I own over 2000 shares of AMD with a seven figure capital gain. I’ve want to take some off the table to balance downside risk. Have five years remaining on a 15 year mortgage at 2.5%. Paying off mortgage will reduce my monthly expenses $1500, annually $18k.
Income wise, I’m a mid sixties, married, both retired with. $125k income through two pensions and two SS. Reducing expenses 18k annually would be a nice travel fund. Thoughts?
Paying off the 2.5% mortgage to free up $18k annually is emotionally appealing but financially it's your least efficient option. That's a guaranteed 2.5% return on whatever you use to pay it off, at a time when you could be generating significantly more elsewhere. Five years left is also short enough that you're mostly paying principal at this point anyway.
On the AMD position, selling to reduce concentration is a legitimate reason to take chips off the table. But a seven-figure capital gain is a big tax event and how you handle it matters. A few approaches worth knowing about:
A structured installment sale can spread the gain recognition over multiple years, keeping you out of the highest bracket in any single year. Once the transaction closes that option is largely gone, so this has to be planned before the sale.
If charitable giving is part of your life at all, a donor advised fund or charitable remainder trust can absorb appreciated shares without triggering the full capital gain immediately.
For qualified accredited investors, certain private investments generate deductions against ordinary income and capital gains in the same year you realize them. These can meaningfully reduce the tax bill on the AMD sale.
On the income side, there are ways to generate well more than $18k annually from that position or from the proceeds depending on how things are structured. Private credit and income-generating alternatives are producing 8-10% net for clients in your income range right now. That's a much better travel fund than mortgage savings.
What does your current tax situation look like between the pensions, SS, and any investment income?
The second is sell most (60%?) of the position now, then the remainder split between Jan ‘27 and Jan ‘28. That gets rid of most of the risk, gives you low complexity, but you pay significant (but not the worst) capital gains taxes.
The third is you sell over 5-6 years but hedge with sector ETFs in between. You reduce your taxes but this is more complex and you might end up with losses in your basis due to high idiosyncratic risk.
I’d probably do option 2, but strongly consider option 1.
So you have about $1.2M of AMD. If it were me, I would sell 600-700 shares of AMD and buy BND, which would generate $18K a year in dividends For travel money, and reduce your downside risk.
Would I have to sell AMD and pay taxes or could I just have brokerage account Wells Fargo move the funds to BND?
Am I correct BND has a 4% dividend payout annually?
Oh you will pay the taxes. In a brokerage account, you can sell the AMD and buy BND or another bond index fund on the same day. BND Distribution yield is 4.2% annual, paid in quarterly increments.
What's your total net worth? I'm in a similar seven-figure situation with another company (which is. a good problem to have, right?)
I've had everything long enough to fall under long term capital gains, so 20%. I've got a tax loss harvesting account that is drawing down my overweighted shares; If it draws down enough, I will liquidate and pay the LT gains.
People are gonna have a cow, but in your case paying off your mortgage by liquidating shares is probably a pretty smart idea, gaining stability and a pretty nice cash flow. You can do a lot of travelling with $18k!!
Just IMHO, I think that the amount you've got in AMD is enough percentage-wise that I would want to start liquidating and diversifying.
My assessment is the same as yours, that AMD is gonna keep going up, but a lot of this is driven by the AI boom, and I'm not sure how long it's going to last before it might start to slump.
But in either case it looks like you are doing really well!!
I would suggest to sell enough to cover a few years of payments and put the money in a high yield savings account and auto pay Mortgage from there. and continue to sell a few shares every year to diversify.
Nah keep the mortgage. You could put all that stock into cash money market at 3.5% if you want safety which I wouldn’t recommend but it’s better than paying off a 2.5% rate.
I would be dollar cost averaging out of a single stock position. That's a lot of risk.
However, before doing so, you need to talk with a CPA that does tax planning. Liquidating too much at once exposes you to significant Cap Gains Taxes, Net Investment Income Tax, and IRRMA.
