Anyone successfully living off dividends & interest?

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unbiased
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Anyone successfully living off dividends & interest?

Post by unbiased »

I'm a few years out from retirement and am exploring a bunch of different portfolio strategies. I won't have enough money to just dump it in a bond fund (unless it's some volatile CEF) and "live off the interest" like our grandparents did. I've run the numbers every which way and in this low-interest rate environment it just won't work. I mean, it could work for maybe a few years or even a decade, but after 20 years inflation will likely require me a regular diet of cat food.

But just out of curiosity, anyone with a NON 8-figure portfolio actually create a stream of income that allows them to (1) meet all expenses and (2) keep up with inflation -- all without eating into principal or using capital gains for your withdrawal strategy? If so, how the heck did you do it?
AlohaJoe
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Re: Anyone successfully living off dividends & interest?

Post by AlohaJoe »

unbiased wrote: Fri Sep 11, 2020 9:25 pm But just out of curiosity, anyone with a NON 8-figure portfolio actually create a stream of income that allows them to (1) meet all expenses and (2) keep up with inflation -- all without eating into principal or using capital gains for your withdrawal strategy? If so, how the heck did you do it?
I'm not sure what's the mystery. People do it by not having lifestyles that require $100,000+ a year to live. Your grandparents almost certainly didn't spend that extravagantly.

A $2,000,000 portfolio generates $30,000 a year in dividends. Add another $30,000 in Social Security and you're at $60,000 a year which is more than most families live on.

Even if you don't want to count Social Security for some nonsensical reason (your grandparents certainly used it!), $30,000 a year is very livable, especially if you have a paid off house. After all, 50% of retiree households are living off of $43,000 or less.

Anyway, most people on Bogleheads think not wanting to spend down principal is foolish and makes no sense.
Last edited by AlohaJoe on Sat Sep 12, 2020 12:19 am, edited 1 time in total.
flaccidsteele
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Re: Anyone successfully living off dividends & interest?

Post by flaccidsteele »

unbiased wrote: Fri Sep 11, 2020 9:25 pm But just out of curiosity, anyone with a NON 8-figure portfolio actually create a stream of income that allows them to (1) meet all expenses and (2) keep up with inflation -- all without eating into principal or using capital gains for your withdrawal strategy? If so, how the heck did you do it?
Yes. I have

I purchased US rental real estate during the Great Recession. Once I replaced my household income I became financially free. Started investing in the 1990s when I graduated, and retired in my 40s

Over the last decade cashflow from rent has grown faster than inflation actually

Equity has also grown at better-than-inflation (4-fold) but that’s beside the point

Rental cashflow ensures that I never need to spend down my investments in the US index and Berkshire Hathaway class B (first started buying in the mid-1990s @$1800/sh before 30-1 reverse split, and last shares purchased in March 2020 @$170)

Only way for those late in the game to do the same is to 1) have another market collapse and 2) have a strategy and resources to “be greedy when others are fearful”, otherwise the only option is to cut expenses to the bone and live like a student (eating cat food)

A normal market can only provide so much
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
123
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Re: Anyone successfully living off dividends & interest?

Post by 123 »

AlohaJoe wrote: Fri Sep 11, 2020 9:44 pm ...I'm not sure what the mystery. People do it by not having lifestyles that require $100,000+ a year to live...
+1 I've helped elderly relatives and family friends manage their finances. They were all "savers", never had high income, but they were solid believers in living below their means. The only debt they ever had was a mortgage. They don't believe in credit cards. The bought new cars for cash and drove them for 15 - 20 years. Their annual total expenses are under $20K. They don't believe in the stock market. Their income from social security and interest is always 2 or 3 times their expenses. Their biggest worry was finding new banks to keep everything FDIC insured (solved with brokered CDs). They sleep well at night. The solution is simply live below your means.
The closest helping hand is at the end of your own arm.
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Makaveli
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Re: Anyone successfully living off dividends & interest?

Post by Makaveli »

This has concerned me as well. As does the lack of replies. As AlohaJoe pointed out, $2MM portfolio sheds $30k per year. How many folks have $2MM in retirement and unfortunately, $30k isn't that big of a number these days.

I continue to search for other avenues of passive income but have yet to find one that fits. Inevitably, I go round-and-round on real estate but have yet to pull the trigger. Although the majority of Bogleheads do not support tangible real estate it is one of the most talked about ways of generating passive income and nearly every high net worth person I personally know owns some properties.
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TomatoTomahto
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Re: Anyone successfully living off dividends & interest?

Post by TomatoTomahto »

Makaveli wrote: Sat Sep 12, 2020 7:51 am Although the majority of Bogleheads do not support tangible real estate it is one of the most talked about ways of generating passive income and nearly every high net worth person I personally know owns some properties.
I am HNW. I do not own any properties. I don’t know you personally, only virtually, but please add me to your minority list of HNW who don’t own property.

ETA: we are not yet retired, but anticipate living off dividends, interest, SS, pensions, and RMDs. We expect our taxable account to increase in size during retirement.
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AlohaJoe
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Re: Anyone successfully living off dividends & interest?

Post by AlohaJoe »

Makaveli wrote: Sat Sep 12, 2020 7:51 am This has concerned me as well. As does the lack of replies.

