Living Off Dividends

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willthrill81
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Re: Living Off Dividends

Post by willthrill81 » Tue Jul 25, 2017 8:15 pm

Wakefield1 wrote:With people discussing withdrawal or harvesting techniques of their investments perhaps it is a good idea to remember that some younger people have a huge proportion of their investments within the 401 K or other deferred comp. tax deferred framework,meaning that they will be forced to take required minimum distributions eventually. I assume that means that stock in the accounts has to be sold. Am I wrong,can stock be taken (or shares of stock containing mutual funds) without selling or liquidating as shares "in kind" moved to taxable accounts to satisfy the RMD obligation? (I believe that stock can be sold into cash within the accounts before taking the RMD but that still involves selling. (Ignoring the case of accounts that are not in stocks or funds that contain stocks)
My understanding is that the dollar value of the tax deferred account must be depleted by the deadlines (i.e. 3.8% of the dollar value of the 401k). Even if you could just swap them out "in kind," it wouldn't make any difference from a tax perspective because the amount being swapped would still be considered as earned income.

The RMD issue really is nothing more than a tax issue. Funds obtained from RMDs can simply be reinvested in a taxable account.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

snarlyjack
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Re: Living Off Dividends

Post by snarlyjack » Tue Jul 25, 2017 10:55 pm

Stormbringer,

I think FIRE all depends on your age.

Goal: I would like to FIRE (financial independent/retire early).
I got on my computer & researched...it would take me approximately 15 more years
to save up enough to live on my dividends. Approx. 2 1/2 to 3 1/2 % dividend level.

What is my age?
What age would I like to FIRE?
How much money would I be able to DCA each & every month?
What fund or funds would I use?
Can I cut my expenses to the bone & invest even more (buying time)?
I went on the internet & started to research how other people
are doing it.
How much risk am I willing to take?
How much money is it going to take to FIRE?
Start with your goal's & develop a plan.

I wish you the very best of luck!

bob_m10
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Re: Living Off Dividends

Post by bob_m10 » Wed Jul 26, 2017 7:00 am

Hi, I am confused as to the advantage of taking dividends vs reinvesting dividends and selling equities? For example say a person is in retirement and is in the withdrawal phase, why not reinvest the dividends and withdrawal ~4% a year?

lazydavid
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Re: Living Off Dividends

Post by lazydavid » Wed Jul 26, 2017 7:37 am

Wakefield1 wrote:With people discussing withdrawal or harvesting techniques of their investments perhaps it is a good idea to remember that some younger people have a huge proportion of their investments within the 401 K or other deferred comp. tax deferred framework,meaning that they will be forced to take required minimum distributions eventually. I assume that means that stock in the accounts has to be sold. Am I wrong,can stock be taken (or shares of stock containing mutual funds) without selling or liquidating as shares "in kind" moved to taxable accounts to satisfy the RMD obligation? (I believe that stock can be sold into cash within the accounts before taking the RMD but that still involves selling. (Ignoring the case of accounts that are not in stocks or funds that contain stocks)
You can't transfer "in-kind" between tax advantaged and non-tax-advantage accounts. So you will have to sell. But if you don't want to sell yet have to take the RMD anyway, you can effectively sell just enough to pay the taxes on your RMD.

Let's say your RMD for this year is $10k to make the math easy, and you're in the 15% bracket. You sell $10k worth of TSM in your 401k and withdraw, withholding for taxes. Then take the $8500 that remains and buy TSM in your taxable account. Barring huge market movements in the couple of days it takes to accomplish this, you've sold and bought at about the same share price, so you've stayed invested (again with the exception of those few days).

danaht
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Re: Living Off Dividends

Post by danaht » Wed Jul 26, 2017 7:48 am

Most US dividends are tax qualified at the 0 to 15% rate - where bonds are taxed at the full income tax rate. Most companies try to reward shareholders by increasing their dividends over time. So if you can live off of dividends only - then go for it. It's a good strategy. Also, to diversify - you could keep your bonds in an IRA where the higher (un)qualified tax rate has no effect.

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Ketawa
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Re: Living Off Dividends

Post by Ketawa » Wed Jul 26, 2017 8:19 am

bob_m10 wrote:Hi, I am confused as to the advantage of taking dividends vs reinvesting dividends and selling equities? For example say a person is in retirement and is in the withdrawal phase, why not reinvest the dividends and withdrawal ~4% a year?
There is no advantage. Dividends are a forced taxable event. Other than the downsides of less control over your taxes compared to taking capital gains, and higher tax rates on non-qualified dividends, they have no advantage or disadvantage compared to capital appreciation as an alternative source of return for equities. Try reading this thread: Dividend Misunderstandings & Only Spend Return.

Taking dividends at ~2.5% vs your 4% is just a lower SWR. It will probably survive in almost any market, but so would taking 2% of dividends + 0.5% of capital gains if you had something like Total Stock Market instead of a high dividend portfolio. Would you rather have Total Stock Market or a portfolio that is not as diversified? There isn't anything special about the dividends.

bob_m10
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Re: Living Off Dividends

Post by bob_m10 » Wed Jul 26, 2017 12:17 pm

Ketawa wrote:
There is no advantage. Dividends are a forced taxable event. Other than the downsides of less control over your taxes compared to taking capital gains, and higher tax rates on non-qualified dividends, they have no advantage or disadvantage compared to capital appreciation as an alternative source of return for equities. Try reading this thread: Dividend Misunderstandings & Only Spend Return.

Taking dividends at ~2.5% vs your 4% is just a lower SWR. It will probably survive in almost any market, but so would taking 2% of dividends + 0.5% of capital gains if you had something like Total Stock Market instead of a high dividend portfolio. Would you rather have Total Stock Market or a portfolio that is not as diversified? There isn't anything special about the dividends.
Ok, so no real difference and thanks for the link. To me it seems simpler to have any dividends reinvested and then withdrawal as needed where you have complete control. I do see the point where living off your dividends seems like you are not touching your principle.

Side questions, If you reinvest your dividends is it still a taxable event? I assume this would only apply to a taxable account. thanks

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Ketawa
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Re: Living Off Dividends

Post by Ketawa » Wed Jul 26, 2017 12:31 pm

bob_m10 wrote:Side questions, If you reinvest your dividends is it still a taxable event? I assume this would only apply to a taxable account. thanks
Yes, you will still receive a 1099 from your brokerage or mutual fund company reporting the dividends that were paid for your taxable accounts.

usnaron
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Re: Living Off Dividends

Post by usnaron » Thu Jul 27, 2017 1:56 pm

minimalistmarc wrote:The "living off dividends" idea just makes me bang my head off a brick wall.

