Sold my manufacturing business last month and after taxes I'm looking at about $2.3M. I'm 54 and not looking to work full time anymore. What are realistic passive income options? I keep hearing about dividend portfolios, rental real estate, annuities. Anyone been through this? I want something that requires minimal involvement but I'm not naive enough to think there's zero risk.
Investing
How to set up passive income from sale proceeds
Congrats on the sale. I'm not a financial advisor but I went through something similar. The biggest thing I'd say is don't rush. I parked my proceeds in a high yield savings and short term treasuries for six months while I figured out what I actually wanted. That breathing room saved me from making a dumb decision.
What kind of annual income are you targeting? That changes the the answer a lot. 4% on 2.3M is around 92k before taxes. People will argue about safe withdrawal rates forever but that's a reasonable place to start.
I'd look at a laddered treasury or CD approach for part of it, then maybe a broad dividend index fund for another chunk. True passive. Rental real estate is passive until the water heater dies at 11pm on a Sunday. Depends on whether you want a phone call or not.
Targeting around 90-100k befor tax. I have no debt and the house is paid off. I've had enough of phone calls, honestly. That's part of why I sold.
If you truly don't want involvement, a fee-only advisor who charges hourly to review a plan might be worth the few hundred bucks. Not someone who wants to manage your money for 1% a year. Just a second set of eyes to make sure you're not missing something obvious.
Annuities get a lot of hate but a simple SPIA or a deferred income annuity can cover your baseline expenses and let you be more aggressive with the rest. The catch is you're giving up liquidity. For some people that's fine. For others it's a dealbreaker. Only you know which one you are.
Also don't overlook taxes on the proceeds themselves. Depending on how the sale was structured you might have a big capital gains hit in the year of sale. Splitting it across tax years if possible can matter a lot. Hopefully your CPA already walked you through that.
One thing I'd throw out there: the research on safe withdrawal rates is mostly based on a 30 year retirement. At 54 you might be looking at 35-40 years, so maybe lean a little conservative on the percentage. Or keep a couple years of expenses in cash so you're not selling into a down market.
Dividend index fund + treasury ladder + a cash buffer is boring and that's a compliment. Boring is what you want here.
Curious what you end up doing. Update the thread if you don't mind. Not enough follow through on these things.