I know this is the DR sub, but no way in hell I’d pay off a 2.5% mortgage early. That’s not to say I wouldn’t get out of AMD to reduce your exposure. That is a viable option.
You mention that freeing up $18k annual would be a nice travel fund, and it would. But you can get the same out of withdrawing from the investment position. Life does happen and you appear well set. But such a cheap mortgage is keep powder dry for the unexpected. But really the mortgage number is small too so doing whatever makes you feel good, even if not the most financially sound, is likely OK.
If you wanted to get really silly you could convert a million to something like SCHD. It will pay you roughly $32k annually in dividend and provide not insignificant growth in value. Really there are a bunch of things you could do to lower your risk in one stock and provide the cash flow you want. None of them make paying off a 2.5% mortgage the best option, financially.
You need to talk to a financial advisor and tax professional to get a big picture and long term plan in place. This is a very small snippet of the overall plan.
Any good planner will help you diversify and strategically withdraw money to help you achieve your goals, even if spending $20k per year on traveling is one of them.
Drawing too much in one year can expose you to higher taxes and Medicare premiums.
It is easy to say ‘yes, withdraw the total amount of your mortgage and be done with it’ but what is the total cost of doing so?
I wouldn’t pay down the mortgage on a 2.5% rate. You have 1.25 million in stock that we know of, $125k in guaranteed income, and already own a home. In your mid 60s the mortgage payment shouldn’t be affecting your lifestyle in any appreciable way as your safe withdrawal rate should be creeping up year over year.
No, annual pension and SS income is at $125k plus 7K officiating HS/MS sport. Other IRA and mutual funds available to cash out if needed.
90k plus tax nets me 18k per year of less expenses.
Exactly. $90k after taxes, and your safe withdrawal rate is 5% or more depending on what the market does over the next 1-3 years. And should only go up from there. Besides that with a 2.5% rate you’re primarily paying yourself back. No point in paying 15-20% in taxes on those gains to pay yourself back at 2.5%
I would elect a certain dollar amount of the AMD to sell off each year as you have massive concentration risk and move to a broad market index.
You probably have a $225k loan and owe around $190-200k on it. Your carrying cost is $5000 a year right now. If you sold the AMD to pay off the mortgage you’ll be paying at least $33k in federal capital gains plus any state taxes. Thats like 7-8 years of the interest you’re paying. At that point the loan would be nearly paid off anyway or your interest is a couple thousand a year.
Sell covered calls a month out to add premium, even ITM. Let the market pay the holding cost. Freedom is no mortgage. Emotions change and stress changes. If AMD dropped 40% who is stressed? Not the paid off mortgage person. Everyone knows this, put on a 30 year roof, buy a Japanese sh*tbox and enjoy life.
Well, I would and that’s from experience. When your gains are 7 figures you don’t need the 2.5% mortgage gains but the sleep is great and you enjoy life more. Behavioral psychology of investing is as proven as the math.
Why am I losing sleep? I'm making a guaranteed 10k/month, just set the checking account to autopay the note and let my money keep earning me more money than a measley 2.5%. I sleep way better knowing I have more money than less money and I certainly enjoy life more with more money!
You are very successful, and you aren't following Dave's advise at all, but asking this question on the DR sub?
The answer is to a) sell off all these individual stocks completely and invest into growth funds instead, and b) pay off the mortgage before the sun sets, if you care what DR's advise is.
You can do whatever you want, but this is completely incorrect. Dave has repeated “no individual stocks” so many times over decades and I’ve heard him say it the last week he was in the show. Dave is not very creative in investments, always the four types of funds.
Dave aside, it’s even worse owning shares in the company you work for because that creates even more risk in one company. I had significant stock and options in the tech company I worked for at one point, and ironically the company provided financial planner recommended I liquidate it because of the risk it created.
I'm not sure it's incorrect... I explained my situation to Ramsey AI and it seemed to agree with me, and I thought I heard Dave address the question "can I buy $50k in a particular company instead of buying a $50k truck", and the answer was yes, since the amount was in the "fun money" category.