I have a well diversified P2P loan portfolio (asset backed loans only), that pays around 12% - 13% annually, in monthly installments.

I have not had any losses in 3 years.

If you were obsessed with living off dividends relating to dividends for shares, which is just the same as selling down your capital, whyg not switch to a high income portfolio based on something similar to above, and then you would need save much less money to retire.

Main disadvantage, requires a bit more time and effort than boglehead share investing, which is why most of my money still goes into boglehead equity portfolio. When I am > 70 I don't think I will have the inclination to manage my P2P portfolio anymore.
I believe the riskiest part of P2P loans is the fact that if the company (like lending club) go bankrupt, you lose your entire investment or large portion of it. Additionally, large default rates can be expected when unemployment spikes (the borrower will default on your loan before his/her mortgage or car loan).

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knpstr
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Re: Living Off Dividends

Post by knpstr » Thu Jul 27, 2017 2:00 pm

No. Bonds would not be necessary.
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius

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willthrill81
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Re: Living Off Dividends

Post by willthrill81 » Thu Jul 27, 2017 2:07 pm

usnaron wrote:
minimalistmarc wrote:The "living off dividends" idea just makes me bang my head off a brick wall.

I have a well diversified P2P loan portfolio (asset backed loans only), that pays around 12% - 13% annually, in monthly installments.

I have not had any losses in 3 years.

If you were obsessed with living off dividends relating to dividends for shares, which is just the same as selling down your capital, whyg not switch to a high income portfolio based on something similar to above, and then you would need save much less money to retire.

Main disadvantage, requires a bit more time and effort than boglehead share investing, which is why most of my money still goes into boglehead equity portfolio. When I am > 70 I don't think I will have the inclination to manage my P2P portfolio anymore.
I believe the riskiest part of P2P loans is the fact that if the company (like lending club) go bankrupt, you lose your entire investment or large portion of it. Additionally, large default rates can be expected when unemployment spikes (the borrower will default on your loan before his/her mortgage or car loan).
That is not known for certain. Lending Club at least does have contingency plans in case of their own bankruptcy, but exactly how this would shake out for investors is unknown.

And even spikes in unemployment, such as in 2008-2009, do not necessarily lead to unsecured loans becoming unprofitable. Credit cards remained profitable for banks even during that time frame, and P2P loans have been found to behave very similarly to credit cards.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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JamesG
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Re: Living Off Dividends

Post by JamesG » Sat Jul 29, 2017 2:06 am

Can this strategy simply be viewed as effectively having something close to a 90/10 stock/cash portfolio?
E.g. Assuming real return of 2.5% and inflation of 2%, nominal dividends are 4.5% p.a. Accumulating three years of cash at this rate leads to an approximate 90/10 stock/cash portfolio in status quo.
He who has a garden and a library wants for nothing. Cicero.

msk
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Re: Living Off Dividends

Post by msk » Sat Jul 29, 2017 2:56 am

Indeed dividends are a distraction. I checked the history of the SP500 for 50 years between 1966 and 2016. My conclusion: you can withdraw 5% of the portfolio value (including the previous year's dividends minus 15% tax) annually and your portfolio should survive 50 years more or less intact, inflation adjusted, i.e. in real terms. Throughout the 50 years your 5% withdrawals will trend upwards keeping up with inflation. Of course because you are withdrawing a constant 5% of portfolio value, following a market fall, that 5% will shrink in that year; but following a market rise that 5% will be greater. Hence, to withstand comfortably a 50% market fall, you need to be able to survive on 2.5% of your portfolio value today. If that 50% market fall occurs in year 35 then you need to be able to survive on today's 2.5% plus 35 years' inflation. You can, hence 100% to stocks is OK. I am at 100%. Some people are overly nervous and might say that 50 years' history is not enough, despite Vietnam and Iraq/Afghanistan being included. But over 300 years it has been researched that the world average returns on "commerce and industry" have been better than 5% p.a. real terms. But then some people seem more anxious about stock market gyrations than heart attacks. Each of us has his own comfort zone. To some, all bonds and cash are on a fiat currency so only gold is secure enough... 100% stocks is fine with me.

The Wizard
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Re: Living Off Dividends

Post by The Wizard » Sat Jul 29, 2017 5:23 am

bob_m10 wrote:Hi, I am confused as to the advantage of taking dividends vs reinvesting dividends and selling equities? For example say a person is in retirement and is in the withdrawal phase, why not reinvest the dividends and withdrawal ~4% a year?
In this case, the OP apparently has a larger taxable account than "needed", such that a 2.5% withdrawal rate exceeds his expenses.
All of us should be so fortunate...
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jbolden1517
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Re: Living Off Dividends

Post by jbolden1517 » Sat Jul 29, 2017 5:31 am

msk wrote:Indeed dividends are a distraction. I checked the history of the SP500 for 50 years between 1966 and 2016. My conclusion: you can withdraw 5% of the portfolio value (including the previous year's dividends minus 15% tax) annually and your portfolio should survive 50 years more or less intact, inflation adjusted, i.e. in real terms. Throughout the 50 years your 5% withdrawals will trend upwards keeping up with inflation.
That causes enormous shifts in spending, which is highly damaging to utility (the geometric mean of spending / the sum of the log of the annual spending). A person experiencing income flips and that level is undergoing rather regular financial dislocation. They are upgrading their apartment one year and being evicted 2 years later. They incur credit cards bills for travel they then can't pay.... The whole point of a retirement portfolio is to provide a stable income. I'm all in favor of growth, and think that many people undermine their retirement portfolios by placing psychological security higher than their need for inflation adjusted income, but those sorts of spending swings are damaging.

