Bogleheads.org is a great resource. But for me the ER forum and their FIRE calculator has been more on the point.
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Early retirement strategies
- Thread starter hobbes
- Start date
adiggs
Well-Known Member
I love the comment!
But since you'd already earned at least 1 of every other thing, I added the Disagree just so you'd have the sweep.
Everybody needs a reaction sweep at least once in their life
adiggs
Well-Known Member
He´d tell me to sell most of my TSLA and diversify, no? Not ready to do that yet... But maybe I have a wrong imagination of financial advisors, maybe it wouldn´t hurt after all. I can still not listen to him
I've been working with a couple of financial advisor / planners (different reasons leading to both), and yes - they're advising "sell TSLA, lock in those amazing hair on fire risky gains, and diversify". They don't actually say hair on fire risky, but they're thinking it
I ignore that advice, and have found them very helpful for understanding different mechanisms for getting money out of IRAs, figure out expenses in retirement, and asking a whole bunch of questions that help prepare for retirement - not all of which I had thought of.
I don't recall where on these TMC Forum threads I found this info, but it appears to be an awesome way to get some cash from a large pile of TSLA shares.
The goal: HODL forever--never sell a share.
This first link is one company I've found and I'm working to get a quote from them (NO idea if they're any good; just FYI). The second is from one of our brokers, TD Ameritrade, as their rates are jaw-droppingly low, nearly free money; see for yourself . . . .
Asset-Based Loans & Mortgages - Griffin Funding
And:
Securities Based Lending - Collateral Lending | TD Ameritrade
(Note: Libor 30-day rate is about 0.15%, and has been remarkably low for a lot of history.)
The goal: HODL forever--never sell a share.
This first link is one company I've found and I'm working to get a quote from them (NO idea if they're any good; just FYI). The second is from one of our brokers, TD Ameritrade, as their rates are jaw-droppingly low, nearly free money; see for yourself . . . .
Asset-Based Loans & Mortgages - Griffin Funding
And:
Securities Based Lending - Collateral Lending | TD Ameritrade
(Note: Libor 30-day rate is about 0.15%, and has been remarkably low for a lot of history.)
This is how Musk finances his personal lifestyle. He lives like a billionaire and pays no taxes because he never sells anything and collects no salary.
FYI: Info from TD Ameritrade "TD Bank" initial reply to my query re: collateral lending.
It almost feels that this is TDA's invitation to transfer our accounts to Interactive Brokers?!? You'd think that if they were serious about keeping us, they'd make an effort to match their margin lending rate, no?
We would love to assist you with a collateralized Line of Credit using your taxable accounts at TD Ameritrade. I have included two links for additional information on how TD Bank's collateralized lending program works. This should answer many of your questions.
We do try to match our competitors rates if they happen to lower, with the exception of Interactive Brokers. Our rates on commitment amounts $1MM- $2.999MM is 2.15% + 30 day Libor and $3MM + is 1.50% + 30 day Libor.
It almost feels that this is TDA's invitation to transfer our accounts to Interactive Brokers?!? You'd think that if they were serious about keeping us, they'd make an effort to match their margin lending rate, no?
We would love to assist you with a collateralized Line of Credit using your taxable accounts at TD Ameritrade. I have included two links for additional information on how TD Bank's collateralized lending program works. This should answer many of your questions.
We do try to match our competitors rates if they happen to lower, with the exception of Interactive Brokers. Our rates on commitment amounts $1MM- $2.999MM is 2.15% + 30 day Libor and $3MM + is 1.50% + 30 day Libor.
So this would be about 2.3% rate on loans between 1 to 3MM, correct? Fidelity is almost 6%!!
Might be time to look for alternates for us.
If you are price shopping look at Schwab as well if you fall in the 2.5M to 3M range: Pledged Asset Line® | Schwab Bank | Charles Schwab
Loan Value Of Collateral at Origination Interest Rate Spread
$100,000 to <$250,000 4.50%
$250,000 to <$500,000 3.25%
$500,000 to <$1,000,000 2.75%
$1,000,000 to <$2,500,000 2.25%
$2,500,000 and above 1.75%
(The spread is the amount over the one month LIBOR you pay.)
FYI: There's an easy to use calculator on here which tells you exactly what your rate will be for the amount borrowed; very useful, and damning for TDA and others as the rates are about HALF of what the others charge. On a 7-figure loan that's huge, esp. over time . . . and, yes, I'm "frugal" which is why there's so much in the account in the first place
Interactive Brokers Margin Rates
The only catch that I'm aware of is that IBKR used to (or still?) have special requirements for margin with TSLA shares. (Anyone know if that's still the case?)
Yes its still the case (I've had to just buy a cheap Put to keep my portfolio margin limit in check). The published margin rate from IBKR for TSLA is 40% but the actual rate is much higher, something like 75%. This adds a House Based margin requirements above the standard rate, specifically for TSLA. I believe it may be based on their Collateral Value Pricing (CVP) policy that lowers the cost value of TSLA shares that you can borrow against.
