Relax after achieving a certain level of dividend income?

[skor99]

Instead of having a target age or target number, can somebody just look at their interest and dividend income ( mostly dividends ) and say they are ready for retirement if the int/Div + Soc security income exceeds their income requirement in retirement ?

Dividends can go down during recessions but even for something like a near depression like in 2008, I see that my Div income exceeded the 2007 number in 2010 , so did not take a long time for that to recover , even though stock values took longer to match 2007 highs. Same for the slump in 2020 , 2021 dividends came close to 2019 and 2022 dividends exceeded 2019 easily.

Makes sense ?

[cbs2002]

Makes sense ?

Not really. You may have a psychological preference to see the dividend payments come in, but whether you are selling stocks or getting dividend checks, the money is coming from the same place and is a partial reflection of total value to the shareholder. Dividend-paying stocks are no more likely to recover from a downturn than non-dividend-paying stocks. Linking your retirement spending to assumed future dividend revenue seems pretty risky to me.

Ask anyone who relied on GE dividends as a source of long-term income how that went over the last 15 years.

What's stopping you from just calculating multiple of annual expenses in your portfolio?

[capran]

I'm too OCD to be of any help. I know there are too many variables for a one size fits all. It boils down to your comfort level. We started off our both retired (59.5 and 62) in 2014 with one small pension. We added my taking SS at 64, and my pension at 65, and will add her SS at 70 (in 2 years). Up until last May, our total "cash" nest egg remained at the same level it was in 2014 with minimal dividends. In May we made a rather large cash purchase that we would have never expected back then, selling our 1997 sailboat and buying a 2008 trawler which, with sales tax and registration was about 275k, for a net check of 225k that we had to write. If we didn't have the extra savings, and just focused on meeting the everyday living expenses with regularly scheduled income, we would have been OK, but unable to make such a drastic purchase. (and that doesn't even factor in all the unknowns of very old age needs).

It will be interesting to hear what others think.

[Silverado]

Sounds like a good way to work way too long to me.

[skor99]

Makes sense ?

Not really. You may have a psychological preference to see the dividend payments come in, but whether you are selling stocks or getting dividend checks, the money is coming from the same place and is a partial reflection of total value to the shareholder. Dividend-paying stocks are no more likely to recover from a downturn than non-dividend-paying stocks. Linking your retirement spending to assumed future dividend revenue seems pretty risky to me.

Ask anyone who relied on GE dividends as a source of long-term income how that went over the last 15 years.

What's stopping you from just calculating multiple of annual expenses in your portfolio?

Not relying on one or two dividend paying companies but dividend paying ETFs with hundreds of stocks … also per my experience dividends don’t seem directly co related to stock price recovery- I already mentioned that my dividends came back quicker than the stock values..

If dividends did not totally collapse in 2001-2 , 2008-9 and 2020 what makes you suggest that this might not work in the future ?

[cbs2002]

Makes sense ?

Not really. You may have a psychological preference to see the dividend payments come in, but whether you are selling stocks or getting dividend checks, the money is coming from the same place and is a partial reflection of total value to the shareholder. Dividend-paying stocks are no more likely to recover from a downturn than non-dividend-paying stocks. Linking your retirement spending to assumed future dividend revenue seems pretty risky to me.

Ask anyone who relied on GE dividends as a source of long-term income how that went over the last 15 years.

What's stopping you from just calculating multiple of annual expenses in your portfolio?

Not relying on one or two dividend paying companies but dividend paying ETFs with hundreds of stocks … also per my experience dividends don’t seem directly co related to stock price recovery- I already mentioned that my dividends came back quicker than the stock values..

If dividends did not totally collapse in 2001-2 , 2008-9 and 2020 what makes you suggest that this might not work in the future ?

Stocks did not totally collapse in any of these timeframes either, they just went down. If you are looking at yields on ETFs of dividend-paying stocks, I'd encourage you to compare total return over a long period to an ETF of a regular old stock index (e.g. VOO). I have not done this myself. Total return less taxes and fees over the long haul is what matters, not yield.

[8301]

My dividends are large enough that the sum of 2 ss and dividends more than meet expenses. The downside is that they push me into high tax brackets once RMD starts and IRMAA.

[burritoLover]

Makes sense ?