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Re: Living Off Dividends

Post by The Wizard » Sat Jul 29, 2017 5:56 am

jbolden1517 wrote:
msk wrote:Indeed dividends are a distraction. I checked the history of the SP500 for 50 years between 1966 and 2016. My conclusion: you can withdraw 5% of the portfolio value (including the previous year's dividends minus 15% tax) annually and your portfolio should survive 50 years more or less intact, inflation adjusted, i.e. in real terms. Throughout the 50 years your 5% withdrawals will trend upwards keeping up with inflation.
That causes enormous shifts in spending, which is highly damaging to utility (the geometric mean of spending / the sum of the log of the annual spending). A person experiencing income flips and that level is undergoing rather regular financial dislocation. They are upgrading their apartment one year and being evicted 2 years later. They incur credit cards bills for travel they then can't pay.... The whole point of a retirement portfolio is to provide a stable income. I'm all in favor of growth, and think that many people undermine their retirement portfolios by placing psychological security higher than their need for inflation adjusted income, but those sorts of spending swings are damaging.
I don't think I agree.
A spendaholic mindset is a separate issue from an income with some variability.
That 5% withdrawal analysis doesn't lock you into implementing it rigidly; you can leave some to enhance your reserves.

And with tax deferred funds, some folks withdraw more than they spend for tax management purposes.The remainder gets reinvested...
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jbolden1517
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Re: Living Off Dividends

Post by jbolden1517 » Sat Jul 29, 2017 6:45 am

The Wizard wrote: I don't think I agree.
A spendaholic mindset is a separate issue from an income with some variability.
That 5% withdrawal analysis doesn't lock you into implementing it rigidly; you can leave some to enhance your reserves.

And with tax deferred funds, some folks withdraw more than they spend for tax management purposes.The remainder gets reinvested...
I think our disagreement may be linguistic. What are you describing are shifts within a portfolio. We are talking about withdraws from the portfolio entirely. The reserves for example count as part of the portfolio. If they exist at all, the portfolio isn't 100% stock.

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willthrill81
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Re: Living Off Dividends

Post by willthrill81 » Sat Jul 29, 2017 9:52 am

msk wrote:Indeed dividends are a distraction. I checked the history of the SP500 for 50 years between 1966 and 2016. My conclusion: you can withdraw 5% of the portfolio value (including the previous year's dividends minus 15% tax) annually and your portfolio should survive 50 years more or less intact, inflation adjusted, i.e. in real terms. Throughout the 50 years your 5% withdrawals will trend upwards keeping up with inflation.
That strategy would indeed never have run out of money, but in the majority of the historical 30 year periods, your inflation-adjusted balance would have either remained remained flat or shrunk a bit. At the end of 30 years, you would have had a smaller inflation-adjusted balance about one-third of the time, though that's not a huge problem as retirees' spending tends to drop 1-2% annually in real terms from 65 until death.

I actually plan on using a similar strategy, but I'll be incorporating some bonds into the portfolio and will probably only withdraw 4.5%.
jbolden1517 wrote:That causes enormous shifts in spending, which is highly damaging to utility (the geometric mean of spending / the sum of the log of the annual spending). A person experiencing income flips and that level is undergoing rather regular financial dislocation. They are upgrading their apartment one year and being evicted 2 years later. They incur credit cards bills for travel they then can't pay.... The whole point of a retirement portfolio is to provide a stable income. I'm all in favor of growth, and think that many people undermine their retirement portfolios by placing psychological security higher than their need for inflation adjusted income, but those sorts of spending swings are damaging.
Utility is important, but if you are prepared for a variable income on the front end, it can still easily work. What you are describing is either just plain debt (bad idea with a variable income and not generally recommended for retirees anyway) or bad budgeting. A person using this strategy should likely be using something like the "You Need a Budget" approach (YNAB); simply put, you can only spend from last month's (or year's) income. So if your income drops, it only impacts your future spending, not your current spending. But again, if such a retiree just never went into any kind of debt that could not be immediately paid off with cash on hand, they wouldn't get into trouble as long as their withdrawals never dropped lower than their necessary expenses. For those employing this approach, I would say that these necessary expenses shouldn't exceed 50% of their withdrawals since an all stock portfolio could drop 50% (even though that's only happened three times in market history).

Further, while it is indeed psychologically nice to have a stable income, many investors have had highly variable incomes their entire career anyway and managed just fine. The "whole point of a retirement portfolio" is not "to provide a stable income" but to provide an income sufficient for the retiree that they will not outlive. For those wanting stability, they must give up something. This may come from putting some of the initial portfolio into a SPIA, incorporating enough bonds to smooth out the portfolio's returns, or holding back some of their withdrawn cash for when they know the market will be down.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

klw084
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Re: Living Off Dividends

Post by klw084 » Sat Jul 29, 2017 10:00 am

I have a P2P account at Lending Club. Their average return is nowhere near 12%.

Furthermore, unless your account is an IRA and thus tax deferred, any P2P gains would be taxed as income rather than the 15% of a dividend.

I think more and more people are souring on P2P, certainly Lending Club is nowhere near the high flyer it once was.

The Wizard
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Re: Living Off Dividends

Post by The Wizard » Sat Jul 29, 2017 10:50 am

jbolden1517 wrote:
The Wizard wrote: I don't think I agree.
A spendaholic mindset is a separate issue from an income with some variability.
That 5% withdrawal analysis doesn't lock you into implementing it rigidly; you can leave some to enhance your reserves.

And with tax deferred funds, some folks withdraw more than they spend for tax management purposes.The remainder gets reinvested...
I think our disagreement may be linguistic. What are you describing are shifts within a portfolio. We are talking about withdraws from the portfolio entirely. The reserves for example count as part of the portfolio. If they exist at all, the portfolio isn't 100% stock.
There's still a Financially Irresponsible component to your original post that is going to vary widely among people.
And most retirees have SS income as a nondecreasing base in addition to variable income from a stock portfolio. So that tempers the variation.

I'm retired but I worked part-time last year and made $30,000 additional on top of my normal retirement income. So what did I do with that juicy windfall?
1) paid a lot of taxes & FICA (28%+5%+7.65%)
2) put 50% of each net paycheck in my Roth IRA until I hit the limit
3) put 50% of each net paycheck toward additional paydown on my modest HELOC balance.