I continue to search for other avenues of passive income but have yet to find one that fits.
The lack of replies is likely because Bogleheads think "passive income" is a fool's errand that fundamentally misunderstands investing. There have been a bazillion threads about dividends and passive income in the past and I imagine most Bogleheads are tired of trying to explain it yet again.

Anyway, I'm a HNW person, as are my dozen closest friends, and none of us own property besides our residence. So you can add all of us to your list, too. I don't actually personally know any HNW person who got there via property. They all got there via their day job and then bought properties after they were already HNW.
Last edited by AlohaJoe on Sat Sep 12, 2020 8:06 am, edited 1 time in total.
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Re: Anyone successfully living off dividends & interest?

Post by jebmke »

TomatoTomahto wrote: Sat Sep 12, 2020 8:02 am
Makaveli wrote: Sat Sep 12, 2020 7:51 am Although the majority of Bogleheads do not support tangible real estate it is one of the most talked about ways of generating passive income and nearly every high net worth person I personally know owns some properties.
I am HNW. I do not own any properties. I don’t know you personally, only virtually, but please add me to your minority list of HNW who don’t own property.

Same. We owned a rental property for a while - conversion from personal use during weak RE market. One of the happiest days of my retired life was when we finally sold it.
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Riprap
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Re: Anyone successfully living off dividends & interest?

Post by Riprap »

TomatoTomahto wrote: Sat Sep 12, 2020 8:02 amI am HNW.
What is the threshold for crossing into the HNW category these days?
truenorth418
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Re: Anyone successfully living off dividends & interest?

Post by truenorth418 »

jebmke wrote: Sat Sep 12, 2020 8:05 am
TomatoTomahto wrote: Sat Sep 12, 2020 8:02 am
Makaveli wrote: Sat Sep 12, 2020 7:51 am Although the majority of Bogleheads do not support tangible real estate it is one of the most talked about ways of generating passive income and nearly every high net worth person I personally know owns some properties.
I am HNW. I do not own any properties. I don’t know you personally, only virtually, but please add me to your minority list of HNW who don’t own property.

Same. We owned a rental property for a while - conversion from personal use during weak RE market. One of the happiest days of my retired life was when we finally sold it.
The thread is about "living off of dividends & interest", but it quickly went off the rails into real estate investing.

For what it's worth, I am HNW, I got that way via working hard at corporate jobs for 25 years and saving my money, I am now retired and I don't own any investment real estate. In fact, I don't own any real estate at all. I rent my places of residence, which gives me the flexibility to move around and experience different places as I feel like it, all over the world. I guess I don't live off of "dividends & interest" because interest rates are so low and as for dividends as has been explained all over Bogleheads for years dividends and capital gains all come from the same pot, there is nothing special about dividends except that they deliver taxable income whether you want it or not while I have more control over when to take capital gains to live on (and pay taxes on).
Normchad
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Re: Anyone successfully living off dividends & interest?

Post by Normchad »

I’m HNW and don’t own any properties besides my house.

All the people I personally know who, own rental properties, wish they didn’t.

I do think though it could be a fine answer for some people. I looked into,it years ago, and I just don’t have the personality or ambition for it. Too much work and hassle for me.
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Re: Anyone successfully living off dividends & interest?

Post by NewMoneyMustBeSmart »

Riprap wrote: Sat Sep 12, 2020 8:09 am
TomatoTomahto wrote: Sat Sep 12, 2020 8:02 amI am HNW.
What is the threshold for crossing into the HNW category these days?
These sources suggest below:

https://www.investopedia.com/terms/h/hnwi.asp
- HNW - $1M-5M Liquid

https://www.wealthx.com/intelligence-ce ... er-wealth/
- VHNW - $5M-$100M Liquid
- UHNW - $100M+ Liquid
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TN_Boy
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Re: Anyone successfully living off dividends & interest?

Post by TN_Boy »

Makaveli wrote: Sat Sep 12, 2020 7:51 am This has concerned me as well. As does the lack of replies. As AlohaJoe pointed out, $2MM portfolio sheds $30k per year. How many folks have $2MM in retirement and unfortunately, $30k isn't that big of a number these days.

I continue to search for other avenues of passive income but have yet to find one that fits. Inevitably, I go round-and-round on real estate but have yet to pull the trigger. Although the majority of Bogleheads do not support tangible real estate it is one of the most talked about ways of generating passive income and nearly every high net worth person I personally know owns some properties.
The problem that you are having is that you are thinking in terms of "living off income" and "not touching principal."

If you re-orient yourself to thinking in terms of total return (see the many threads on this forum about dividends versus total return) you should realize that your search for "passive income" may be unnecessary.

If you think total return, you will see that you can safely get much more than 30k a year from a 2M portfolio.

If your desire is to live off dividends and interest and not touch principal and also leave a huge legacy, the answer is simply that yes, you need a very large amount of money. But in that situation, you are asking the investments to do more than just fund your retirement.
Nowizard
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Re: Anyone successfully living off dividends & interest?

Post by Nowizard »

If one lives off dividends and interest and also has SS and a pension, along with a conservative portfolio holding at least a small percentage of equities, they will be saving for their heirs in most cases. It does not require an eight figure portfolio.

