Fellow Moparians, Any Investment Diversification Advice?

[captcolour]

@captcolour great reply and my setup currently mimics yours almost identically. Indeed the 20% I referred to is my approximate income tax rate, yet it’d be a pretty stiff voluntary penalty to suffer (saying I pulled 1/4 to 1/2 to invest in rural land). My financial guy says it’s only possible to shift into land by utilizing trusts, whatever that involves, but he says it’s insanely expensive. I’m also deferring SS until age 67 unless an emergency arises.

On the question of SS, I think you need to be careful here.  Don't want to make this political but Washington has talked about for several years capping/reducing the amount of SS based on any pension and/or 401K investments a person has when filing.  This is a very real possibility now so I filed for SS already since I'm 62.  I figure those already in the system would be grandfathered so my amount won't be touched.  Your situation is different since a young pup at 59 .  If this capping happens, will likely happen in the next 2 years before you can file so you will see the new rules.  If these new SS rules go into effect, at that time it might make sense to take a bunch of money out of the 401K to buy land, take the income tax hit, if it helps you with increased SS.  Depending on the formula that is put into place, might help you or make it more of a wash.

[captcolour]

@captcolour how do you like Kentucky? Thats one of the states we’re looking to escape Illinois to. Tennessee and Missouri are the others being considered. Right now, Missouri is tempting us for several reasons.

I've been in Kentucky now for 34 years so it is home.  Live in Northern Kentucky, about 30 miles South of Cincinnati.  It is great because you have a city pretty close but a lot of country.  Closer to retirement, people are supposed to downsize.  We went from a subdivision to buying 41 acres about 7 years ago.  Had our retirement house built on the property (2,400 sq.ft ranch), a 40x60 pole barn, and just in time for Christmas 2020, built another house for my daughter and grandkids on the front of the property.  She's divorced and they were living with us for about 2 years, so had to do something!  So we have a pretty good set-up here.

KY doesn't tax SS income at all, and doesn't tax the first $31K of pension, 401K, IRA income so pretty retiree friendly.  State income tax once it kicks in is 6%.  Property taxes are relatively low, sales tax is 6%, but you pay personal property tax on vehicles every year.  When I paid the 2020 registration on my 2017 F350 dually, it cost almost $500.  On the flip side, the '70 'cuda with historic plates cost me 62 cents!  I've always said states will get your money one way or another.  Some states more than others in total.  Tennessee for example doesn't have state income tax, but sales tax is like 9% and property taxes are higher.

[7E-Bodies]

@captcolour your situation sounds exactly like what we plan to do as well as what we currently have in this horridly ran state of IL. Paying almost 8k in property taxes, sales tax at 8-10% depending on county, roads not fit for ATV's, $150 annual plates (I think...and my trailers are $118). Rumors abound that next year will bring pension taxes. Any new community members in KY, TN, or MO can be fully assured we wont be bringing bad concepts from a bad state as we intend to escape what is encroaching upon us here. My current shop is amazing and will be the hardest thing to leave, also a 40x60. We'd be looking to the Amish perhaps to build another on a new property, a few years before building a house. On a deathbed promise (literally), we are waiting to get our daughter through the local private high school before we can leave the area. Some of the folks in our area are already grieving our plans, but it simply has to be. We'd be interested in 20-50-? acres rural, yet not far from town(s). I just wish there were a way to swing the income tax concept with 401k/IRA withdrawals to get the land ahead of the sale of our current place. It'd be nice to have something already established prior to selling here.

[captcolour]

Kevin, does your 401K give you the option of borrowing against it?  Would be a way to access it without a tax hit.  You basically pay yourself interest back into the 401K.  Investors say don't do it, but in your situation, may be the perfect thing to do.  For some 401K loans, the money you repay goes in as after-tax, so helps build that pool of money some.  With my 401K, if buying property, can get a 15-year loan.  I used this for down payment money on this property I bought because my current home wasn't on the market yet.  Similar situation.

[7E-Bodies]

Excellent thoughts, and coincidentally, my investment guy just called as you wrote this reply. He's very much behind our ideas and highly confident in our doing this. I'll mention your idea to him but for now, he says the taxes would be a wash in the long run and is basically giving me a green light. He's also a friend and neighbor. Our kids grew up together so there's a deep trust.

[mopartaz]

I do a conversion from my traditional IRA to a Roth every year only problem is the taxes payed now.
I have mostly mutual funds ,, I'd look into  Morgan Stanley inst. discovery (MPEGX)  It seems to be doing well.
Started to invest into the EV market a little also.
Is anyone into the crypto? I just signed up on Coinbase.

[7E-Bodies]

A buddy bought six Bitcoins when they were $318.00. He figured he could afford to lose $2k. He tried to get me to do it also. I thought it was insanity. Oh well.

[Jay Bee]

OMG, I had to lookup the worth of 1 Bitcoin
On Feb. 22/21 @ 3:09am UTC - 1Bitcoin = $56,915.10 USD

[7E-Bodies]

Yyyyyyyep. I know. 

[challengermaniac]

This has been a very positive and helpful Off Topic discussion everyone.  Thanks for continuing to share your thoughts and experiences. 

Now are we all moving to Kentucky or what!

Ps;  I can vouch for having rental homes as I have two.  When purchasing I solely looked at rental income to loan payment.  Over the past five years each of my rentals has appreciated $50k annually, so location, location, location is critical!   

[RSI700VIPER]

Excellent thoughts, and coincidentally, my investment guy just called as you wrote this reply. He's very much behind our ideas and highly confident in our doing this. I'll mention your idea to him but for now, he says the taxes would be a wash in the long run and is basically giving me a green light. He's also a friend and neighbor. Our kids grew up together so there's a deep trust.

Most 401Ks allow you to begin withdrawing funds at age 59 1/2. 

[JH27N0B]

There's actually a rule where you can take money out of a 401K at age 55 penalty free, if you've left employment at the company you have the 401K in and we're in the plan at least 5 years.
I've been looking at putting some of my savings in TIPS funds.  With our government throwing huge amounts money around like there's no tomorrow, I'm fearing we are going to end up with a lot of inflation soon, like we had in the 70s and early 80s.  TIPS are inflation adjusted treasury securities that are supposed to adjust in value for inflation.
I too am hoping to move to Kentucky or Tennessee soon.  If inflation doesn't destroy my retirement savings, Illinois will figure out a way to tax it away from me! 

[Skdmark]

I'm glad I had an opportunity to have a job transfer out of Illinois 15 years ago to SE Wisconsin. Company paid move.
Been trying to get my mom to move out of Chicago for about the last 12 years.

While I have 13-15 more years to go before retirement, I'm always curious to hear strategies from others.

[captcolour]

Most 401Ks allow you to begin withdrawing funds at age 59 1/2.
[/quote]

Penalty free yes; tax free no.  Taxes will kill you if you wanted to take a large chunk out in a given year to buy or pay down a mortgage.

[7E-Bodies]

Exactly, @captcolour. And I'm at 20% so I'm just looking at hedging into a large parcel of rural/farm ground outside of Illinois to eventually build on when we sell out here in 4 years.