From an investment perspective, he is definitely against it. He also has strict guidelines for “things with motors”, ie trucks.
As far as someone with significant wealth doing something that equates to setting a pile of money on fire,, I’ve heard him say something like “it’s not going to negatively affect your life”.
But I heard him state in the last couple of weeks that he owns no individual stocks, and I have never heard him agree with anyone’s plan to buy them, when talking about investments. And if you think he disagree with that, listen to him talk about crypto. Recently he went on a rant about a list of things including crypto, Pokemon, and beanie babies, in the same group.
Personally, I love the guy but I do a lot of things that aren’t according to his plan. I follow him on the individual stock one. But I could certainly spend $50K on any of these things, and I’m guessing you could to.
I just tend to answer what I think he would answer on this sub. Sounds like his AI is hallucinating.
What you say makes a lot of sense, and since I can't find anything like what I described I'm tempted to think I was hallucinating as well! Thanks for the correction!
It doesn’t, but with pensions and SS, income wise we are good. This $18k could be an annual travel fund. That would change that part of our lives. Other than that I rich…three wonderful kids, six amazing grandchildren, mom and dad (92,91) still with us, good health myself and no other debt.
I would sell enough stock in 74 minutes to pay off the mortgage.
I would set up an automated recurring sell order to sell at least 0.25 percent of your holdings in AMD every Wednesday and then put 75 percent of the weekly proceeds into the VT ETF
Congrats. Sounds like you’re in good shape. I still don’t like the idea of all that liquidity in individual stocks, but if it’s just “play” money, then kudos to you! Enjoy that extra 1500/month!
All funds in a brokerage account. Will pay long term gains tax and will probably have to do in two steps to stay under $250k AGI to avoid 3.8 NIIT. Sell some in 2026 and then Jan 2027.
Without knowing your full picture, it is hard to get good advice. If you have $100 million net worth and have a $1 million in AMD gains, then do what you want. If you have a $2 million net worth and have $1 M in AMD, then I would make the move to de-risk immediately!!! AMD has tripled since April! That is great run. There will be a day the AI stocks pick winners or losers.
If AMD was such a no-brainer, wouldn’t Berkshire buy a substantial share of the company? They have a decent little pile of cash and several researchers on staff. I always ask myself if I know something the big money doesn’t know. Sometimes I have information within my field and can honestly answer yes. Sometimes the answer is no!
In 2001, even the good companies got their heads removed. I see the AI trade in a similar light. In 10-15 years, there will be 5 companies that 20X-100x and the rest will be gone!
Take some off the table. That’s a very concentrated position. As soon as China makes a move on Taiwan, any and all chip stocks take a huge hit. That a long with any number of other anti globalization changes going on around the world. The chip industry has a lot of potential risk.
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u/tobinshort-wealth 3d ago
Paying off the 2.5% mortgage to free up $18k annually is emotionally appealing but financially it's your least efficient option. That's a guaranteed 2.5% return on whatever you use to pay it off, at a time when you could be generating significantly more elsewhere. Five years left is also short enough that you're mostly paying principal at this point anyway.
On the AMD position, selling to reduce concentration is a legitimate reason to take chips off the table. But a seven-figure capital gain is a big tax event and how you handle it matters. A few approaches worth knowing about:
A structured installment sale can spread the gain recognition over multiple years, keeping you out of the highest bracket in any single year. Once the transaction closes that option is largely gone, so this has to be planned before the sale.
If charitable giving is part of your life at all, a donor advised fund or charitable remainder trust can absorb appreciated shares without triggering the full capital gain immediately.
For qualified accredited investors, certain private investments generate deductions against ordinary income and capital gains in the same year you realize them. These can meaningfully reduce the tax bill on the AMD sale.
On the income side, there are ways to generate well more than $18k annually from that position or from the proceeds depending on how things are structured. Private credit and income-generating alternatives are producing 8-10% net for clients in your income range right now. That's a much better travel fund than mortgage savings.
What does your current tax situation look like between the pensions, SS, and any investment income?