Tim
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Re: Anyone successfully living off dividends & interest?

Post by Chuck107 »

AlohaJoe wrote: Fri Sep 11, 2020 9:44 pm
unbiased wrote: Fri Sep 11, 2020 9:25 pm But just out of curiosity, anyone with a NON 8-figure portfolio actually create a stream of income that allows them to (1) meet all expenses and (2) keep up with inflation -- all without eating into principal or using capital gains for your withdrawal strategy? If so, how the heck did you do it?
I'm not sure what's the mystery. People do it by not having lifestyles that require $100,000+ a year to live. Your grandparents almost certainly didn't spend that extravagantly.

A $2,000,000 portfolio generates $30,000 a year in dividends. Add another $30,000 in Social Security and you're at $60,000 a year which is more than most families live on.

Even if you don't want to count Social Security for some nonsensical reason (your grandparents certainly used it!), $30,000 a year is very livable, especially if you have a paid off house. After all, 50% of retiree households are living off of $43,000 or less.

Anyway, most people on Bogleheads think not wanting to spend down principal is foolish and makes no sense.
Absolutley agree, retired 16 yrs, living off of small pension and SS, spend aprox 32k per yr, with an extra 12k per year left over.
Never have touched investments yet.
Everything paid for, of course it all depends on how much you spend a year in retirement, that is more important than the size of your portfilio.
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Riprap
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Re: Anyone successfully living off dividends & interest?

Post by Riprap »

TN_Boy wrote: Sat Sep 12, 2020 8:23 amThe problem that you are having is that you are thinking in terms of "living off income" and "not touching principal."
I don't think it's necessarily a problem. It's more of a mindset. A business owner sells out and invests in stocks and bonds. He is exchanging one income producing asset (the former business) for another (stocks/bonds). I think this is pretty prevalent here but those people don't tend to be as vocal as the total return proponents. It would be like selling part of their former business to make ends meet which of course would be unsustainable in the long run.
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Re: Anyone successfully living off dividends & interest?

Post by TN_Boy »

flaccidsteele wrote: Fri Sep 11, 2020 10:28 pm
unbiased wrote: Fri Sep 11, 2020 9:25 pm But just out of curiosity, anyone with a NON 8-figure portfolio actually create a stream of income that allows them to (1) meet all expenses and (2) keep up with inflation -- all without eating into principal or using capital gains for your withdrawal strategy? If so, how the heck did you do it?
Yes. I have

I purchased US rental real estate during the Great Recession. Once I replaced my household income I became financially free. Started investing in the 1990s when I graduated, and retired in my 40s

Over the last decade cashflow from rent has grown faster than inflation actually

Equity has also grown at better-than-inflation (4-fold) but that’s beside the point

Rental cashflow ensures that I never need to spend down my investments in the US index and Berkshire Hathaway class B (first started buying in the mid-1990s @$1800/sh before 30-1 reverse split, and last shares purchased in March 2020 @$170)

Only way for those late in the game to do the same is to 1) have another market collapse and 2) have a strategy and resources to “be greedy when others are fearful”, otherwise the only option is to cut expenses to the bone and live like a student (eating cat food)

A normal market can only provide so much
Not really; the OP asked
anyone with a NON 8-figure portfolio actually create a stream of income that allows them to (1) meet all expenses and (2) keep up with inflation
You diverted money from stock and bond investments into a real estate business. Which is a perfectly reasonable choice. But you have not stated how to get a big stream of income from a stock and bond portfolio.

Like many posters on BHs, the combination of a decent income + regular old stock and bond investments has worked well for us.

If the OP wants to start a real estate business (or invest in some other small business) that's an option of course.
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Re: Anyone successfully living off dividends & interest?

Post by TN_Boy »

Riprap wrote: Sat Sep 12, 2020 8:28 am
TN_Boy wrote: Sat Sep 12, 2020 8:23 amThe problem that you are having is that you are thinking in terms of "living off income" and "not touching principal."
I don't think it's necessarily a problem. It's more of a mindset. A business owner sells out and invests in stocks and bonds. He is exchanging one income producing asset (the former business) for another (stocks/bonds). I think this is pretty prevalent here but those people don't tend to be as vocal as the total return proponents. It would be like selling part of their former business to make ends meet which of course would be unsustainable in the long run.
It's a problem because it means the OP doesn't understand how best to manage an investment portfolio.

But we should avoid getting too far in the weeds about spending down principal; there are many threads covering this.

I brought it up because focusing on income only means you need a much larger portfolio than if you believe in total return.

If I was stuck in the "don't spend down principal" mindset I'd have to work a lot longer before retirement.
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Re: Anyone successfully living off dividends & interest?

Post by Mike Scott »

In my fantasy world, I would invest for total return but have enough invested so that the dividends provided for all my desires and the investment would continue to grow forever.

In real life, very few people have that much money and so you get all the various methods of personal finance of how to invest and withdraw enough to get by without spending it all before death and never having enough to satisfy the uncertainty of looking decades into the future. That's kind of the reason this chat forum and many others exit.

In real life, people live within their income or they don't. How many people have posted in this thread (and many others) that they are living off pensions and/or SS and don't actually expect to need any of the $ they saved and invested through their lifetime?
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Riprap
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Re: Anyone successfully living off dividends & interest?