Not really. You may have a psychological preference to see the dividend payments come in, but whether you are selling stocks or getting dividend checks, the money is coming from the same place and is a partial reflection of total value to the shareholder. Dividend-paying stocks are no more likely to recover from a downturn than non-dividend-paying stocks. Linking your retirement spending to assumed future dividend revenue seems pretty risky to me.

Ask anyone who relied on GE dividends as a source of long-term income how that went over the last 15 years.

What's stopping you from just calculating multiple of annual expenses in your portfolio?

Not relying on one or two dividend paying companies but dividend paying ETFs with hundreds of stocks … also per my experience dividends don’t seem directly co related to stock price recovery- I already mentioned that my dividends came back quicker than the stock values..

If dividends did not totally collapse in 2001-2 , 2008-9 and 2020 what makes you suggest that this might not work in the future ?

Stock dividends do not improve your safe withdrawal rate - they are irrelevant from that perspective - the same as a forced sale. If someone forced you to sell x% four times a year from your stock funds, would you believe that would dictate whether you could retire or not?

[8301]

Makes sense ?

Not really. You may have a psychological preference to see the dividend payments come in, but whether you are selling stocks or getting dividend checks, the money is coming from the same place and is a partial reflection of total value to the shareholder. Dividend-paying stocks are no more likely to recover from a downturn than non-dividend-paying stocks. Linking your retirement spending to assumed future dividend revenue seems pretty risky to me.

Ask anyone who relied on GE dividends as a source of long-term income how that went over the last 15 years.

What's stopping you from just calculating multiple of annual expenses in your portfolio?

Not relying on one or two dividend paying companies but dividend paying ETFs with hundreds of stocks … also per my experience dividends don’t seem directly co related to stock price recovery- I already mentioned that my dividends came back quicker than the stock values..

If dividends did not totally collapse in 2001-2 , 2008-9 and 2020 what makes you suggest that this might not work in the future ?

Stocks did not totally collapse in any of these timeframes either, they just went down. If you are looking at yields on ETFs of dividend-paying stocks, I'd encourage you to compare total return over a long period to an ETF of a regular old stock index (e.g. VOO). I have not done this myself. Total return less taxes and fees over the long haul is what matters, not yield.

Another ad nauseam lecture on dividends vs. total return. It is not about chasing after dividends. If your investment is large enough, e.g., VTSAX or VTIAX, you have an automatic cash inflow without lifting a finger. Can you find anything wrong with the scenario? You are free to choose BRK instead.

[RubyTuesday]

If your dividends are coming from broad total market funds, they’re around 2%. So yes, if you can pay your expenses completely from dividends and SS you likely have a very safe withdrawal rate.

Relax… You will have likely worked much longer than necessary and your heirs will be very happy with you.

[ScubaHogg]

If your dividends are coming from broad total market funds, they’re around 2%. So yes, if you can pay your expenses completely from dividends and SS you likely have a very safe withdrawal rate.

Relax… You will have likely worked much longer than necessary and your heirs will be very happy with you.

Right? So the OPs situation would be at like 50x annual expenses. So yep, the OP can retire

[idc]

This is a very informative and well documented video on dividend stocks https://youtu.be/4iNOtVtNKuU

It took me a while to mentally switch from thinking dividends are the best way to get steady income to a mode where it might be more optimal to have a holistic strategy.

[Mike Scott]

If dividends from stock index funds is enough then you are probably in the 2% withdrawal range. It's not the dividends that make you safe but rather the 2% withdrawal rate.

[skor99]

If dividends from stock index funds is enough then you are probably in the 2% withdrawal range. It's not the dividends that make you safe but rather the 2% withdrawal rate.

Ok this statement makes it clear - 2 - 2.5% would be the effective withdrawal rate and that is too conservative

[CyclingDuo]

Instead of having a target age or target number, can somebody just look at their interest and dividend income ( mostly dividends ) and say they are ready for retirement if the int/Div + Soc security income exceeds their income requirement in retirement ?

Sure. If the combination of the household's Social Security income stream + dividends + fixed income interest exceeds all of the household's expense requirements, then just reinvest the excess and live off of what you need.

The three fund portfolio's current yields:

VXUS currently yields 3.09%
VTI currently yields 1.66%
BND currently yields 2.51%

So if you had $700K in each fund for a $2.1M portfolio, your annual income stream would be around...

VXUS = $21,630
VTI = $11,620
BND = $17,570
----->$50,820 Total dividends + interest before taxes

Could one relax with a 2.4% withdrawal rate when combined with the SS income stream(s) if the income exceeds your expenses?