This Reddit post provides some explanation of the CVP policy: https://www.reddit.com/r/teslainves..._for_ib_investors_tsla_margin_rate_currently/
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Thanks for the link! Been trying to understand IBKR margin since I switched from Fidelity. May have to migrate another account to take better advantage.
I hope this is the right place for this question. Roth IRA thread is closed.
I like the idea of moving some TSLA to a Roth, but would have to create a backdoor conversion.
Can I transfer some stock this year (paying income taxes on it, naturally) and some in future years? Or even multiple times in a year? (dollar averaging)
If I only get one shot this year, I better think about it carefully.
If I only get one shot in my liefetime, I really better think about it!
TIA and sorry my google-fu skills failed me. Am hoping someone here has done this, or happens to know, and yes, I get and accept “not an advice” and ymmv.
I like the idea of moving some TSLA to a Roth, but would have to create a backdoor conversion.
Can I transfer some stock this year (paying income taxes on it, naturally) and some in future years? Or even multiple times in a year? (dollar averaging)
If I only get one shot this year, I better think about it carefully.
If I only get one shot in my liefetime, I really better think about it!
TIA and sorry my google-fu skills failed me. Am hoping someone here has done this, or happens to know, and yes, I get and accept “not an advice” and ymmv.
The Raza
Member
Maybe I'm misunderstanding what you're trying to do - but I don't believe a "backdoor conversion" would be ideal with already purchased stock. A Roth Backdoor conversion is used when someone makes over the Roth Contribution limit ($139k in 2020 for individual) but wants to take advantage of an IRS loophole to still stuff $6k ($7k if you're older than 50) into their Roth IRA anyways.
They do this by first opening up a traditional IRA and funding $6k from their bank (post-tax dollars) and then immediately converting that traditional IRA into a Roth IRA. While that $6k is undergoing the conversion process, it should really be in a money market fund - otherwise you'll have some tax work to do on gains / losses next year. I've done this with Vanguard and the process is fairly easy - but I've not done anything related to stocks in the conversion. I believe another simplification for tax purposes is to have no open traditional IRAs for this backdoor process to work.
If you already have a traditional IRA accounts (say because you rolled your prior employment 401ks together) with stocks, I'm not sure how much benefit you'll get by only converting a portion of that traditional IRA to a Roth IRA.
And you don't get one specific shot in your life time, you can do backdoor Roth conversions every year. This link may help you.
Backdoor Roth IRA 2020: A Step by Step Guide with Vanguard
adiggs
Well-Known Member
Has anybody else tried to leverage Fidelity into providing them with significantly better margin rates than their published rates?
I'm finding the idea of a margin loan over outright sale of shares might be a valuable addition to my collection of tools for generating a living until age 60 and I have full access to my retirement accounts (which can then take over for a margin loan).
But paying 6-8% doesn't appeal to me.
I'm hoping others have done this, with success, and can tell me (us) about what they did. Otherwise I'm just gonna call the financial advisor they assigned me and have a discussion.
I'm finding the idea of a margin loan over outright sale of shares might be a valuable addition to my collection of tools for generating a living until age 60 and I have full access to my retirement accounts (which can then take over for a margin loan).
But paying 6-8% doesn't appeal to me.
I'm hoping others have done this, with success, and can tell me (us) about what they did. Otherwise I'm just gonna call the financial advisor they assigned me and have a discussion.
Thanks, I have 401k at my employer, which I will just let ride. I have a rolled-over account which is where most of my TSLA is, and then I have a traditional IRA (funded with after-tax dollars, so gains would be taxed proportionally when I take distributions). My Schwab guy just said I could roll over stocks directly, so sounds like it would just be up to my accountant to calculate however much needs to be taxed as income.
If I were you, I would print these out and bring them with you.
Nothing like the implied, "I'm closing my accounts and moving them elsewhere" to get their attention.
Please let us know how it goes as we too are in this boat!
Interactive Brokers Margin Rates
(Tip: Plug in your account balance to see your actual, very low, interest rate. Then print.)
And:
Securities Based Lending - Collateral Lending | TD Ameritrade
Closest thread I could find.
I’m curious what others here who are homeowners with mortgages are thinking. I could pay off my mortgage with my TSLA gains. I’d have to sell 25% of my shares. And my mortgage rate is now 2.75% thanks to a refinance at current rates.
So on one hand the no mortgage payment would be life changing but it would come at a cost of selling 1/4 of my TSLA position. And the low rate vs. future TSLA growth... so curious what others may be thinking.
Not making any move just yet...
I’m curious what others here who are homeowners with mortgages are thinking. I could pay off my mortgage with my TSLA gains. I’d have to sell 25% of my shares. And my mortgage rate is now 2.75% thanks to a refinance at current rates.
So on one hand the no mortgage payment would be life changing but it would come at a cost of selling 1/4 of my TSLA position. And the low rate vs. future TSLA growth... so curious what others may be thinking.