Post by Riprap »

TN_Boy wrote: Sat Sep 12, 2020 8:36 am It's a problem because it means the OP doesn't understand how best to manage an investment portfolio.
I guess I don't either. :D
Actin
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Re: Anyone successfully living off dividends & interest?

Post by Actin »

Makaveli wrote: Sat Sep 12, 2020 7:51 am This has concerned me as well. As does the lack of replies. As AlohaJoe pointed out, $2MM portfolio sheds $30k per year. How many folks have $2MM in retirement and unfortunately, $30k isn't that big of a number these days.

I continue to search for other avenues of passive income but have yet to find one that fits. Inevitably, I go round-and-round on real estate but have yet to pull the trigger. Although the majority of Bogleheads do not support tangible real estate it is one of the most talked about ways of generating passive income and nearly every high net worth person I personally know owns some properties.
You have to get a lot looser with your definition of passive. A very wealthy family friend, net worth well over 150 million, told me that he considers anything a passive investment if it takes less than 20 hours a week to control.
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Re: Anyone successfully living off dividends & interest?

Post by sailaway »

Actin wrote: Sat Sep 12, 2020 9:26 am
Makaveli wrote: Sat Sep 12, 2020 7:51 am This has concerned me as well. As does the lack of replies. As AlohaJoe pointed out, $2MM portfolio sheds $30k per year. How many folks have $2MM in retirement and unfortunately, $30k isn't that big of a number these days.

I continue to search for other avenues of passive income but have yet to find one that fits. Inevitably, I go round-and-round on real estate but have yet to pull the trigger. Although the majority of Bogleheads do not support tangible real estate it is one of the most talked about ways of generating passive income and nearly every high net worth person I personally know owns some properties.
You have to get a lot looser with your definition of passive. A very wealthy family friend, net worth well over 150 million, told me that he considers anything a passive investment if it takes less than 20 hours a week to control.
Hey, only two passive investments to make a full time job!
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TomatoTomahto
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Re: Anyone successfully living off dividends & interest?

Post by TomatoTomahto »

Riprap wrote: Sat Sep 12, 2020 8:09 am
TomatoTomahto wrote: Sat Sep 12, 2020 8:02 amI am HNW.
What is the threshold for crossing into the HNW category these days?
Well, if you have to ask ... :D

My guess is that it’s north of $3M. Why did I pick $3M? Nothing that scientific, but it represents the amount of fixed income I needed in our “safe” asset portion of our quasi-LMP (Liability Matching Portfolio). How did I pick that? I felt $2M was light and $4M was excessive :D

Sometimes you don’t need a weatherman to tell you the sun is shining.
Okay, I get it; I won't be political or controversial. The Earth is flat.
TN_Boy
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Re: Anyone successfully living off dividends & interest?

Post by TN_Boy »

Actin wrote: Sat Sep 12, 2020 9:26 am
Makaveli wrote: Sat Sep 12, 2020 7:51 am This has concerned me as well. As does the lack of replies. As AlohaJoe pointed out, $2MM portfolio sheds $30k per year. How many folks have $2MM in retirement and unfortunately, $30k isn't that big of a number these days.

I continue to search for other avenues of passive income but have yet to find one that fits. Inevitably, I go round-and-round on real estate but have yet to pull the trigger. Although the majority of Bogleheads do not support tangible real estate it is one of the most talked about ways of generating passive income and nearly every high net worth person I personally know owns some properties.
You have to get a lot looser with your definition of passive. A very wealthy family friend, net worth well over 150 million, told me that he considers anything a passive investment if it takes less than 20 hours a week to control.
To each his own, but I wouldn't consider an investment that takes, for example 15 hours a week of my time "passive." 15 to 20 hours a week is a part time job!
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TomatoTomahto
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Re: Anyone successfully living off dividends & interest?

Post by TomatoTomahto »

TN_Boy wrote: Sat Sep 12, 2020 9:35 am
Actin wrote: Sat Sep 12, 2020 9:26 am
Makaveli wrote: Sat Sep 12, 2020 7:51 am This has concerned me as well. As does the lack of replies. As AlohaJoe pointed out, $2MM portfolio sheds $30k per year. How many folks have $2MM in retirement and unfortunately, $30k isn't that big of a number these days.

I continue to search for other avenues of passive income but have yet to find one that fits. Inevitably, I go round-and-round on real estate but have yet to pull the trigger. Although the majority of Bogleheads do not support tangible real estate it is one of the most talked about ways of generating passive income and nearly every high net worth person I personally know owns some properties.
You have to get a lot looser with your definition of passive. A very wealthy family friend, net worth well over 150 million, told me that he considers anything a passive investment if it takes less than 20 hours a week to control.
To each his own, but I wouldn't consider an investment that takes, for example 15 hours a week of my time "passive." 15 to 20 hours a week is a part time job!
And furthermore, RE is a job you’re less and less able to perform as you get older. I once rented out a cabin. After my 2nd deadbeat tenant, I vowed to burn it to the ground before I rented it out again. Well rid of it.
Okay, I get it; I won't be political or controversial. The Earth is flat.
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Re: Anyone successfully living off dividends & interest?

