/ long term triple net lease = Tenant takes care of everything and pays real estate taxes and insurance. Collect a rent check every month and check in periodically to make sure tenant is keeping things paid and taking care of the place.

Farm ground = Pay the annual property taxes and collect an annual cash rent check from the farmer.