Not making any move just yet...
All (especially @tesla Pilot, @EV forever, @adiggs):
I may be in the position to finally retire (again) early next year, and I’m looking at some options for providing supplemental monthly income from my taxable U.S. E*TRADE portfolio – 90% TSLA and 10% combination of ARKG, ARKF and BPTRX. I’d like to solicit your ideas and suggestions about three strategies I’m considering.
Option 1: Selling shares at opportune times during the year. Margin account would be used to smooth the outflow if needed, but margin total kept near zero. These would all be long-term cap gains, so tax would be 15% for me. The yearly income I would need plus taxes would equal about 15% of my current portfolio. As long as TSLA SP grows >15%/year, this should last forever.
Pros: No debt (as long as margin amount stays small). No danger of margin calls.
Cons: Taxes. Reduction in shares slows portfolio growth potential.
Option 2: Use margin (current max on this account is 40% of portfolio value). Margin interest is 7.95%. I would simply use margin for income. The yearly income I would need plus interest on the margin would equal about 14% of my current portfolio. As long as TSLA SP grows >14%/year, this should last forever. However, the margin amount would continue to grow at a constant rate (but still stay within maximum allowable portfolio percentage).
Pros: No reduction of shares, so greater portfolio growth potential. No taxes. Margin debt not reflected in credit report.
Cons: Debt with moderately high interest rate. Potential for margin call if deep SP hit.
Option 3: Use Line of Credit. Portfolio is collateral, interest rate 3.84%. LOC would be used for income. The yearly income I would need plus interest on the loan would equal about 13% of my current portfolio. As long as TSLA SP grows > 13%/year, this should last forever. However, the loan amount would continue to grow at a constant rate (but still stay within the maximum allowable portfolio percentage).
Pros: No reduction of shares, so greater portfolio growth potential. No taxes. Moderately low interest rate (doubt this is tax deductible interest).
Cons: Debt. Potential for margin call if deep SP hit. Debt would presumably be reflected in credit report.
I have neglected the effect of inflation in all of these options.
Do these strategies make sense? Is one clearly superior? Have I missed any other options?
Thanks for your help.
I may be in the position to finally retire (again) early next year, and I’m looking at some options for providing supplemental monthly income from my taxable U.S. E*TRADE portfolio – 90% TSLA and 10% combination of ARKG, ARKF and BPTRX. I’d like to solicit your ideas and suggestions about three strategies I’m considering.
Option 1: Selling shares at opportune times during the year. Margin account would be used to smooth the outflow if needed, but margin total kept near zero. These would all be long-term cap gains, so tax would be 15% for me. The yearly income I would need plus taxes would equal about 15% of my current portfolio. As long as TSLA SP grows >15%/year, this should last forever.
Pros: No debt (as long as margin amount stays small). No danger of margin calls.
Cons: Taxes. Reduction in shares slows portfolio growth potential.
Option 2: Use margin (current max on this account is 40% of portfolio value). Margin interest is 7.95%. I would simply use margin for income. The yearly income I would need plus interest on the margin would equal about 14% of my current portfolio. As long as TSLA SP grows >14%/year, this should last forever. However, the margin amount would continue to grow at a constant rate (but still stay within maximum allowable portfolio percentage).
Pros: No reduction of shares, so greater portfolio growth potential. No taxes. Margin debt not reflected in credit report.
Cons: Debt with moderately high interest rate. Potential for margin call if deep SP hit.
Option 3: Use Line of Credit. Portfolio is collateral, interest rate 3.84%. LOC would be used for income. The yearly income I would need plus interest on the loan would equal about 13% of my current portfolio. As long as TSLA SP grows > 13%/year, this should last forever. However, the loan amount would continue to grow at a constant rate (but still stay within the maximum allowable portfolio percentage).
Pros: No reduction of shares, so greater portfolio growth potential. No taxes. Moderately low interest rate (doubt this is tax deductible interest).
Cons: Debt. Potential for margin call if deep SP hit. Debt would presumably be reflected in credit report.
I have neglected the effect of inflation in all of these options.
Do these strategies make sense? Is one clearly superior? Have I missed any other options?
Thanks for your help.
Clmason I belive the question is about risk. If TSLA lost much of it's value would you have problems paying the mortgage? Do you sleep well at night when thinking about this?
My answers to these questions are no and yes. So I will keep my mortgage and probably increase it soon. My TSLA shares will be used to finance items from the fun categories.
On the other hand it depends on the size of your investment. If it's ordinary sized like mine - and that is what it sounds like - I'd just keep it as is. But if there is no way you can spend it all you might as well pay down the mortgage.
So how do you sleep?
My answers to these questions are no and yes. So I will keep my mortgage and probably increase it soon. My TSLA shares will be used to finance items from the fun categories.
On the other hand it depends on the size of your investment. If it's ordinary sized like mine - and that is what it sounds like - I'd just keep it as is. But if there is no way you can spend it all you might as well pay down the mortgage.
So how do you sleep?