So like I said, variable income is fine, especially when it varies on the high side...
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Stormbringer
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Re: Living Off Dividends

Post by Stormbringer » Sat Jul 29, 2017 10:59 am

The Wizard wrote:In this case, the OP apparently has a larger taxable account than "needed", such that a 2.5% withdrawal rate exceeds his expenses.
All of us should be so fortunate...
That may be the case. At 48, we have $1.5M in retirement accounts and adding about $83K per year (Solo 401K, regular 401K, two backdoor Roths) plus other taxable savings. We're also on track to have 15 rental properties paid off and cash flowing. It leaves me wondering what is the point of owning a lot of bonds in our situation.
"Compound interest is the most powerful force in the universe." - Albert Einstein

The Wizard
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Re: Living Off Dividends

Post by The Wizard » Sat Jul 29, 2017 11:11 am

Stormbringer wrote:
The Wizard wrote:In this case, the OP apparently has a larger taxable account than "needed", such that a 2.5% withdrawal rate exceeds his expenses.
All of us should be so fortunate...
That may be the case. At 48, we have $1.5M in retirement accounts and adding about $83K per year (Solo 401K, regular 401K, two backdoor Roths) plus other taxable savings. We're also on track to have 15 rental properties paid off and cash flowing. It leaves me wondering what is the point of owning a lot of bonds in our situation.
People who are realistically Financially Independent a few times over can do as they please with their portfolio, anywhere from 0% risk on up, within reason.
It's those of us who are just barely FI who need to be cautious about portfolio volatility...
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jbolden1517
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Re: Living Off Dividends

Post by jbolden1517 » Sat Jul 29, 2017 12:41 pm

willthrill81 wrote:
jbolden1517 wrote:That causes enormous shifts in spending, which is highly damaging to utility (the geometric mean of spending / the sum of the log of the annual spending). A person experiencing income flips and that level is undergoing rather regular financial dislocation. They are upgrading their apartment one year and being evicted 2 years later. They incur credit cards bills for travel they then can't pay.... The whole point of a retirement portfolio is to provide a stable income. I'm all in favor of growth, and think that many people undermine their retirement portfolios by placing psychological security higher than their need for inflation adjusted income, but those sorts of spending swings are damaging.
Utility is important, but if you are prepared for a variable income on the front end, it can still easily work. What you are describing is either just plain debt (bad idea with a variable income and not generally recommended for retirees anyway) or bad budgeting. A person using this strategy should likely be using something like the "You Need a Budget" approach (YNAB); simply put, you can only spend from last month's (or year's) income. So if your income drops, it only impacts your future spending, not your current spending.
Well true. But huge swifts of spending decrease utility. A person spending $100k then $50k then $100k has a lower utility then one spending a steady $83k / yr. I like the 95% rule I learned from Boogle heads but I think a 5% fixed percentage draw is just not getting as much utility as they could from the fund.
willthrill81 wrote: But again, if such a retiree just never went into any kind of debt that could not be immediately paid off with cash on hand, they wouldn't get into trouble as long as their withdrawals never dropped lower than their necessary expenses.
Well yes. But most people are going to be matching their withdraws to their necessary expenses. What are they paying in rent? What are they paying for food? Sure they can move to a cheaper place for a short period of time but moving expenses (especially for an elderly person) can be quite large. You liquidate furniture if you are lucky at 20-cents on the dollar and if you are unlucky at more like negative-5-cents on the dollar. If they are comfortable enough that dropping to a 2.5% draw doesn't hurt their standard of living then they could have a diversified (maybe lower volatility) growth oriented portfolio and just either up their living standard or pass on more to the grandkids.
willthrill81 wrote: For those employing this approach, I would say that these necessary expenses shouldn't exceed 50% of their withdrawals since an all stock portfolio could drop 50% (even though that's only happened three times in market history).
I not sure what you mean by "market history". There are pretty good records of pretty terrible inflationary and recessionary bears all through USA and global history happening essentially every generation along with minor panics more frequently. And remember with the USA you have serious selection bias going in your favor. The drop could be more than 50%.

That being said. If a person can get buy with a 2.5% draw in the first place they could do the 4%-95% rule and be fine with a high standard of living. I'm talking about the person who actually needs the 5% draw.
willthrill81 wrote: Further, while it is indeed psychologically nice to have a stable income, many investors have had highly variable incomes their entire career anyway and managed just fine. The "whole point of a retirement portfolio" is not "to provide a stable income" but to provide an income sufficient for the retiree that they will not outlive.
Both are true. If they outlived the income it wasn't stable.
willthrill81 wrote: For those wanting stability, they must give up something. This may come from putting some of the initial portfolio into a SPIA, incorporating enough bonds to smooth out the portfolio's returns, or holding back some of their withdrawn cash for when they know the market will be down.
That's what the dividend threads are about... Because dividends are more stable than share prices they give up less (though I think there are even better strategies than equity income).

jbolden1517
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Re: Living Off Dividends

Post by jbolden1517 » Sat Jul 29, 2017 12:43 pm

Stormbringer wrote:
The Wizard wrote:In this case, the OP apparently has a larger taxable account than "needed", such that a 2.5% withdrawal rate exceeds his expenses.
All of us should be so fortunate...
That may be the case. At 48, we have $1.5M in retirement accounts and adding about $83K per year (Solo 401K, regular 401K, two backdoor Roths) plus other taxable savings. We're also on track to have 15 rental properties paid off and cash flowing. It leaves me wondering what is the point of owning a lot of bonds in our situation.
I'd say you need to be holding high risk assets that correlate negatively with real estate prices and rental income, not bonds to shield yourself. You have a real estate portfolio.

jbolden1517
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Re: Living Off Dividends

Post by jbolden1517 » Sat Jul 29, 2017 12:45 pm

The Wizard wrote: I think our disagreement may be linguistic. What are you describing are shifts within a portfolio. We are talking about withdraws from the portfolio entirely. The reserves for example count as part of the portfolio. If they exist at all, the portfolio isn't 100% stock.
There's still a Financially Irresponsible component to your original post that is going to vary widely among people.
And most retirees have SS income as a nondecreasing base in addition to variable income from a stock portfolio. So that tempers the variation.

I'm retired but I worked part-time last year and made $30,000 additional on top of my normal retirement income. So what did I do with that juicy windfall?
1) paid a lot of taxes & FICA (28%+5%+7.65%)
2) put 50% of each net paycheck in my Roth IRA until I hit the limit
3) put 50% of each net paycheck toward additional paydown on my modest HELOC balance.

So like I said, variable income is fine, especially when it varies on the high side...
I'd consider SS to be an annuity asset and carry it at the cost for an inflation adjusted annuity (which is quite huge). So for example if you start collecting $30k at age 70 inflation adjusted that might be equivalent to a $1.5m annuity position. And yep that's part of the asset allocation.
Last edited by jbolden1517 on Mon Jul 31, 2017 8:46 pm, edited 1 time in total.

snarlyjack
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Re: Living Off Dividends

Post by snarlyjack » Sat Jul 29, 2017 1:35 pm

I spent this past week analyzing the different academic studies on dividends.

