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Would you invest any differently if you had $10 million?

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  • Dont_know_mind
    replied




    This is years away, but how do you plan to take RMDs in the $2M in real estate in your self directed IRA?
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    I'm still 20 years out from RMD's so haven't thought about it much. It's interesting to see what Dennis and others are doing to mitigate it.

    Currently, I'm more focussed on how to use roth-IRA funds to a better capacity. I think I've really underutilized the tax advantage of these to date.

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  • dennis
    replied
    @Hank To answer your question I have about $5M in SDIRA real estate and low 8 figures NW. I am 67 and concerned about the RMDs because eventually  the appreciation will outstrip the ability of the property to match the RMDs. Fortunately with Trump's tax law we can use the 100% first year bonus cost segregation depreciation to move the $ out of the SDIRA and purchase property outside of the IRA. We are selling the apartments in the IRA and finding apartments outside of the IRA and  taking a distribution (being over 59) to buy the apts. and using the cost segregation to cover the income so not getting killed with the taxes on the distribution. This delays but doesn't eliminate taxes unless we  eventually sell the property we bought outside of the IRA and delay again in a 1031. We will get most of the property outside of the IRA by the time I turn 70.5 and by the time the law sunsets 2022. You have to use the tax laws when they are in your favor. We have done this last year and this year to cover the capital gains on failed 1031s (on property sold outside of the IRA) to good effect. With the ones we bought last yr and this yr we are finding about a 25% first yr. depreciation so that if you buy $1M of apt you get $250K in first yr depreciation. I am an active real estate investor since I retired from medical practice so the tax laws are more to my favor than a passive investor.

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  • FIREshrink
    replied
    Yes, this thread is silly because instead of asking hypothetically, poster could have just asked those with a NW over $10m to explain how their investing did or didn't change.

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  • FIREshrink
    replied
    Use the rental income, which should be far more than RMDs until close to the very end.

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  • Hank
    replied
    This is years away, but how do you plan to take RMDs in the $2M in real estate in your self directed IRA?

    Leave a comment:


  • Dont_know_mind
    replied




    @don‘t-know: Is all of your real estate outside of SDIRA?
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    I have 2M in real estate in SDIRA and the rest outside.

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  • dennis
    replied
    @Don't-know: Is all of your real estate outside of SDIRA?

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  • Dont_know_mind
    replied
    I reached 10M NW, I decided not to do anything different. Am 90% real estate, 8% cash, 2% stocks. Probably will deploy 8% cash at some stage, in real estate again, which has worked well for me.

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  • Tim
    replied
    @Hank,
    Your plan philosophy is similar to mine.
    With a “new infusion” of $10mm or drastic increase, I think I would moving some “wants” into the “need” column. Thus, the cash equivalent would increase in amount. Most likely it would be a smaller percentage though.
    Love your plan. Adjust when necessary but low probability with plenty of leeway.

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  • adventure
    replied




    Yes
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    ^^

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  • dennis
    replied
    We own mostly multifamily but some single family rentals. I was 100% stock market till the 2000-2002 meltdown and I saw so many docs who were 100% stock market get their knees cut out from under them so I was determined to diversify assets to avoid that and started reading about real estate investing and all of the tax advantages so we rolled cash out of the stock market and started buying apartments in 2005. That was with taxable cash. Then I learned about SDIRA real estate investing so started doing that in a SDIRA in 2007. I don't manage as I didn't have the time or interest plus IRS rules prohibits you managing your own property in a SDIRA. It's worked out well for us and my retirement income is currently 50% from the SDIRA real estate income and 50% from property owned outside of the SDIRA. We are taking advantage of Trump's tax law and using cost segregation depreciation to sell property in the IRA and take a distribution and buying property outside of the IRA and cover the distribution with the cost seg to delay/avoid getting a big tax hit from the distribution. I hope to move the properties out of the IRA before getting dinged with RMDs when I hit 70.5 and before the tax law runs out in 2022.

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  • Kamban
    replied


    Would you invest any differently if you had $10 million (not including your home)? If so, how would invest this?
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    There is a difference between suddenly getting $10M ( lottery, inheritance, IPO etc) vs accumulating $10M over the years.

    In the first group - if you do not have a investment policy you could lose the money rather rapidly, blowing on things you don't need or useless assets like Supercars.?

    The 2nd group does not need to change their investment policy that has made the 1M into 3, later 5 and now 10M. Let the compounding grow but periodically withdraw money to enjoy life rather than reinvesting all the dividends / returns.

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  • Hank
    replied
    Typically it takes less than two years to recover from a recession.  James Cloonan with the American Association of Individual Investors argues in favor of keeping 2-5 years of living expenses in cash or cash equivalents (laddered CDs, Treasuries, high yield savings account, etc.) and keeping a higher allocation to equities with the rest of your portfolio.

    We plan to sock away three years worth of needs (not wants) in cash equivalents starting three years from target retirement date (add a year's worth of cash per year for the last three years).  If things go well in the market, spend from equities.  If the market crashes, spend cash and don't touch equities until the market recovers.  Tighten the belt, travel domestically instead of internationally (or travel to places that are bargains because the economy is trashed), etc.  If this time the market doesn't recover within three years, we may have bigger issues.

    We plan to pay off the mortgage, have fully funded 529s, and generally get monthly obligations as low as possible before retirement.  That means monthly needs should be significantly lower than monthly wants.  Having $10M in liquid net worth wouldn't change the plan.

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  • finalyearresident
    replied




    We passed $10M 2 yrs ago and am 80% real estate, 20% stock market. Not planning on changing allocation.
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    I'm always curious when I hear of physicians heavily tilted in RE.

    How did you do it? Commercial properties? Multi family? Direct ownership? or do you mean REITs?

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  • White.Beard.Doc
    replied
    I do think a fair bit about my asset mix but I don't feel too strongly that I should change anything at this moment.  My investment policy statement has a plan for a slowly growing bond percentage, but that plays out over the next 10 years.  I am thinking about staying the course without growing the bond percentage, but I will have to think longer before rewriting my IPS.

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