Post by jcar »

It comes down to what you require to live monthly and also provide money for occasional nice things like trips, helping out grandchildrens education, etc. We certainly have no problems doing this, now about four years into retirement. I'm presently sitting in a nice beachfront hotel in Florida for 10 days or more if the urge should strike us. I use SS, a pension and dividend income on the occasions it's needed. I haven't tapped it in many months but probably will this month to cover trip. In a couple months we will take off again somewhere, hopefully Mt Rushmore or if virus improves Mexico or Europe. It doesn't take near as much to live a nice life as the "advisors " will tell you. Of course you can't wait until 55 and then start saving. Many make that mistake.
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Re: Anyone successfully living off dividends & interest?

Post by delamer »

The $30,000 in annual income from a $2 million portfolio isn’t etched in stone.

My taxable account is 70% stocks/20% cash/10% bonds and it earns the equivalent of $50,000/year on a $2 million portfolio. The includes dividends/interest/capital gains on mutual funds. It’s been like earning this for a few years.

If you aren’t comfortable with the volatility of a 70% stock allocation in retirement, that’s understandable. And there may be a few years when the income drops — as it would with any portfolio containing stocks. But it’s an option.
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Re: Anyone successfully living off dividends & interest?

Post by CyclingDuo »

unbiased wrote: Fri Sep 11, 2020 9:25 pmI'm a few years out from retirement and am exploring a bunch of different portfolio strategies. I won't have enough money to just dump it in a bond fund (unless it's some volatile CEF) and "live off the interest" like our grandparents did. I've run the numbers every which way and in this low-interest rate environment it just won't work. I mean, it could work for maybe a few years or even a decade, but after 20 years inflation will likely require me a regular diet of cat food.

But just out of curiosity, anyone with a NON 8-figure portfolio actually create a stream of income that allows them to (1) meet all expenses and (2) keep up with inflation -- all without eating into principal or using capital gains for your withdrawal strategy? If so, how the heck did you do it?
Dividends + long term capital gains + interest will be used in our retirement to help fund our expenses. However, we will also have a pension income stream and Social Security income stream, so cannot say the dividends + interest alone will fund everything as they will only be a part of the mix. We are a few years out from retirement, and currently the dividend stream gets reinvested. The dividends are approaching $39K on an annual basis, so it wouldn't surprise me to potentially see it grow over the next 5 years as we continue to reinvest the current dividends in our taxable account and stuff our Roth IRA's each year so that they grow as well.

If taxes are mitigated and well managed, the dividend and long term capital gain rate can be as low as $0. I remain agnostic about both and don't buy into the argument of "not eating into principal" as taking a dividend is indeed removing capital out of your investment unless you reinvest the dividends. Selling shares of an ETF or mutual fund or individual stocks for capital gains is, in effect, a way of creating your very own "dividend". In other words, don't be fooled by the notion of the dividend stream being somehow different. It's not free money. It is removing capital from that particular investment. That being said, if one feels comfortable just living off of the dividends and has enough coming in each month/quarter/year - then so be it. We all have to deal with dividends.

CyclingDuo
Last edited by CyclingDuo on Sat Sep 12, 2020 9:53 am, edited 1 time in total.
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Re: Anyone successfully living off dividends & interest?

Post by dbr »

I don't have enough money to live off dividends and interest. However, the dividends and interest produced by my portfolio are enough to fund all the portfolio withdrawals we make. That, however, is a happenstance that has nothing to do with anything in particular. We don't take dividends and interest as withdrawals per se. Since the portfolio has increased in real value since we started making withdrawals one could say the principal has been preserved. You will have to decide if this counts as "successful." Note I would not necessarily have expected this result but we have been lucky to have low inflation and a bull market in stocks the last eleven years.

I would observe along with others that this whole question arises from a fundamental misunderstanding of how to think about investments. Specifically the failure is in not using the concept of return as a basic starting point for thinking about the whole thing. The reason to start with return rather than dividend and interest payout is that starting with return provides a set of both necessary and sufficient information to understand the system while dividends and interest are pieces that are not sufficient in themselves to describe what is going on.
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telemark
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Re: Anyone successfully living off dividends & interest?

Post by telemark »

I am only a poor simple retired millionaire, so am relying on total return and spending down my portfolio to get by :D In any case. many companies now prefer stock buybacks to issuing dividends. Not sure why I would want to pretend that isn't happening.
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Re: Anyone successfully living off dividends & interest?

Post by BGeste »

I live very comfortably on my dividends, interest, and capital gains and therefore I do not have to sell principal or shares. At some point I might do so but the income from current shares keeps increasing, even this year. My portfolio consists of broad indexes as well as some higher yielding funds and bond funds so the overall portfolio generates about 4 percent in income. Total value of portfolio is under 8 figures but over $5 million and has steadily grown since I retired two years ago. I have no pension, real estate properties, and I am too young for social security.
Last edited by BGeste on Sat Sep 12, 2020 10:02 am, edited 1 time in total.
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bertilak
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Re: Anyone successfully living off dividends & interest?

Post by bertilak »

TomatoTomahto wrote: Sat Sep 12, 2020 8:02 am ETA: we are not yet retired, but anticipate living off dividends, interest, SS, pensions, and RMDs.
RMDs are not a source of income.

