Would Appreciate Some Help, Want to Invest For Income

[james.hendrickson]

Hi PF Forums Community,

I'm looking at being able to invest for income this month. Finally - I hit my debt payoff and retirement contribution goals, so I'd like to start investing for income outside of my retirement accounts.

Are there particular stocks you like?

Or particular strategies you like?

Looking forward to the communities thoughts.

[disneysteve]

What's your goal here? Whether investing for income ever makes sense is a common topic of debate. Many are of the opinion that you're better off focusing on total return and just selling shares when you need cash. If I'm not mistaken, you're relatively young. It isn't that common to be looking for income investments prior to retirement.

Personally, I'm still not 100% sure where I stand on this issue. I like the thought of having a "fixed" income portion to my portfolio, but I can't deny that over time, the growth portion has always outperformed, even when you include the down market periods. We do own VYM - Vanguard High Yield Dividend fund. We have a small position in individual corporate bonds. We have some dividend-paying stocks. And we have a lot of money in bond funds (BND, VBTLX). But I'm still not convinced we shouldn't have a lot more in equities, even as we near retirement.

[james.hendrickson]

What's your goal here? Whether investing for income ever makes sense is a common topic of debate. Many are of the opinion that you're better off focusing on total return and just selling shares when you need cash. If I'm not mistaken, you're relatively young. It isn't that common to be looking for income investments prior to retirement.

Personally, I'm still not 100% sure where I stand on this issue. I like the thought of having a "fixed" income portion to my portfolio, but I can't deny that over time, the growth portion has always outperformed, even when you include the down market periods. We do own VYM - Vanguard High Yield Dividend fund. We have a small position in individual corporate bonds. We have some dividend-paying stocks. And we have a lot of money in bond funds (BND, VBTLX). But I'm still not convinced we shouldn't have a lot more in equities, even as we near retirement.

Thanks DisneySteve, I'll mull that over.

[Jluke]

Why would you want to throw off income that can be taxed?

[Singuy]

Currently my go to are two reits, "O" and "SRET". Both have yet to recover from my pre-pandemic levels so their dividends are pretty good. O pays out dividend monthly. My other go to is probably high yield tax exempt ETF.

[disneysteve]

Why would you want to throw off income that can be taxed?

Exactly what our CPA told me at our recent meeting. He advised me to stop adding to any income-generating positions outside of tax-sheltered accounts and only put money into growth stocks/funds to limit the taxes.

[james.hendrickson]

Why would you want to throw off income that can be taxed?

Good point Jluke! Thanks for the comment back.

[Jluke]

BRKB (no dividends)
VTI (dividends, but tax efficient)

[Drake3287]

Year's ago I did the same as you, I simply had some extra cash after hitting all my saving goals so I put $50,000 over a few years into a Raymond James Financial "hobby" type account, buying various stocks that I liked such as Apple, Disney, Starbucks, BofA and the like. I haven't invested a penny more since that original $50k and it's now worth around a quarter million.

The problem now is that I have this nice tidy $200k profit sitting there waiting to be taxed! I know lots of people would love to have my problem but I should have been more careful with future tax consequences. I also have a 401k and 457k plan to deal with also at some point. At least my cash is free and clear and was taxed as it was earned.

[disneysteve]

The problem now is that I have this nice tidy $200k profit sitting there waiting to be taxed!

Yeah, we have that "problem", too.

I plan to use some of that stuff for charitable giving. Earlier this year, we donated a few thousand dollars of stock that cost us next to nothing. Our cost basis was about $7.50/sh. It was $62.00/sh when we made the donation. It was money we were going to give no matter what. Using the stock instead of cash saved us a bunch on taxes.

In retirement, I think we'll also be able to take advantage of the 0% CG bracket to an extent. If we keep our taxable income under 106K, we can do that.

[bjl584]

You used to own rental property.
Any thoughts about jumping back into that?

[james.hendrickson]

You used to own rental property.
Any thoughts about jumping back into that?

BJ - yes, and I need to save up a downpayment.