How to generate [$120,000/year] from investments

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JazzTime
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Re: How to generate [$120,000/year] from investments

Post by JazzTime »

exodusNH wrote: Fri Jun 02, 2023 3:28 pm
JazzTime wrote: Fri Jun 02, 2023 2:00 pm He could just buy SCHD and never touch the principal. Divs grow every year. Easy peasy!
That's not how dividends work.

After paying out the dividend, the share value drops by that amount. As an ETF is just a collection of stocks, they have the same behavior. This is why there's a pinned post here: viewtopic.php?t=129142&sid=3633178477ab ... cbfe533154
Sorry to disappoint, but here are the facts according to Portfolio Visualizer.

If you invested $4MM in SCHD in Jan. 2013 and withdrew the dividends as paid, here are your results.

Final balance (May 2023) = $9.8MM
Div pd in 2013 = $127K
Div pd in 2022 = $362K
Dividends increase each and every year. I'll take that! :moneybag :moneybag :moneybag

Disclaimer: Past results are not an indicator of future performance. OK, we all know that. :beer
The difficulty with jazz is there are too many notes. (Borrowed from Emperor's critique in Amadeus)
the_wiki
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Re: How to generate [$120,000/year] from investments

Post by the_wiki »

JazzTime wrote: Fri Jun 02, 2023 4:07 pm
exodusNH wrote: Fri Jun 02, 2023 3:28 pm
JazzTime wrote: Fri Jun 02, 2023 2:00 pm He could just buy SCHD and never touch the principal. Divs grow every year. Easy peasy!
That's not how dividends work.

After paying out the dividend, the share value drops by that amount. As an ETF is just a collection of stocks, they have the same behavior. This is why there's a pinned post here: viewtopic.php?t=129142&sid=3633178477ab ... cbfe533154
Sorry to disappoint, but here are the facts according to Portfolio Visualizer.

If you invested $4MM in SCHD in Jan. 2013 and withdrew the dividends as paid, here are your results.

Final balance (May 2023) = $9.8MM
Div pd in 2013 = $127K
Div pd in 2022 = $362K
Dividends increase each and every year. I'll take that! :moneybag :moneybag :moneybag

Disclaimer: Past results are not an indicator of future performance. OK, we all know that. :beer
Sure, but with VOO you'd have 12 million after taking annual withdrawals over same period. QQQ would give you 20 million. Why should I withdraw $362k and pay more taxes if I don't need the money?
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JazzTime
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Re: How to generate [$120,000/year] from investments

Post by JazzTime »

the_wiki wrote: Fri Jun 02, 2023 4:25 pm
JazzTime wrote: Fri Jun 02, 2023 4:07 pm
exodusNH wrote: Fri Jun 02, 2023 3:28 pm
JazzTime wrote: Fri Jun 02, 2023 2:00 pm He could just buy SCHD and never touch the principal. Divs grow every year. Easy peasy!
That's not how dividends work.

After paying out the dividend, the share value drops by that amount. As an ETF is just a collection of stocks, they have the same behavior. This is why there's a pinned post here: viewtopic.php?t=129142&sid=3633178477ab ... cbfe533154
Sorry to disappoint, but here are the facts according to Portfolio Visualizer.

If you invested $4MM in SCHD in Jan. 2013 and withdrew the dividends as paid, here are your results.

Final balance (May 2023) = $9.8MM
Div pd in 2013 = $127K
Div pd in 2022 = $362K
Dividends increase each and every year. I'll take that! :moneybag :moneybag :moneybag

Disclaimer: Past results are not an indicator of future performance. OK, we all know that. :beer
Sure, but with VOO you'd have 12 million after taking annual withdrawals over same period. QQQ would give you 20 million. Why should I withdraw $362k and pay more taxes if I don't need the money?
I think the OP wanted $120K initial income and presumably would want a cost of living raise each year. He doesn't have to spend it if he doesn't want it. What are you going to do with the $20MM you made in QQQ? Take it with you?

There's lots of ways to meet the OP's objective. I merely stated one reasonable way. And dividends are taxed at more favorable rates than interest/bond income. Unfortunately, dividends are considered "verboten" by BHers.
The difficulty with jazz is there are too many notes. (Borrowed from Emperor's critique in Amadeus)
the_wiki
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Re: How to generate [$120,000/year] from investments

Post by the_wiki »

JazzTime wrote: Fri Jun 02, 2023 7:58 pm
the_wiki wrote: Fri Jun 02, 2023 4:25 pm
JazzTime wrote: Fri Jun 02, 2023 4:07 pm
exodusNH wrote: Fri Jun 02, 2023 3:28 pm
JazzTime wrote: Fri Jun 02, 2023 2:00 pm He could just buy SCHD and never touch the principal. Divs grow every year. Easy peasy!
That's not how dividends work.

After paying out the dividend, the share value drops by that amount. As an ETF is just a collection of stocks, they have the same behavior. This is why there's a pinned post here: viewtopic.php?t=129142&sid=3633178477ab ... cbfe533154
Sorry to disappoint, but here are the facts according to Portfolio Visualizer.

If you invested $4MM in SCHD in Jan. 2013 and withdrew the dividends as paid, here are your results.

Final balance (May 2023) = $9.8MM
Div pd in 2013 = $127K
Div pd in 2022 = $362K
Dividends increase each and every year. I'll take that! :moneybag :moneybag :moneybag

Disclaimer: Past results are not an indicator of future performance. OK, we all know that. :beer
Sure, but with VOO you'd have 12 million after taking annual withdrawals over same period. QQQ would give you 20 million. Why should I withdraw $362k and pay more taxes if I don't need the money?
I think the OP wanted $120K initial income and presumably would want a cost of living raise each year. He doesn't have to spend it if he doesn't want it. What are you going to do with the $20MM you made in QQQ? Take it with you?