I ended up making a portfolio change:
1). 70% Vanguard High Dividend Yield Index Fund (428 stocks).
2). 30% Vanguard Dividend Appreciation Index Fund (186 stocks).
3). + some CD's.

I want high dividend yield + dividend growth. I tore apart the stocks
in both funds. Imho, both funds have some holes in them (pro's & con's).
But together having both funds closes a lot of the holes. All in all,
between both funds the companies are excellent. Their is some (minor)
overlap between the funds but not that much.

When I analyze the dividend stock strategy (high dividend yield + dividend growth)
it's a excellent strategy. What I really like is the quality companies that pay dividends.
In my mind it's all about quality, quality, quality...

Here is a short write-up...Enjoy,

https://www.fool.com/investing/2017/04/ ... ation.aspx

https://www.fool.com/investing/2016/09/ ... ple-h.aspx
Last edited by snarlyjack on Sat Jul 29, 2017 3:16 pm, edited 2 times in total.

wrongfunds
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Re: Living Off Dividends

Post by wrongfunds » Sat Jul 29, 2017 3:02 pm

collecting $30k at age 70 inflation adjusted that might be equivalent to a $1.5m annuity position
Going with easy 4% rule (starting at age 70) really equivalent to $750K or less annuity position.

jbolden1517
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Re: Living Off Dividends

Post by jbolden1517 » Sat Jul 29, 2017 3:41 pm

wrongfunds wrote:
collecting $30k at age 70 inflation adjusted that might be equivalent to a $1.5m annuity position
Going with easy 4% rule (starting at age 70) really equivalent to $750K or less annuity position.
750k at age 70 will buy you slightly over $4k with a survivor benefit no inflation adjustment. It will get you closer to $5k with no survivor benefit. Hard to get good online information but my understanding is the insurance companies use 3% and half life expectancy in their models. Life expectancy is about 15 years so a CPI adjustment would cost 21%. So it does seem my off the cuff comment was high. Seems like the social security benefit is coming in around $890k.

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willthrill81
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Re: Living Off Dividends

Post by willthrill81 » Sat Jul 29, 2017 3:57 pm

jbolden1517 wrote:
willthrill81 wrote: But again, if such a retiree just never went into any kind of debt that could not be immediately paid off with cash on hand, they wouldn't get into trouble as long as their withdrawals never dropped lower than their necessary expenses.
Well yes. But most people are going to be matching their withdraws to their necessary expenses. What are they paying in rent? What are they paying for food? Sure they can move to a cheaper place for a short period of time but moving expenses (especially for an elderly person) can be quite large. You liquidate furniture if you are lucky at 20-cents on the dollar and if you are unlucky at more like negative-5-cents on the dollar. If they are comfortable enough that dropping to a 2.5% draw doesn't hurt their standard of living then they could have a diversified (maybe lower volatility) growth oriented portfolio and just either up their living standard or pass on more to the grandkids.
Rent is unnecessary for many retirees as they own their own home outright. Housing expenses are typically greatly reduced at that point. Liquidating furniture because of a decline in your portfolio sounds...unlikely.
jbolden1517 wrote:
willthrill81 wrote: For those employing this approach, I would say that these necessary expenses shouldn't exceed 50% of their withdrawals since an all stock portfolio could drop 50% (even though that's only happened three times in market history).
I not sure what you mean by "market history". There are pretty good records of pretty terrible inflationary and recessionary bears all through USA and global history happening essentially every generation along with minor panics more frequently. And remember with the USA you have serious selection bias going in your favor. The drop could be more than 50%.
U.S. market history. There have only been three times that a decline of 50% or more occurred in U.S. equities. Considering that the U.S. is roughly 50% of all global equities, I'm not sure how serious the selection bias is, but I won't debate over it.
jbolden1517 wrote:That being said. If a person can get buy with a 2.5% draw in the first place they could do the 4%-95% rule and be fine with a high standard of living. I'm talking about the person who actually needs the 5% draw.
Most experts and those on this forum believe that a 5% fixed WR plus CPI is too risky, at least to begin a 30 year retirement. Such a person likely needs to delay retirement until they can live on 4% fixed plus CPI.
jbolden1517 wrote:
willthrill81 wrote: Further, while it is indeed psychologically nice to have a stable income, many investors have had highly variable incomes their entire career anyway and managed just fine. The "whole point of a retirement portfolio" is not "to provide a stable income" but to provide an income sufficient for the retiree that they will not outlive.
Both are true. If they outlived the income it wasn't stable.
It is not necessary for an income to be stable in order to avoid outliving it. Conversely, you could have a perfectly stable income while constantly drawing down your portfolio until the money is gone.
jbolden1517 wrote:
willthrill81 wrote: For those wanting stability, they must give up something. This may come from putting some of the initial portfolio into a SPIA, incorporating enough bonds to smooth out the portfolio's returns, or holding back some of their withdrawn cash for when they know the market will be down.
That's what the dividend threads are about... Because dividends are more stable than share prices they give up less (though I think there are even better strategies than equity income).
It has been repeatedly shown on this forum, ad nauseum, that dividend strategies are not necessarily more stable, efficient, or effective than a total return approach incorporating bonds to smooth the results. You clearly believe otherwise however.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Living Off Dividends

