I’ll try to keep this brief, although I’m not entirely sure how to frame the question.
Basically, what’s the point in having a high stock balance if:
1) You only feel comfortable spending the dividends that the stocks generate; but
2) You don’t want to earn dividends in an amount above a certain threshold;
3) Regardless, your annual spending needs are below that threshold amount anyway; and
4) Because you want to keep your annual incomes below a certain amount, you will likely never be able to sell any of your stock balance.
——
I’m struggling with whether we should keep investing in stocks, or if we should maintain our cash amounts, based on the foregoing queries and the following problem:
Let’s say a couple has $3,000,000 in stocks in a taxable account and $1,350,000 in cash (plus retirement accounts, but they don’t matter at the moment).
They want to keep their income below a certain amount, and their spending is well less than their income by at least $20,000.
At current interest rates, their yearly income from dividends and interest exceed the desired income threshold by at least $25,000.
Should they keep investing in stocks or maintain their cash holdings?
It seems to me that both options present problems.
With stocks, the dividends they generate pay out less than an equivalent principal amount held in cash (which is good for reducing one’s income), but as the stocks appreciate in value, selling any portion of them results in ever-higher income amounts (which is not ideal).
At some point, I presume, it becomes impossible to sell any stocks without generating a massive tax bill and associated high yearly income, but that point in time may never appear in my lifetime.
With cash, the interest payouts are currently high (not ideal for us currently), and cash loses out to inflation over the long term (which is not good for maintaining a standard of living), but you can easily spend it without affecting your taxable income (which is great at keeping your taxable income low).
At some point, I presume, the cash becomes essentially worthless as time goes on, but that point in time may never appear in my lifetime.
So what would be better: a high stock balance that you may never be able (or want) to access, or a high cash balance?
Thank you.
Basically, what’s the point in having a high stock balance if:
1) You only feel comfortable spending the dividends that the stocks generate; but
2) You don’t want to earn dividends in an amount above a certain threshold;
3) Regardless, your annual spending needs are below that threshold amount anyway; and
4) Because you want to keep your annual incomes below a certain amount, you will likely never be able to sell any of your stock balance.
——
I’m struggling with whether we should keep investing in stocks, or if we should maintain our cash amounts, based on the foregoing queries and the following problem:
Let’s say a couple has $3,000,000 in stocks in a taxable account and $1,350,000 in cash (plus retirement accounts, but they don’t matter at the moment).
They want to keep their income below a certain amount, and their spending is well less than their income by at least $20,000.
At current interest rates, their yearly income from dividends and interest exceed the desired income threshold by at least $25,000.
Should they keep investing in stocks or maintain their cash holdings?
It seems to me that both options present problems.
With stocks, the dividends they generate pay out less than an equivalent principal amount held in cash (which is good for reducing one’s income), but as the stocks appreciate in value, selling any portion of them results in ever-higher income amounts (which is not ideal).
At some point, I presume, it becomes impossible to sell any stocks without generating a massive tax bill and associated high yearly income, but that point in time may never appear in my lifetime.
With cash, the interest payouts are currently high (not ideal for us currently), and cash loses out to inflation over the long term (which is not good for maintaining a standard of living), but you can easily spend it without affecting your taxable income (which is great at keeping your taxable income low).
At some point, I presume, the cash becomes essentially worthless as time goes on, but that point in time may never appear in my lifetime.
So what would be better: a high stock balance that you may never be able (or want) to access, or a high cash balance?
Thank you.
Statistics: Posted by Random Poster — Mon Jul 01, 2024 9:27 pm — Replies 7 — Views 401