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How to best sell down when retired - and options are not possible

Hi!

Like others here the recent gains have brought me to the fortunate situation that I'll start living off my investments. Incredible to be here so soon! Thank you Tesla, Elon and TMC forums!

On my investment account I cannot use options. So please don't suggest that. I have a Nordnet Zero (IKZ) account. I get my payout in Norwegian Kroner so valuta exchange is another factor here.

So I'm thinking I have two main choices:

1) Sell some shares every month or quarter. Which will be dollar averaging the selling down.

2) Do an Elon and borrow against my investments. And pay interests. Currently 2.99% for me I belive.

And then there are other factors to consider:
  • Perhaps a separate valuta account is useful so that I can sell shares for USD and later exchange into NOK.
  • We all learned about the MMD and friday pushdowns when buying. So the best way to sell is perhaps to avoid the MMD and sell well before the end of week.
  • I don't want to risk any margin calls. So where do I draw the line when borrowing money? 10% or 30% or?
  • When buying expensive items like a car or a house I will use a mortgage to postpone the sale of my shares.

I cannot be the only one reading up on best practices here. What do you guys think?
 
Actually - I moved all my shares from Nordnet to Schwab, and started selling options last year.
No tax were to be paid, since I didn't sell my shares (so they said - havent filed last years taxes yet).
Should be pretty simple to move all or some of your portfolio to somewhere you can sell options.

I know Schwab have closed for new account from outside of US, but Interactive Brokers is an great option (no pun intended).

Edit: But if you don't want to do options (you can), then selling a few shares every month will be the way to do it imho. Same as you do when buying - buy, dont wait for a dip.. just in reverse. ;-)
 
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Christine69420

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Oct 19, 2018
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Congratulations!

It may be a good idea to have a few months of cash income available. So you don't have to sell when the stock market take a dip.

Or maybe you have other income like from a pension then this may not be necessary if you can manage on your pension income alone when the stock market dips.

My plan is to do exactly what you outline. Sell a few shares each month. I thought about selling once a year but I believe the risk of selling on a bad day is less if I spread it out and sell every month.
 
Actually - I moved all my shares from Nordnet to Schwab, and started selling options last year.
No tax were to be paid, since I didn't sell my shares (so they said - havent filed last years taxes yet).
Should be pretty simple to move all or some of your portfolio to somewhere you can sell options.

I know Schwab have closed for new account from outside of US, but Interactive Brokers is an great option (no pun intended).

This is probably helpful for others. But for me learning about options sounds like too much work. And that is what I retired to avoid doing! :p

And if you want to know more about options in retirement then look here

Early retirement strategies

But I want to find other ways of financing my retirement. Hence this thread.
 
Or maybe a credit limit at my broker can be used in these situations?

I plan to get one approved. I just haven't decided how much I should get. Definitely less than 50% - perhaps 20% could be reasonable?

A credit limit sounds like a great idea. 2.99% Tesla will absolutely kill that, just in monthly growth for a decade to come. :)

I'd go full credit (ior what you need in a year)- and sell shares once in a while to reduce used credit when there are obvious run-ups ahead of news.
 

Christine69420

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Oct 19, 2018
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I have been reading about borrowing against TSLA on Nordnet. They have stricter limits on how much you can borrow if you like me have 99% in one stock only.

Verdipapirbelåning - Øk handlekraften din

I would guess other brokers have similar limits.

So then the important question for me is how much must the share price go down before I get into trouble?

Edit: I agree with Runar that Tesla will beat the interest rate for years to come. But general stock market crashes like the one in March 2021 is still a risk.
 
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Christine69420

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Oct 19, 2018
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1) Sell some shares every month or quarter. Which will be dollar averaging the selling down.

Dollar averaging is selling for a specific amount each month isn't it?

My plan is similar - but also in very early alpha and may change when I learn more about this.

I simply divided the number of shares I have by the number of months until I assume my old age pension should be sufficient. So I get a fixed number of shares I sell each month.