Post by jbolden1517 » Sat Jul 29, 2017 4:30 pm

willthrill81 wrote: Rent is unnecessary for many retirees as they own their own home outright. Housing expenses are typically greatly reduced at that point. Liquidating furniture because of a decline in your portfolio sounds...unlikely.
Then their house is part of their portfolio and they are drawing a rent equivalent from it. The rent equivalent income is stable. Not counting that sort of stuff is just bad accounting.
willthrill81 wrote:
jbolden1517 wrote: I not sure what you mean by "market history". There are pretty good records of pretty terrible inflationary and recessionary bears all through USA and global history happening essentially every generation along with minor panics more frequently. And remember with the USA you have serious selection bias going in your favor. The drop could be more than 50%.
U.S. market history. There have only been three times that a decline of 50% or more occurred in U.S. equities. Considering that the U.S. is roughly 50% of all global equities, I'm not sure how serious the selection bias is, but I won't debate over it.
The USA is 50% now. It wasn't until recently. I think you are only counting from 1926 since otherwise there are way more than 3. In which case, yes about once per generation. That's not unlikely.
willthrill81 wrote:
jbolden1517 wrote:That being said. If a person can get buy with a 2.5% draw in the first place they could do the 4%-95% rule and be fine with a high standard of living. I'm talking about the person who actually needs the 5% draw.
Most experts and those on this forum believe that a 5% fixed WR plus CPI is too risky, at least to begin a 30 year retirement. Such a person likely needs to delay retirement until they can live on 4% fixed plus CPI.
Obviously it is more risky. And I personally wouldn't do it unless I had to. That being said, there are people in those situations or worse. Things like 7+% draws aren't uncommon.
jbolden1517 wrote:
willthrill81 wrote: Further, while it is indeed psychologically nice to have a stable income, many investors have had highly variable incomes their entire career anyway and managed just fine. The "whole point of a retirement portfolio" is not "to provide a stable income" but to provide an income sufficient for the retiree that they will not outlive.
Both are true. If they outlived the income it wasn't stable.
It is not necessary for an income to be stable in order to avoid outliving it. Conversely, you could have a perfectly stable income while constantly drawing down your portfolio until the money is gone.
willthrill81 wrote:
jbolden1517 wrote: That's what the dividend threads are about... Because dividends are more stable than share prices they give up less (though I think there are even better strategies than equity income).
It has been repeatedly shown on this forum, ad nauseum, that dividend strategies are not necessarily more stable, efficient, or effective than a total return approach incorporating bonds to smooth the results. You clearly believe otherwise however.
Yeah because the data and evidence prove exactly the opposite. The people making this case end up assuming what they are trying to prove. Most of the people making the case couldn't follow the math. The historical data about stability stands in stark contrast to their theory. They are wrong.

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Re: Living Off Dividends

Post by Ged » Sat Jul 29, 2017 5:18 pm

Stormbringer wrote:If an investor had say three years of living expenses in a money market account, and could live off the dividend yield (say 2.5%) of a dividend-oriented index fund, is there any reason to own bonds?

The logic being that in aggregate, dividends rarely get cut, and when they do, they tend to be restored as quickly as possible. The cash would be there as a shock-absorber in those cases. Also, the dividend growth-rate of the S&P 500 has historically been comfortably above the rate of inflation, so real purchasing power should increase over time.
The problems I see with this approach are as follows:

1. The current total market dividend rate is 1.8%. To get a 2.5% dividend rate means selecting a subset of the total market. This in turn opens the question as to whether you can manage the selection of this subset in a way to avoid getting less than the market total return. Experience suggests to me this is unlikely.

2. Managing a subset of funds to get a 2.5% rate will be a lot of work. Especially in later years this may become problematic.

3. Dividends are not as tax friendly as capital appreciation. This could materially affect the effective rate of return.

4. As more companies eschew dividends in favor of stock repurchases the universe of dividend issuing companies is shrinking.

5. The dividend growth rate can be deceptive. In most years it exceeds inflation. However in 2009 it was -20%. How long will it take to overcome the cumulative income lost since this radical adjustment? I don't know but it seems like a seminal event that calls into question the strategy as a whole.

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Re: Living Off Dividends

Post by blueberry » Sat Jul 29, 2017 5:49 pm

Stormbringer wrote:
The Wizard wrote:In this case, the OP apparently has a larger taxable account than "needed", such that a 2.5% withdrawal rate exceeds his expenses.
All of us should be so fortunate...
That may be the case. At 48, we have $1.5M in retirement accounts and adding about $83K per year (Solo 401K, regular 401K, two backdoor Roths) plus other taxable savings. We're also on track to have 15 rental properties paid off and cash flowing. It leaves me wondering what is the point of owning a lot of bonds in our situation.
I'm surprised you didn't mention 15 rental properties in your original post. That seems more significant to your possible outcomes than whether you have bonds or cash.

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Re: Living Off Dividends

Post by msk » Sat Jul 29, 2017 9:29 pm

I think that the conclusions reached from a lot of these discussions get muddled up because we mix up situations that are in fact very different, e.g. not keeping in mind that there is a huge difference between somebody entering retirement with a million $ portfolio and another entering with a $10 million portfolio. Both can retire reasonably comfortably (e.g. with SS in addition) but the million $ guy has to be much more cautious as regards income variability. The $10 million guy can happily withstand a 50% market fall. He buys his new $100k Mercedes after a market rise (now is the time :mrgreen: ) and simply skips any major purchases or that two-month luxury vacation on the other side of the world following a market fall. The data I dug up for 1966 to 2016 are as follows if anyone wants to evaluate his own withdrawal/spend strategies in a spreadsheet (as I did before I discovered this wonderful BH site):

SP500 compounded @ 6.6% p.a.
Inflation compounded @ 4% p.a.
Dividends averaged @ 3.1% p.a.

Because the above data are averages, it's very easy to, e.g. enter your own tax rates, age-based withdrawals, etc. I was looking for a "spend" strategy that will last long, >30 years and, critically, keep up with inflation. I was at age 72, but I was also looking for a strategy to advise my heirs. It turned out that, provided some variability can be tolerated (my portfolio was large enough and I expect my heirs to depend on their job incomes primarily) then the 5% p.a. spend after paying 15% tax on dividends was the best. Lately I checked that against a Monte Carlo simulation in portfoliovisualizer for confirmation. No problems. For a person with a barely adequate portfolio, that million $ guy, this is not a suitable spend strategy, especially if he does not have SS to back things up. YMMV.

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Re: Living Off Dividends

Post by willthrill81 » Sat Jul 29, 2017 9:39 pm

msk wrote:I think that the conclusions reached from a lot of these discussions get muddled up because we mix up situations that are in fact very different, e.g. not keeping in mind that there is a huge difference between somebody entering retirement with a million $ portfolio and another entering with a $10 million portfolio. Both can retire reasonably comfortably (e.g. with SS in addition) but the million $ guy has to be much more cautious as regards income variability. The $10 million guy can happily withstand a 50% market fall. He buys his new $100k Mercedes after a market rise (now is the time :mrgreen: ) and simply skips any major purchases or that two-month luxury vacation on the other side of the world following a market fall.
+1

Well said. Those retiring close to the 'margins' generally need to be more conservative both in their asset allocation and in their withdrawal strategy because they don't have much wiggle room. Saving significantly more than necessary allows one to have a more aggressive (or conservative actually) portfolio, a more aggressive withdrawal strategy, and/or more left to heirs and charity.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Living Off Dividends

Post by gilgamesh » Sun Jul 30, 2017 5:27 am

The Wizard wrote:
bob_m10 wrote:Hi, I am confused as to the advantage of taking dividends vs reinvesting dividends and selling equities? For example say a person is in retirement and is in the withdrawal phase, why not reinvest the dividends and withdrawal ~4% a year?
In this case, the OP apparently has a larger taxable account than "needed", such that a 2.5% withdrawal rate exceeds his expenses.
All of us should be so fortunate...
Are you saying it's a fortunate thing for all of us to work longer than necessary?