They just transfer money out of a tax-advantaged account to some other account. The friction of taxes makes that inefficient and therefore a net loss. You can't live off of losses.

I'm pretty sure you understand that but the casual mention may give someone the wrong idea.

P.S. The term "tax-advantaged" becomes somewhat ironic once you are no longer contributing!
Last edited by bertilak on Sat Sep 12, 2020 10:03 am, edited 1 time in total.
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Re: Anyone successfully living off dividends & interest?

Post by LittleMaggieMae »

AlohaJoe wrote: Fri Sep 11, 2020 9:44 pm
unbiased wrote: Fri Sep 11, 2020 9:25 pm But just out of curiosity, anyone with a NON 8-figure portfolio actually create a stream of income that allows them to (1) meet all expenses and (2) keep up with inflation -- all without eating into principal or using capital gains for your withdrawal strategy? If so, how the heck did you do it?
A $2,000,000 portfolio generates $30,000 a year in dividends. Add another $30,000 in Social Security and you're at $60,000 a year which is more than most families live on.
How does one get 30K per year in SS? How high of a income does a single person need to get to that? Is it assumed they are working until their Full Retirement Age at the highest level of income until they are FRA (which might be 66 or 67?)

I an single and always have been. I would like to step away from my high paying job at 57. (my lowest income year will be 14K - 35 years ago as of today) My "SS estimate" at full retirement age 67 is 2863.00 per month. but doesn't that assume I keep my current pay of over 100K per year job until I'm 67??
Last edited by LittleMaggieMae on Sat Sep 12, 2020 10:16 am, edited 1 time in total.
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Re: Anyone successfully living off dividends & interest?

Post by flaccidsteele »

TN_Boy wrote: Sat Sep 12, 2020 8:31 am Not really; the OP asked
anyone with a NON 8-figure portfolio actually create a stream of income that allows them to (1) meet all expenses and (2) keep up with inflation
But you have not stated how to get a big stream of income from a stock and bond portfolio.
FYI The quote you provided from the OP doesn’t contain the criteria “income from a stock and bond portfolio”
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Re: Anyone successfully living off dividends & interest?

Post by Leif »

NewMoneyMustBeSmart wrote: Sat Sep 12, 2020 8:18 am https://www.wealthx.com/intelligence-ce ... er-wealth/
- VHNW - $5M-$100M Liquid
- UHNW - $100M+ Liquid
WealthX wrote:The Wealth-X High Net Worth Handbook 2019 reveals that there were 22.4 million HNW individuals globally in 2018 and a vast majority of that population – just over 20 million – had between $1 and $5 million in net worth. This creates a distinct division in the HNW population ushering in a new wealth tier – very high net worth (VHNW) individuals, or those who have a net wealth of between $5 million and $30 million.
So presumably, UHNW is $30+ Million.
WealthX wrote:There are approximately 2.5 million VHNW individuals (4.8-5 million when counting their spouses) in the world, and the United States alone is home to over 750,000. The VHNW wealth tier has growth in recent years in tandem with the UHNW population and their respective wealth.
Last edited by Leif on Sat Sep 12, 2020 10:14 am, edited 1 time in total.
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Re: Anyone successfully living off dividends & interest?

Post by TomatoTomahto »

bertilak wrote: Sat Sep 12, 2020 10:00 am
TomatoTomahto wrote: Sat Sep 12, 2020 8:02 am ETA: we are not yet retired, but anticipate living off dividends, interest, SS, pensions, and RMDs.
RMDs are not a source of income.
I take your point. RMDs are not income, but I guess I was emphasizing the M as in Minimum in my thoughts. I wish we didn’t have to distribute anything until after our passing, but that’s currently not an option. Ditto dividends and interest; we won’t need to spend the roughly 2% they throw off; they just add to taxes.
Okay, I get it; I won't be political or controversial. The Earth is flat.
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Re: Anyone successfully living off dividends & interest?

Post by flaccidsteele »

Personally as an investor that has 7 figures in stocks and 7 figures in rental real estate I’m an outlier in forums like Bogleheads and BiggerPockets

OP I wouldn’t listen to Bogleheads about real estate. They’re generally ignorant in that area (eg. “it’s a lot of work”, etc. I don’t even live in the same country as my rental properties). Focus more on their discussions around the stock market

Same advice for BiggerPockets. They don’t know what they’re talking about when it comes to stocks (eg. they like to compare unrealistically leveraged property to leverage-free stock market returns). Focus more on their discussions around real estate
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Re: Anyone successfully living off dividends & interest?

Post by willthrill81 »

Riprap wrote: Sat Sep 12, 2020 8:09 am
TomatoTomahto wrote: Sat Sep 12, 2020 8:02 amI am HNW.
What is the threshold for crossing into the HNW category these days?
The wealthiest age group are 60-64 year olds, and a $2.1 million net worth puts you into the 90th percentile of that group. That sounds like 'high net worth' to me.
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Re: Anyone successfully living off dividends & interest?