On the plus side:
  • Simple to understand
  • I don't run out of shares earlier than planned
  • The stock market should appreciate more than inflation so that should not be a problem
Challenges:
  • If the share price swing really low then my income that month will be less than I may be used to
  • I will eventually have sold them all
Tweaks:
  • I can sell more aggressively when starting out to get a buffer several months worth
  • If I don't use all my money I can skip selling a month (or several) until I need to
 

kanweg

Member
Jun 11, 2020
538
5,089
Europe
My plan is
- eliminate all margin and sell a bit more than that to live for say 6 months. This is when I quit (almost did it last month, but the market turmoil and drop of the SP stopped me.
- if there is a crash, buy stock on margin. Don’t use the full margin so that I can borrow money to live off while the market has not yet recuperated. If the market bounces back, sell the additional shares to bring margin back to zero and use the money earned to live off a bit longer without having to sell core shares.
- if the market behaves, sell stock while it is high.

I plan on retiring early, which will be a period of several years with no income yet quite a bit of (wealth) tax. Have considered using margin for that. Shares sold early don’t yield as much as the same number of shares sold later. Makes it harder to follow the above strategy, though,

I’d love to follow a less risky strategy by investing in ARK, but it is not available at this side of the pond.

Any comments are appreciated.
 

UkNorthampton

TSLA - 12+ startups in 1
Jun 15, 2019
1,108
8,926
Northampton, England
UK - so not a Scandi

Most TSLA is in ISAs, some in SIPP (Pension)

ISA - limits on contributions, no tax on withdrawal, no tax on dividends - you paid tax before putting in, options hard/impossible

SIPP - pay in net & government tops up to gross salary type figure (simplified description), limits. Income in retirement is taxable above certain limits and 25% up to £250k can be taken tax free - finer details when I get closer to retirement as rules often change. Can retire at 55 earliest. Options hard/impossible

Neither can be pledged for loans (technically can some argue, but not found any company to loan).

Few ISA holders have much money. One of UK's largest providers (HL) says it has 300 millionaire ISA holders. The same company suggests in various articles that 1500 SIPP (pension) millionaires in UK (my interpretation articles hints).

I think the best idea for me is to sell as and when, reverse pound/dollar cost averaging.

I'd like to retire early, or be part-time with lots of travel (when possible) but do it cheaply as I tell myself that selling £1 tesla now is like selling £10 in future.

Can't afford it yet, $TSLA would have to rise quite a bit.

I have a simple spreadsheet model of this with inflation, shares, shareprice & expected Tesla increase. I see how many shares I have to sell each month and ensure that I don't run out of shares in 50 years (acts as inheritance after I go), or do goal seek to see what inflation/shareprice growth is needed.

When I feel confident that I've got a lifetime of shares, I'll retire, probably diversify, start to sell a MAX number of shares each month & live accordingly. Stock market crash and I'm on cheap living for a while (easy for me). Importantly, selling shares doesn't incur tax liability if sensible.

What I have done is borrow money at various interest rates. Loans (2.9%-7.9%), credit card (13% APR & lose interest free period of up to 56 days). All will be paid back at some point, but seeing $TSLA on sale - I can't bring myself to sell when I can buy. All manageable amounts. I've generally avoided debt all my life, but I've now embraced it to a low-typical level of my peers. Unfortunately, I can't seem to access really cheap debt at the moment (actually we - as wife doing same but with higher rates). The UK has changed loan rules to be based on income rather than assets (especially when bank doesn't consider the assets to be in a wrapper they can secure against).

Any ideas appreciated. It might be that I do options in different accounts, but when I'm retired, I want to just travel & relax.
 
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Christine69420

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So now I have been trying this retirement lark for a few months. And the stock marked decided to take a dip.

