Investment portfolio with automatic WITHDRAWS?
July 23, 2021 6:40 PM   Subscribe

Is it possible to set up a mutual fund / ETF investment account that does automatic WITHDRAWS every month, quarter, or otherwise periodically? I know auto-invest is a common feature and in fact I use it on at least one account. I'm asking for the opposite: a platform that can cash out a certain proportion of my investments periodically, on autopilot, until they're used up. See within for more details and why I would want to do this.

First of all, I am not retired, which is maybe why I'm not familiar with this aspect of investment accounts. The basic deal is that I have a relatively modest student loan, say under $40K, which has an interest rate so low I would rather keep my money in investments rather than paying it off all at once. At the same time, I want to "set it and forget it" and automate it to the maximum extent possible.

I have automatic payments set up to the loan from my checking account, but money in checking is making nothing these days, thus prompting my desire to connect an investment account. Ideally, I would invest some fixed amount in a minimal number of mutual funds (like, hopefully just one), and the investment platform would automatically sell a certain amount monthly and send it to my checking account. However, I'm flexible on the mechanics; I'd be happy to create a new checking account if needed, or redirect the loan to pay directly out of the investment company's cash account, or whatever. Just as long as I can set it up once and mostly not touch it for several years.

Obviously I would prefer the fees to be minimal. I guess I could tolerate a fee each time there is a sale / withdraw, as long as I could set it to only happen every 3-6 months. Monthly maintenance fees on the account would be too much, unless it was something super low like < 1% (annually) of assets invested.

Thanks for any input, and please, no need to offer advice like "just pay off the loan, it will make you feel better"; I have considered such options and I'm asking about specific alternative plans.
posted by Joey Buttafoucault to Work & Money (5 answers total) 4 users marked this as a favorite
I believe Personal Capital has a”smart withdraw” feature something like what you describe , but IIRC it was retirement-focused.

(I’m not a PC customer, but they were one of the places i read about before a recent 401k rollover.)
posted by FallibleHuman at 6:53 PM on July 23

I have a Vanguard mutual fund that has an automatic withdrawal feature. I haven't used it, but their automatic deposit feature works just fine and the automatic withdrawal looks like it functions the same way (I just went through the motions there to set this up to see how it works and it's very simple). There are no fees associated with my mutual fund account there, or with automatic withdrawals/deposits.
posted by twelve cent archie at 6:58 PM on July 23 [5 favorites]

Vanguard offers automatic withdrawals. From the Profile & Account Settings page, click “Automatic Investment” and then click on the “Withdrawals” tab.

Fidelity also offers automatic withdrawals; if you have an account, you can use the link on this page.
posted by mbrubeck at 6:59 PM on July 23 [2 favorites]

You can definitely do this with Vanguard mutual funds. I don't think this is available for ETFs (because ETFs are generally bought and sold as shares rather than as dollar amounts) but you can definitely find a nice index mutual fund to invest in that does what you want.

Basically this is something that any decent discount brokerage will do for you for the low low price of figuring out how to navigate their website (which mbrubeck has already done for you for Vanguard and Fidelity!).

The Personal Capital "smart withdraw" is for tax optimization and keeping your portfolio balanced across multiple investments in retirement, which would be overkill for your use case (if you make a one-time lump sum investment in one mutual fund in one account, there won't be any way to optimize the taxes on it or anything to rebalance).
posted by mskyle at 8:15 AM on July 24

This sounds like a tax bomb. Would it not make the most sense to maximize your investments completely separate from the loan payments? e.g. some kind of tax-deferred account that grants an immediate tax return, roll that into the account, start compounding, etc.? I would never make an investment in a regular account where I pay a lot of taxes, capital gains, etc. and then take whatever scant profits are left and pay off a low-interest rate loan. But maybe that's more to do with my tax jurisdiction (not USA).
posted by cape at 1:34 PM on July 24

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