Post by flaccidsteele »

willthrill81 wrote: Sat Sep 12, 2020 10:22 am
Riprap wrote: Sat Sep 12, 2020 8:09 am
TomatoTomahto wrote: Sat Sep 12, 2020 8:02 amI am HNW.
What is the threshold for crossing into the HNW category these days?
The wealthiest age group are 60-64 year olds, and a $2.1 million net worth puts you into the 90th percentile of that group. That sounds like 'high net worth' to me.
Personally I don’t look at median or average NW. It’s not an interesting goal nor is it that much wealth imo

The 1% of NW is more interesting to me. For every 100 people encountered, 1 has a lot of wealth. That’s pretty cool

Top 1% is also in the 60-64 age category at $16m
Last edited by flaccidsteele on Sat Sep 12, 2020 10:28 am, edited 1 time in total.
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Re: Anyone successfully living off dividends & interest?

Post by willthrill81 »

unbiased wrote: Fri Sep 11, 2020 9:25 pm But just out of curiosity, anyone with a NON 8-figure portfolio actually create a stream of income that allows them to (1) meet all expenses and (2) keep up with inflation -- all without eating into principal or using capital gains for your withdrawal strategy? If so, how the heck did you do it?
No.

Why on earth would you want to ignore capital gains? That's where the majority of stocks' returns have been for decades.
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Re: Anyone successfully living off dividends & interest?

Post by willthrill81 »

flaccidsteele wrote: Sat Sep 12, 2020 10:27 am
willthrill81 wrote: Sat Sep 12, 2020 10:22 am
Riprap wrote: Sat Sep 12, 2020 8:09 am
TomatoTomahto wrote: Sat Sep 12, 2020 8:02 amI am HNW.
What is the threshold for crossing into the HNW category these days?
The wealthiest age group are 60-64 year olds, and a $2.1 million net worth puts you into the 90th percentile of that group. That sounds like 'high net worth' to me.
Personally I don’t look at median or average NW. It’s not an interesting goal nor is it that much wealth imo

The 1% of NW is more interesting to me. For every 100 people encountered, 1 has a lot of wealth. That’s pretty cool
I agree and was just answering the question.
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Re: Anyone successfully living off dividends & interest?

Post by flaccidsteele »

willthrill81 wrote: Sat Sep 12, 2020 10:28 am
flaccidsteele wrote: Sat Sep 12, 2020 10:27 am
willthrill81 wrote: Sat Sep 12, 2020 10:22 am
Riprap wrote: Sat Sep 12, 2020 8:09 am
TomatoTomahto wrote: Sat Sep 12, 2020 8:02 amI am HNW.
What is the threshold for crossing into the HNW category these days?
The wealthiest age group are 60-64 year olds, and a $2.1 million net worth puts you into the 90th percentile of that group. That sounds like 'high net worth' to me.
Personally I don’t look at median or average NW. It’s not an interesting goal nor is it that much wealth imo

The 1% of NW is more interesting to me. For every 100 people encountered, 1 has a lot of wealth. That’s pretty cool
I agree and was just answering the question.
Thanks for the link. Cool site! 🙏
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
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Re: Anyone successfully living off dividends & interest?

Post by Toons »

Yes


:mrgreen: :mrgreen:
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Re: Anyone successfully living off dividends & interest?

Post by dbr »

LittleMaggieMae wrote: Sat Sep 12, 2020 10:09 am
How does one get 30K per year in SS? How high of a income does a single person need to get to that? Is it assumed they are working until their Full Retirement Age at the highest level of income until they are FRA (which might be 66 or 67?)

I an single and always have been. I would like to step away from my high paying job at 57. (my lowest income year will be 14K - 35 years ago as of today) My "SS estimate" at full retirement age 67 is 2863.00 per month. but doesn't that assume I keep my current pay of over 100K per year job until I'm 67??
The monthly maximum numbers today are:

$3,790 for someone who files at age 70 $45,480/year
$3,011 for someone who files at full retirement age (FRA) $36,132/year
$2,265 for someone who files at 62 $27,180

But, yes, you have to take account of your earnings history, when you stop earning, and when you file. There is also a future COLA increase to SS benefits. There are web pages at SS and computer programs such as ANYPIA that can do some of these calculations.
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Re: Anyone successfully living off dividends & interest?

Post by ClevrChico »

Yes, my family does this easily in a LCOL area. They have a great apartment, nice car, and travel frequently.

It's very doable with social security and around $500k in investments. At that level they're paying $0 income tax, which gives them the equivalent income of a typical working family, albeit with less expenses.
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Re: Anyone successfully living off dividends & interest?

Post by sycamore »

LittleMaggieMae wrote: Sat Sep 12, 2020 10:09 am ...
How does one get 30K per year in SS? How high of a income does a single person need to get to that?
There are numerous scenarios where you could get 30K per year but I suspect most of them involve quite a few years of high income. One scenario is income at the maximum taxable earnings for 20 of 35 years, the remaining years maybe 1/2 or 2/3 of the max. If you start working at 20, you could be "done" by 55 for example.
LittleMaggieMae wrote: Sat Sep 12, 2020 10:09 am Is it assumed they are working until their Full Retirement Age at the highest level of income until they are FRA (which might be 66 or 67?)