In case it can help anyone or start a nice discussion on strategies;

What I ended up doing so far:
- Sold a few shares in January and February - enough to live on and to start building a buffer against stock market dips
- In Mars I withdrew a smaller amount using a line of credit at my broker - smaller since had a small cash buffer
- In April the share price has to climb above $736 for me to sell shares. If not I use my line of credit

My guidance for when to sell a few or use my own buffer or the line of credit is simple:
- If share price matches MA(50) or higher sell a few shares - enough to live on and to grow my cash buffer
- If share price low and have a cash buffer draw from that
- If no cash and a low share price use line of credit
- Last resort: If all other options exhausted sell a few shares but try to sell as few as possible
 

kanweg

Member
Jun 11, 2020
538
5,089
Europe
I’ve just written a nice letter to my boss (did that in January also, but didn’t have the guts to pull the trigger then. If only I had.) so am quite interested in this topic. My situation is similar to yours and the plan is the same, except that I’ve considered to sell a bit more when I think the stock is high (like it will be next week), and buy back when it is lower again. If it doesnt drop, I was happy with the sales price anyway. If it does drop and doesn’t rise quickly enough, draw on the line of credit and wait it out.
 

TheTalkingMule

Distributed Energy Enthusiast
Oct 20, 2012
9,096
43,071
Philadelphia, PA
I'm essentially living off covered call premiums for the past 4 months. In the US it was permitted in 2020 to withdraw up to $100k from retirement funds, so I sold long dated covered calls at very high strikes and pulled the cash from my IRA(retirement account). Selling January 2023 $1300c options means I may be forced to sell some shares at $1300 within the next year and half, but I'm fine with that if it happens. $1300 share price represents a $1T+ market cap which was about my medium term goal to sell half my shares anyway.

This one time operation netted me about $18-26k per contract and if they execute I'll simply have $130k cash per contract when forced to sell any 100 share bundles. Do the math. It is absolutely worth the time and effort to research selling covered calls when planning to sell. There is no down side if you're selling them at the right time, and we may be heading back to all-time highs soon.

Selling $1500 March 2023 covered calls net you a premium of $11k as of Thursday, and probably closer to $16k if the share price of TSLA gets back around $800.

If the timing worked out and you had enough shares to start with, you could live off the covered call premiums alone for years and not sell a single share! Switch brokers, watch a bunch of YouTube videos, ask for advice here. It's not intimidating at all once you figure it out.
 
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I'm essentially living off covered call premiums for the past 4 months. In the US it was permitted in 2020 to withdraw up to $100k from retirement funds, so I sold long dated covered calls at very high strikes and pulled the cash from my IRA(retirement account). Selling January 2023 $1300c options means I may be forced to sell some shares at $1300 within the next year and half, but I'm fine with that if it happens. $1300 share price represents a $1T+ market cap which was about my medium term goal to sell half my shares anyway.

This one time operation netted me about $18-26k per contract and if they execute I'll simply have $130k cash per contract when forced to sell any 100 share bundles. Do the math. It is absolutely worth the time and effort to research selling covered calls when planning to sell. There is no down side if you're selling them at the right time, and we may be heading back to all-time highs soon.

Selling $1500 March 2023 covered calls net you a premium of $11k as of Thursday, and probably closer to $16k if the share price of TSLA gets back around $800.

If the timing worked out and you had enough shares to start with, you could live off the covered call premiums alone for years and not sell a single share! Switch brokers, watch a bunch of YouTube videos, ask for advice here. It's not intimidating at all once you figure it out.
I understand many can profit from options. But those are not available in my investment account. So that is the reason for me creating this thread.

And even if they were available it sounds too much like work for my retired brain. :D
 

MABMAB

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Jun 19, 2019
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weifoph
OK, so first off I think it depends upon your overall financial picture and plans. To answer those questions for myself, I paid attention to the folks at the bogleheads forum. They have specific ways to ask portfolio questions: Asking Portfolio Questions - Bogleheads.org
They also have sections dedicated to withdrawal strategies: Withdrawal methods - Bogleheads
I would encourage you to look at the withdrawal strategies and consider what method best suits you in your life.
It also depends a bit on tax structure of your country and your asset allocation.

