I've been fortunate for the past few years to have a very high-paying job. Over that time, I've put myself in the following financial situation:
- I own my personal home outright
- I own (also outright) a residental rental property that brings in about $1000 per month in profit
- About $100k in retirement savings, spread across Roth and SEP IRA accounts
- About $200k in a savings account
- My household's non-discretionary monthly expenses (property taxes on our home, insurance, utilities, food) total about $1500
I will soon be changing careers. My income will drop from about $300k annually to around $50k.
My main financial goal before changing jobs is to use the assets I've built up over the past few years -- especially the $200k in cash -- to build more passive or near-passive income streams.
Although I have no intention of stopping working anytime soon, I'd like to put myself in a position where if I lost my job, I would not have to worry much because I'd have enough passive income to support my family without dipping into any savings. Having this type of financial peace of mind and safety net is more important to me than maximizing my net worth.
I'd also like to have the option of retiring in about fifteen or twenty years if I choose, using the passive income streams to support my family until the IRA withdrawals and social security kick in. (That will take a while; I'm currently in my early thirties.)
I'm looking for advice on how to achieve these goals. One thought is to use the $200k to buy more rental property without mortgages in order to generate good cash flows. The downside to this approach is that rental income is not really passive income.
My other thought is to put the $200k in stocks. I'd reinvest the dividends as long as I don't need them, but could spend them if I end up in a position where I do. The downside I foresee to this strategy is short-term market volatility: If the stock market happens to take a big dive at a time when I am out of work, the income generated by dividends would decrease, and I might be forced to dip into principal in order to cover my expenses. Depending on how long I am out of work and how long the market takes to recover, I could potentially end up losing a lot of the principal.
I'd welcome thoughts on which approach is better, or alternative ideas for achieving my goal.