I an single and always have been. I would like to step away from my high paying job at 57. (my lowest income year will be 14K - 35 years ago as of today) My "SS estimate" at full retirement age 67 is 2863.00 per month. but doesn't that assume I keep my current pay of over 100K per year job until I'm 67??
As you noted, the Social Security Administration (SSA) indicates what your benefit will be based on an assumption of you continuing to work and earn. To find out what your benefit will be actually be based on estimated future earnings (including none), you'll want to try the "Anypia" software from SSA. See https://www.ssa.gov/OACT/anypia/download.html.
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Re: Anyone successfully living off dividends & interest?

Post by ruralavalon »

TomatoTomahto wrote: Sat Sep 12, 2020 8:02 am
Makaveli wrote: Sat Sep 12, 2020 7:51 am Although the majority of Bogleheads do not support tangible real estate it is one of the most talked about ways of generating passive income and nearly every high net worth person I personally know owns some properties.
I am HNW. I do not own any properties. I don’t know you personally, only virtually, but please add me to your minority list of HNW who don’t own property.

ETA: we are not yet retired, but anticipate living off dividends, interest, SS, pensions, and RMDs. We expect our taxable account to increase in size during retirement.
We are age 75, retired almost 10 years, no pension or annuity, moderate cost of living area. We live on Social Security and Required Minimum Distributions (RMDs), but could not live on interest and dividends from our investments.
Last edited by ruralavalon on Sat Sep 12, 2020 11:08 am, edited 1 time in total.
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Re: Anyone successfully living off dividends & interest?

Post by bampf »

AlohaJoe wrote: Sat Sep 12, 2020 8:05 am
Makaveli wrote: Sat Sep 12, 2020 7:51 am This has concerned me as well. As does the lack of replies.

I continue to search for other avenues of passive income but have yet to find one that fits.
The lack of replies is likely because Bogleheads think "passive income" is a fool's errand that fundamentally misunderstands investing. There have been a bazillion threads about dividends and passive income in the past and I imagine most Bogleheads are tired of trying to explain it yet again.

Anyway, I'm a HNW person, as are my dozen closest friends, and none of us own property besides our residence. So you can add all of us to your list, too. I don't actually personally know any HNW person who got there via property. They all got there via their day job and then bought properties after they were already HNW.
I am not sure of the definition of HNW (High Net Worth) exactly but suffice to say I could easily own property and choose not to. In fact I had three SFHs at one point generating revenue and I sold them all. So much less stress and the market has been kind to me in terms of returns. Owning property is really very much like a job. You have to put some time and effort into it to make it work. You can of course subcontract out the work, but, then you have to make sure your sub contractors are doing the work. I prefer market returns.
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Re: Anyone successfully living off dividends & interest?

Post by TN_Boy »

flaccidsteele wrote: Sat Sep 12, 2020 10:09 am
TN_Boy wrote: Sat Sep 12, 2020 8:31 am Not really; the OP asked
anyone with a NON 8-figure portfolio actually create a stream of income that allows them to (1) meet all expenses and (2) keep up with inflation
But you have not stated how to get a big stream of income from a stock and bond portfolio.
FYI The quote you provided from the OP doesn’t contain the criteria “income from a stock and bond portfolio”
Okay, I'll quote more:
anyone with a NON 8-figure portfolio actually create a stream of income that allows them to (1) meet all expenses and (2) keep up with inflation -- all without eating into principal or using capital gains for your withdrawal strategy?
I draw your attention to this part of the quote: "all without eating into principal or using capital gains for your withdrawal strategy?"

Doesn't that sound to you like the OP is asking for advice on how to get a stock/bond portfolio to create more yield?? If not, why the bits that I put into bold?? Plus the words "withdrawal strategy" are also typically associated with pulling from a standard investment portfolio. Do you call your rent income withdrawals?

If the OP wants to come in and explain how I misinterpreted his question, sure, but based on the words I see my interpretation seems pretty reasonable. Maybe the OP really did mean to say "what else can I invest in, like say real estate" to get a bigger income stream than I can with stocks and bonds.
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Re: Anyone successfully living off dividends & interest?

Post by TN_Boy »

flaccidsteele wrote: Sat Sep 12, 2020 10:15 am Personally as an investor that has 7 figures in stocks and 7 figures in rental real estate I’m an outlier in forums like Bogleheads and BiggerPockets

OP I wouldn’t listen to Bogleheads about real estate. They’re generally ignorant in that area (eg. “it’s a lot of work”, etc. I don’t even live in the same country as my rental properties). Focus more on their discussions around the stock market

Same advice for BiggerPockets. They don’t know what they’re talking about when it comes to stocks (eg. they like to compare unrealistically leveraged property to leverage-free stock market returns). Focus more on their discussions around real estate
I don't think this is the best forum for real estate investors necessarily, but there are some very experienced BH landlords who post in the RE threads.

The problem is that some of the very experienced landlords say things like "yes, real estate investing is actually work sometimes, and yes there can be real risk" These statements rankle some of the other real estate investors who argue RE investing is kinda like a two hour a week hobby. I don't know why I should take flaccidsteele's opinion over some of the other posters in that regard.

I'm not a real estate investor, so I really don't have a dog in that fight. But I'll repeat, there are experienced RE BHs posting in some of threads. (I know one person who does real estate investing, and from what I know it is far from zero effort, but it's also not an actual part time job, most of the time.... certainly I've heard him talking about some of the repair/refurbish projects he has done, which are more work than I want).
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