What I did pre retirement was add up receipts every month to know exactly what we were spending. I also figured out expected taxes (US based here) and found it difficult to estimate healthcare insurance. If you do not know these figures for yourself, I'd suggest getting them figured out. Some people retire without having a handle on things, they go ahead and retire when they reach some emotional asset amount.

The withdrawal method comes down to personal values, acceptance of pros and cons for each method, along with your risk profile/tolerance.

Here is what we did. The method that most resonated with us was the variable withdrawal method. Variable percentage withdrawal - Bogleheads

IT just made the most sense. With a high equity portfolio one can pull more assets each year. In good years one pulls more assets. In bad years one pulls the same calculated percent, but the dollar value would be lower. Portfolio likely to outlast us. The toughest part of this is needing a certain monthly amount to live on. Without a safety net emergency fund the portfolio withdrawal might not be enough to live on. Pre retirement we changed our focus from saving in retirement accounts to building our emergency fund. Many choose 3-6 months for this, we chose two years. In this manner we can handle extended bear markets. What will you do in your circumstances? There is really so much more to the story as it comes to retirement time.

What I did prior to quitting my job at an earlier age than normal in 2020 was to sell some holdings, the amount of which was based upon the VPW method. I transferred three months worth to our checking account (I quit end of September so the 3 months were for the rest of the year). I also sold enough to finance all of 2021, this amount sits in "cash" in a retirement account. In this way there was peace of mind to cut the cord and have enough money, NO WORRIES. At the end of each month, in addition to adding up expenses, I total assets, do the VPW math, and move another months worth into checking accounts.

Regret minimization can be a good thing to focus on.


Now, to do a better job of answering some of the points you raise.

Sell month or quarterly? Your call, can also do annual. Having funds set aside made this recent bearish price action tolerable. One has to plan in advance for the bad times, they will come again. In the future I will likely sell and transfer monthly.

Borrow on margin? Sure if you want to. I like the debt free peace of mind. Imagine if you did this when stock price was $900 and here we are at 660ish. I'd say emotional turmoil not for me in early retirement. I'm a fan of Elon but certainly don't mimic my investing behaviors after his.

I don't understand the valuata/NOK statement.

I ignore decisions such as what days or time to sell. Some months I do my receipts early, others late. I figure it all evens out. I refuse to agonize over every decision. FYI, this month I did finances early, as a result less money was pulled than if I waited until end of March. If you want to be sure to avoid start or end of market day emotions, set orders to sell at closing or VWAP price. Volume Weighted Average Price (VWAP) Definition.

Who offers advice to go on Margin to fund retirement? I bet they are not older. No F'n way! Again, an individual choice with risks and rewards. I've had enough failure in the market to not want to feel bad with any further problems.

We had some mortgages and a finances M3. But if one goes full tilt with debt and margin, a bad market creates difficult spots to get out of. Emotions can create hasty moves. One might need to sell stuff just to sleep. While we sleep well, the emergency fund has grown large enough we are likely to pay off ALL debt in coming months. Debt to asset ratio can be an interesting metric to track. We retired with debt being <5% of assets.


In the big picture of things, I think the timing of buy and sell decisions can be very tricky to master. Large funds likely have to sell into bullish sentiment while share demand is high. They can then buy when sentiment is low, dropping the price further by dropping their bids. Perhaps keep track of how you view market sentiment, sell when prices are high, when emotions are very bullish. For example, back when TSLA was near $900, the 200 day moving average of the share price was MUCH lower. When share price is 200% of the 200 day average, I like to be cautious. But you have to be a wizened student of the market to make such moves.

What do I think overall? Eh, absent other evidence, I fear you might be retiring with more hope for leverage financing your lifestyle rather than a sufficient asset base.
 

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