There's lots of ways to meet the OP's objective. I merely stated one reasonable way. And dividends are taxed at more favorable rates than interest/bond income. Unfortunately, dividends are considered "verboten" by BHers.
You can sell shares to pull it out. They went up more than $120k/yr on average anyway.

dividends are not free money. The only way they are verboten is when they are treated as superior to making planned manual withdrawals.

I was not suggesting that qqq was a good option, only that it's easy to find good returns when looking in reverse and SCHD is not special in any way other than being a good value stock fund.
strongboy2005
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Re: How to generate [$120,000/year] from investments

Post by strongboy2005 »

The TIPS ladder has more specificity and one can truly ignore them once purchased and simply allow them to mature.

http://www.tipsladder.com/
random_walker_77
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Re: How to generate $120m/year from investments

Post by random_walker_77 »

Raspberry-503 wrote: Fri Jun 02, 2023 2:00 pm
random_walker_77 wrote: Fri Jun 02, 2023 12:04 am
There are probably optimizations, but a baseline to consider would be 70% total bonds (BND), 20% total stock (VTI), and 10% total world stock (VT)
VTI and VT overlap because VT is worldwide including the US. I bet you most of their top 10 investments are identical (I didn't check). So the combination you suggest would end up being mostly US stock. Whether that's good or not has been debated over and over, but I dislike fund combinations with large overlap, it makes it harder to understand the true allocation.
If you want x% foreign stocks, use something like VXUS instead of VT.
If you want to match the worldwide market cap, put all equities in VT as I suggested above
Whoops, thank you, you're absolutely right.
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White Coat Investor
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Re: How to generate [$120,000/year] from investments

Post by White Coat Investor »

Always passive wrote: Thu Jun 01, 2023 11:44 pm [Title edited for clarity - moderator oldcomputerguy]

A family member has asked me to help him
develop a portfolio that will accomplish the following with $4 million;
1. Generate $120k/yr
2. He is not a big risk taker, wishing the portfolio to have no more than about 30% in equities.
3. He is a US citizen living overseas, so he cannot buy funds (ETFs ok) and muni bonds do not help him.
4. The money is currently in cash. A result of he selling his business and plans to retire.
5. Try to leave an inheritance
Any bright ideas?
Well....Federal MMF is paying 5% right now. So one could put $2.4 million in that and have $120K a year from it. Not saying that's what I'd recommend, but without more parameters, that certainly solves the issue. And he'll have $1.6 mllion he can invest in stocks and bonds for growth.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
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Always passive
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Re: How to generate [$120,000/year] from investments

Post by Always passive »

White Coat Investor wrote: Thu Jun 08, 2023 12:01 am
Always passive wrote: Thu Jun 01, 2023 11:44 pm [Title edited for clarity - moderator oldcomputerguy]

A family member has asked me to help him
develop a portfolio that will accomplish the following with $4 million;
1. Generate $120k/yr
2. He is not a big risk taker, wishing the portfolio to have no more than about 30% in equities.
3. He is a US citizen living overseas, so he cannot buy funds (ETFs ok) and muni bonds do not help him.
4. The money is currently in cash. A result of he selling his business and plans to retire.
5. Try to leave an inheritance
Any bright ideas?
Well....Federal MMF is paying 5% right now. So one could put $2.4 million in that and have $120K a year from it. Not saying that's what I'd recommend, but without more parameters, that certainly solves the issue. And he'll have $1.6 mllion he can invest in stocks and bonds for growth.
Why will your idea work in the future. Rates will eventually fall. It seems that the only thing that can work in a ladder of TIPS. And for someone without an IRA, taxes will be paid before realized gains are accomplished as the built in inflation factor is taxable
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White Coat Investor
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Re: How to generate [$120,000/year] from investments

Post by White Coat Investor »

Always passive wrote: Thu Jun 08, 2023 1:29 am
White Coat Investor wrote: Thu Jun 08, 2023 12:01 am
Always passive wrote: Thu Jun 01, 2023 11:44 pm [Title edited for clarity - moderator oldcomputerguy]

A family member has asked me to help him
develop a portfolio that will accomplish the following with $4 million;
1. Generate $120k/yr
2. He is not a big risk taker, wishing the portfolio to have no more than about 30% in equities.
3. He is a US citizen living overseas, so he cannot buy funds (ETFs ok) and muni bonds do not help him.
4. The money is currently in cash. A result of he selling his business and plans to retire.
5. Try to leave an inheritance
Any bright ideas?
Well....Federal MMF is paying 5% right now. So one could put $2.4 million in that and have $120K a year from it. Not saying that's what I'd recommend, but without more parameters, that certainly solves the issue. And he'll have $1.6 mllion he can invest in stocks and bonds for growth.
Why will your idea work in the future. Rates will eventually fall. It seems that the only thing that can work in a ladder of TIPS. And for someone without an IRA, taxes will be paid before realized gains are accomplished as the built in inflation factor is taxable
First, there is no guarantee rates will fall.

Second, the point of my post was that $120K from $4M is child's play when it comes to managing a retirement. You can do just about anything and expect that to last for decades. 100% stocks. 100% nominal bonds. 100% TIPS. 100% cash. Any combination of the above. It'll probably all last 30 years.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
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