Cashing in Investments Can Help Fund Retirement Opportunities
Recently I found myself fondly looking back at the time spent at my first job right out of college.
There are a lot of memories that come to mind, but one stands out in particular - filling out the paperwork for my first 401(K). I was new to the corporate world, and the idea of saving for retirement was a completely foreign concept. Here I was, at the ripe age of 22, feeling like 40 years was a lifetime away. Now that I’ve chipped away at a portion of those 40 years, I’m thankful that I fell into saving as soon as I did.
Whether you’ve been thoughtfully saving for retirement since before you even knew you wanted to, or just jumped into the game, it’s important to note that everyone has a different idea of what their ideal retirement looks like. Some may want to embark on an encore career, slipping into an industry they’ve always dreamed of being a part of. Others may want nothing more than to travel the globe, taking in the sights and sounds of exotic locales. Whatever your end goal, if you’re nearing retirement age I’m sure there’s one thought on your mind - how will you fund it?
If you were smart enough to build a diverse retirement portfolio, chances are you’re the owner of an array of different investments. There are classic retirement planning investments such as 401(K)s, IRAs, annuities, and so on. There are also plenty of investments that aren’t limited to, or considered a large part of, retirement planning. You may own a collection of stocks, bonds, property, or other assets. Regardless of what mix of investments you have, it’s important to prioritize your asset liquidation so you can make the most of your money.
Cost to Maintain & Tax Implications
Generally speaking, you want to keep two main things in mind when liquidating your assets: the work involved in maintaining your asset, and the tax implications of liquidation. The work involved in keeping a certain asset depends on the particulars of the asset. For example, if investment properties make up a large part of your investment portfolio, you may find yourself inundated by tedious landlord duties such as home repairs and tenant management. If you’re involved in real estate, but not at the property level, you may find yourself in possession of one or more private mortgage notes. While this type of investment is generally more hands off, you are still reliant on the consistent, timely payment from the payer. Choosing to sell property, or a mortgage note, may help provide liquidity as you embark on your retirement journey. After weighing the work required to maintain your investments, you want to make sure you liquidate assets in a way that makes the most sense from a tax perspective. Basically, you want to create the most tax efficient income as possible. This means cashing out assets with long term capital gains first, since those rates are lower than income tax rates.
No matter what plans you have in store for your retirement, it’s important that you make decisions based on what’s best for you. Remember that some assets may provide more long term benefit in tact, rather than liquid. And, as always, it’s a good idea to consult with a tax or retirement attorney before making any decisions.