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Re: Living Off Dividends

Post by gilgamesh » Sun Jul 30, 2017 5:46 am

msk wrote:I think that the conclusions reached from a lot of these discussions get muddled up because we mix up situations that are in fact very different, e.g. not keeping in mind that there is a huge difference between somebody entering retirement with a million $ portfolio and another entering with a $10 million portfolio. Both can retire reasonably comfortably (e.g. with SS in addition) but the million $ guy has to be much more cautious as regards income variability. The $10 million guy can happily withstand a 50% market fall. He buys his new $100k Mercedes after a market rise (now is the time :mrgreen: ) and simply skips any major purchases or that two-month luxury vacation on the other side of the world following a market fall.
What if the $10M guy has 20 times the expenses of the $1M guy?

Who went into retirement with the ideal amount relative to expenses? Did the $1M guy go in with ten times lower nest egg than necessary relative to his spending? Or the $10M stayed on the work force much longer than necessary?

Are we assuming all retirees have the same expenses?

Of course if someone has ten times more than necessary for retirement they have more flexibility. But, no one accidentally ends up having ten times more than necessary as they enter retirement.

If you are saying it's necessary to have spending flexibility in retirement, then I completely agree. But, I fail to see how your $1M vs $10M fits into any reality.

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Re: Living Off Dividends

Post by Stryker » Sun Jul 30, 2017 6:06 am

My wife and I both have pensions so that's always something to fall back on if things get rough. I have 28 individual equities in my all Canadian dividend growth portfolio and I don't spend anymore time on it in retirement than I do on the index investments on the other side of our assets. The dividend portfolio funds the maximum my wife and I are allowed in the tax free accounts. We usually have around $5000 left over each year to re-invest into the taxable dividend portfolio. Retirement has been the best part of my life.

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Re: Living Off Dividends

Post by skeptical » Sun Jul 30, 2017 6:22 am

Is there any difference between living off the portfolio “yield” (dividends/interest) or reinvesting them and withdrawing the same amount to live on, or a 2.5% vs 4% portfolio “yield” with the same total return ? No, aside from the possible tax differences

However, is there a connection between portfolio “yield” and the "safe withdrawal rate" ? I find that an interesting question, one that I have not found any specific studies.

The market is saying, through its current yields, that an SWR might be less than the “norm”. This seems to be accepted wisdom, from the discussions I have seen.

There are plenty of studies showing what the actual SWR was for a given year in the past for an asset mix. Would be useful to see an overlay of what the interest/dividend yield was for those years. For example, your basic 50/50 portfolio (total stock/total bond) generates a 2.25% yield right now. What was the equivalent portfolio yield when the SWR was 4%, 5%, 6% ? How strong is the correlation ? And if there is a correlation, does it really mean anything ? How much of a market signal is the yield, and does it have predictive value ?

Of course, you can juice your yield with riskier stocks/bonds, but that just increases the risk that your SWR rate based on this would fail.

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Re: Living Off Dividends

Post by The Wizard » Sun Jul 30, 2017 6:50 am

gilgamesh wrote:
The Wizard wrote:
bob_m10 wrote:Hi, I am confused as to the advantage of taking dividends vs reinvesting dividends and selling equities? For example say a person is in retirement and is in the withdrawal phase, why not reinvest the dividends and withdrawal ~4% a year?
In this case, the OP apparently has a larger taxable account than "needed", such that a 2.5% withdrawal rate exceeds his expenses.
All of us should be so fortunate...
Are you saying it's a fortunate thing for all of us to work longer than necessary?
Yes.
Warren Buffett didn't get wealthy by sipping margaritas on the beach all day...
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Re: Living Off Dividends

Post by The Wizard » Sun Jul 30, 2017 6:55 am

gilgamesh wrote:
What if the $10M guy has 20 times the expenses of the $1M guy?

Who went into retirement with the ideal amount relative to expenses? Did the $1M guy go in with ten times lower nest egg than necessary relative to his spending? Or the $10M stayed on the work force much longer than necessary?

Are we assuming all retirees have the same expenses?

Of course if someone has ten times more than necessary for retirement they have more flexibility. But, no one accidentally ends up having ten times more than necessary as they enter retirement.

If you are saying it's necessary to have spending flexibility in retirement, then I completely agree. But, I fail to see how your $1M vs $10M fits into any reality.
There are lots of examples of both extremes.
Paul Allen's megayacht puts his monthly expenses over the top.
That janitor who lived frugally and gave $8M to charity is the other extreme...
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Re: Living Off Dividends

Post by gilgamesh » Sun Jul 30, 2017 7:37 am

The Wizard wrote:
gilgamesh wrote:
The Wizard wrote:
bob_m10 wrote:Hi, I am confused as to the advantage of taking dividends vs reinvesting dividends and selling equities? For example say a person is in retirement and is in the withdrawal phase, why not reinvest the dividends and withdrawal ~4% a year?
In this case, the OP apparently has a larger taxable account than "needed", such that a 2.5% withdrawal rate exceeds his expenses.
All of us should be so fortunate...
Are you saying it's a fortunate thing for all of us to work longer than necessary?
Yes.
Warren Buffett didn't get wealthy by sipping margaritas on the beach all day...
So your advice for all is, work until you save enough to have a SWR of 2.5%?
Last edited by gilgamesh on Sun Jul 30, 2017 7:41 am, edited 2 times in total.

gilgamesh
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Re: Living Off Dividends

Post by gilgamesh » Sun Jul 30, 2017 7:40 am

The Wizard wrote:
gilgamesh wrote:
What if the $10M guy has 20 times the expenses of the $1M guy?

Who went into retirement with the ideal amount relative to expenses? Did the $1M guy go in with ten times lower nest egg than necessary relative to his spending? Or the $10M stayed on the work force much longer than necessary?

Are we assuming all retirees have the same expenses?

Of course if someone has ten times more than necessary for retirement they have more flexibility. But, no one accidentally ends up having ten times more than necessary as they enter retirement.

