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How much $ to retire and how to fund your lifestyle in retirement
- Thread starter dl003
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I think this likely the right thread to post this question. Looking for a sanity check on an investment move regarding TSLA as we close in on our retirement. My significant other and I plan to retire this year, likely by June. We have accumulated a decent nest egg in the 7 digits, which is diversified. We didn’t start investing in TSLA until after the first stock split, despite being a Tesla owner since 2015; there are reasons, but they are not germane to where I’m headed. TSLA is our largest single equity and represents about 8% of our portfolio. Our cost basis is ~$267/share, with shares bought as low as $113 and as high $1050. Not really interested in increasing the overall percentage that TSLA is in our portfolio, but am interested in taking advantage of the lower share price we are experiencing now, and making some incremental returns. One of our financial advisors had suggested, selling covered calls to take advantage of the stock volatility. I was thinking of going a step farther and buying more now to lower the cost basis, sell covered calls reasonably far out, and if they are called, providing the shares that are at a higher price (above the strike price). That would produce a long-term loss, which will be helpful on taxes. We’d end up with the same # of shares at a lower cost basis, plus the $ from selling the calls. Btw, my goal with the TSLA investment was/is, long(er) term appreciation to grow our principal base and/or replenish any future draw downs. We got in too late to put a large percentage of our portfolio into a single stock.
Thanks for any feedback.
Thanks for any feedback.
For a cautious approach re risk, seems a sound approach. But first make sure you understand how to play CC — returns are nice when share price is relatively flat or heading down, but you can lose a good bit if you have sold at a share price you’re unwilling to lose the shares at as it can get costly to rescue ITM CC. Are you reading and learning from the options thread?
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Thanks. I have perused that thread, but until I retire I lack the time and energy to really invest in fully understanding it. Instead, I will rely on our financial advisors to suggest an approach, which I will then give feedback on based on what I do know from reading the main thread weekly (same issue, I don’t have time to read it daily, let alone hourly). For example, when one of them suggested selling covered calls to me back in Oct, they proposed a January 250. I nixed that because I felt the stock would go above it. Lol, it did and promptly dropped, but I would guess that on the way up, the options would have been called. The new twist that I thought of, is buying a new amount equal to the amount of shares we’ll sell calls against.
My strategy is to sell covered calls, essentially against shares acquired at a price that I wouldn’t be sorry if they got called. The thing that I’d get is an equivalent number at a much lower price, plus the $ for writing the calls. Then I end up with the same number of shares at a lower cost basis. And unless my math is wrong, I end up with the same or more $ than I will have invested to buy the new shares, and a tax write-off, and a lower average cost basis.
Just wanted to point out that those two statements are the cognitive dissonance that you're going to have to get over. If the Jan 250 covered calls were exercised against you, then that would've been perfect, since the stock would've been sold and then you'd sell cash-secured puts to try to re-acquire the shares (preferrably at a lower strike price). Allowing you to essentially sell high and rebuy low.
Anyway, retiring and relying on selling covered calls are a comfort-level thing. Retirement should NOT be a time for you to stress out about money issues, nor should selling covered calls be highly stressful.
SageBrush
REJECT Fascism
Well said. I try and remember that options can serve two purposes: to leverage a bet, or to hedge a bet. I consider the former a fool's errand, and the latter a reasonable idea given the right circumstances.
This is a buy-write covered call option which could be a good way to get started, perhaps on 100 shares at a time, until you understand and feel the dynamics of the share and option price relationship.
WOW! Guess Elon aint so crazy after all.... 
finance.yahoo.com
America’s 4 largest car makers all pass on the Super Bowl for the first time in 23 years — and the race to catch Elon Musk could be to blame
Stellantis seemed to speak for the Big Three when it told Fortune that it had to "mitigate the impact of a challenging U.S. automotive market."
I knew Tesla shouldn’t have put that slide in the ER last year showing Tesla sales go up when competitors advertise EVs at the Super Bowl.WOW! Guess Elon aint so crazy after all....
America’s 4 largest car makers all pass on the Super Bowl for the first time in 23 years — and the race to catch Elon Musk could be to blame
Stellantis seemed to speak for the Big Three when it told Fortune that it had to "mitigate the impact of a challenging U.S. automotive market."
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Just keep in mind - instead of hedging your original position by writing CCs (which is what your advisor suggested), you are actually increasing your concentration by buying the buy-write shares (even with CCs against them).
The down side risk here is that you make a few bucks on the CCs but the stock itself drops significantly more than you made on the CCs. I’m guessing your adviset won’t be comfortable with this idea because I think he was trying to get you to decrease your TSLA concentration, not add to it.
Lol, I now get all your points. I am at the “take baby steps,” level. Yes that’s what I will do.
As for @Oil4AsphaultOnly ‘s comment that retirement should not be a time to stress out about money issues - I guess it depends on what you mean. Stepping off the ledge from steady W-2 income to depending mostly on market based instruments income is a little stressful, though I know we are very fortunate. Some people thrive on change and love taking risks. I like some change and to assess the risks before I take the step. It’s why I chose to not follow in my father’s footsteps and be an entrepreneur.. All good advice. Thank you all.
Thanks. Wrt to the advisor (we have 2 - interesting story for a different day), he’s accepted that I am not going to decrease my investment while I believe the long term view still is very strong. I ran my idea by the other advisor and she thought it was logical. I will have to fight myself to not keep the extra shares, but I will sell them or keep writing calls until they get called - because I set a max cost basis in conjunction with my wife about how much we’d invest total in TSLA.
That indeed is a challenge, not letting shares purchased for buy-writes turn into long-term holdings
When you say retire, do you mean living off passive income from the two rentals? Just curious as to the feasibility of retiring at 45 with $475k.
Yes, the rentals are a big help. But I'm also incredibly cheap. Used to be homeless. I can stretch a dollar like not many others. Also, I used to be a car mechanic, so I can fix/repair nearly anything, so that's a huge money saver. And if i have a major major health event suicide will be my escape hatch (I never carry health insurance unless work pays for it, total waste of money, and i have no dependents) . And I'll continue to follow other passions and dabble in interests that make me a little money. And thank you for your analyses as well, mongo, always appreciate your posts.
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