If you are saying it's necessary to have spending flexibility in retirement, then I completely agree. But, I fail to see how your $1M vs $10M fits into any reality.
There are lots of examples of both extremes.
Paul Allen's megayacht puts his monthly expenses over the top.
That janitor who lived frugally and gave $8M to charity is the other extreme...
Of course there are extremes....but what's the point in talking about someone who has $10M going into retirement but only needs $1M? What does such an example convey?

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Re: Living Off Dividends

Post by The Wizard » Sun Jul 30, 2017 7:48 am

gilgamesh wrote: So you your advice for all is, work until you save enough to have a SWR of 2.5%.
Not necessarily, but you raise a good point: why is Jeff Bezos still running amazon.com when he could retire yesterday? Does someone need to have a serious talk with that guy?

When some people retire, they sell their business for a few million or more. Point is, lots of people enjoy their work to a degree. Not everyone is working cash registers at Walmart...
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Re: Living Off Dividends

Post by The Wizard » Sun Jul 30, 2017 7:53 am

gilgamesh wrote: Of course there are extremes....but what's the point in talking about someone who has $10M going into retirement but only needs $1M? What does such an example convey?
Some people are motivated to succeed more than I am, for instance.
I don't think that's a bad thing...
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Re: Living Off Dividends

Post by gilgamesh » Sun Jul 30, 2017 8:09 am

The Wizard wrote:
gilgamesh wrote: So you your advice for all is, work until you save enough to have a SWR of 2.5%.
Not necessarily, but you raise a good point: why is Jeff Bezos still running amazon.com when he could retire yesterday? Does someone need to have a serious talk with that guy?

When some people retire, they sell their business for a few million or more. Point is, lots of people enjoy their work to a degree. Not everyone is working cash registers at Walmart...
I agree, it's just that you said 'all of us'....I certainly won't feel fortunate to have so much in retirement as I would have worked unnecessarily long. I will work as long as it is necessary to enjoy life now and then when I've saved enough to be financially independent. I do not fault those who wants to work longer and I do not fault those who curtail spending even more now to retire even sooner. Everybody is different.

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Re: Living Off Dividends

Post by gilgamesh » Sun Jul 30, 2017 8:11 am

The Wizard wrote:
gilgamesh wrote: Of course there are extremes....but what's the point in talking about someone who has $10M going into retirement but only needs $1M? What does such an example convey?
Some people are motivated to succeed more than I am, for instance.
I don't think that's a bad thing...
No it's not a bad thing, but not everyone need to strive to do that either.

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Re: Living Off Dividends

Post by snarlyjack » Sun Jul 30, 2017 8:55 am

Portfolio Design.

(I realize that this is different thinking than a total return investor).
(This is more for a income/growth investor).

Being a young guy interested in FIRE the perfect portfolio might be:
Equity (Portfolio):

60% High dividend yield fund. (FTSE/Russell Index).
30% Dividend appreciation fund. (Dividend Achievers Index).
10% Total stock market fund. (Pick-up everything moving).

Income (Portfolio):
90/10, 80/20, 70/30, 60/40 Total Bond Fund.
For the stability of the portfolio.

As a income/growth investor this is how I' am thinking...
How would you put together the perfect portfolio to
run out 60 or 70 years? Achieving income & growth yet
still picking up everything that moves?

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Re: Living Off Dividends

Post by jbolden1517 » Sun Jul 30, 2017 9:17 am

skeptical wrote:However, is there a connection between portfolio “yield” and the "safe withdrawal rate" ? I find that an interesting question, one that I have not found any specific studies.
If you want to run the math, under deflation dividends are about 1/2 as volatile as stocks. So a 100% equity income portfolio provides the income stability of a 50/50 mix. Under inflation dividends mostly keep up with inflation so you take on very little risk (for example 1973 bear when you had 18% inflation you had 17% dividend increases). We are either in a late deflationary period or early reflation. Once we know we are clear that means for our lifetimes we likely stay clear.

Mostly the goal in getting your safe withdrawal rate up is avoiding the situation of large losses early in retirement, which get compounded by withdrawal pulling the withdrawal rate up... Using equity income accomplishes that. It reduces the damage from deflationary bears, it almost eliminates the damage from inflationary bears (and inflation in general) at the expense of inflation adjusted growth during bulls.

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Re: Living Off Dividends

Post by jbolden1517 » Sun Jul 30, 2017 9:26 am

Ged wrote:1. The current total market dividend rate is 1.8%. To get a 2.5% dividend rate means selecting a subset of the total market. This in turn opens the question as to whether you can manage the selection of this subset in a way to avoid getting less than the market total return. Experience suggests to me this is unlikely.
If you choose a dividend portfolio because of stability you get a slightly better return than the market total return (some value premium). But compared to pure value plays you do worse. What you get is income stability.
Ged wrote: 2. Managing a subset of funds to get a 2.5% rate will be a lot of work. Especially in later years this may become problematic.
There are tons of equity income funds. And frankly 2.5% is rather low for them even today.
Ged wrote: 3. Dividends are not as tax friendly as capital appreciation. This could materially affect the effective rate of return.
Qualified dividends count as capital gains. There isn't any difference between selling and getting capital gains and getting qualified dividends.
Ged wrote: 4. As more companies eschew dividends in favor of stock repurchases the universe of dividend issuing companies is shrinking.
The flow has reversed on that. Because of widespread indexing and quasi-indexing stock buybacks don't have the impact on share price they once had -- index funds buy dilution and sell concentration. Payout rates have been edging up steadily since 2012 and the percentage of companies paying a dividend in the SP500 (just to pick an index) is up from the low 70s to low 80s. Dividends are back in fashion.
Ged wrote: 5. The dividend growth rate can be deceptive. In most years it exceeds inflation. However in 2009 it was -20%. How long will it take to overcome the cumulative income lost since this radical adjustment? I don't know but it seems like a seminal event that calls into question the strategy as a whole.
It took till 2012 till the yield was back up. That was about 18 months earlier than investors in the SP500 got back to break even. As far as cumulative income about 2013.

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Re: Living Off Dividends

Post by WoodSpinner » Sun Jul 30, 2017 10:35 am

lazydavid wrote:
You can't transfer "in-kind" between tax advantaged and non-tax-advantage accounts. So you will have to sell. But if you don't want to sell yet have to take the RMD anyway, you can effectively sell just enough to pay the taxes on your RMD.
I do not believe this is correct ....

See 2 Good reasons to consider an in-kind RMD distribution among other sites found when Googling the topic.

Has something changed? :?:

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