Living on dividends during retirement

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chris319
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Re: Living on dividends during retirement

Post by chris319 »

The bottom line is that a person can absolutely jigger around investments to produce some kind of income stream that is smooth enough to do the job and large enough to be what a person wants.

In general that is a somewhat onerous task that might or might not lead to a less than desirable asset allocation and choice of investments. It still does not relieve the investor of estimating how much can be safely spent for how long.
Not onerous at all. There are perfectly good ETF's nowadays which have high yields; I named three such funds above. SCHD is good if you are allergic to or don't understand covered-call strategies. This may be the exception where a managed fund is preferable to an index fund inasmuch as we are interested more in income than growth. I like the way DIVO blends growth and income (from covered calls).

https://finance.yahoo.com/quote/DIVO?p= ... c=fin-srch

As far as sustainability, these funds will continue to pay dividends for as long as you (or your heirs) hold them. No worries about depleting your principal provided you don't sell shares.
Bogle also encourages investors to focus on investment vehicles that generate cash returns. For the equity portion of a cash-generating portfolio, he recommends dividend-bearing stocks because they provide a stream of income that can be used for living expenses. To him, the income stream can be more important than the fluctuating value of the stock that pays it. He also recommends capitalizing the value of fixed-income streams so that they can be treated as equivalent to fixed-income investments and included in an overall portfolio. For example, he thinks that the typical retiree already has $300,000 to $350,000 in fixed income investment based on the value that he places on the cashflow from Social Security.
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22twain
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Re: Living on dividends during retirement

Post by 22twain »

If you have enough assets that you can comfortably live off the dividends that they produce, but quarterly payouts are too "choppy" for you, that is, you'd prefer a regular "paycheck" of the same amount every month, simply use your brokerage settlement fund as a buffer.

Let the dividends go to the settlement fund. Set up an automatic monthly transfer of the desired "paycheck" amount from the settlement fund to your checking account. Check the settlement fund occasionally to make sure that it has enough money to cover the withdrawals.

Or you can log in once a month to check the settlement fund and initiate a monthly transfer by hand. This shouldn't take more than five minutes. It's what I do myself. In my case, dividends alone aren't enough to cover my expenses, so once per year I sell enough shares to make up the difference for the coming year, leaving the proceeds in the settlement fund.
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Stef
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Re: Living on dividends during retirement

Post by Stef »

sc9182 wrote: Thu Dec 01, 2022 7:04 am Is this 10th thread this month (technically, last month: Nov) on living-on/preferring Dividends? Always look-out for Total Return, not simply dividends .. though it sounds "better" -- Dividends as a factor hasn't been a good factor for long term success, nor long-term out-performance (Vs. Total Return).
How so? Wasn‘t value investing pretty great for decades until 2009?
Wannaretireearly
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Re: Living on dividends during retirement

Post by Wannaretireearly »

hammockhiker wrote: Sat Dec 03, 2022 11:10 am
ThriftyGeorge wrote: Sat Dec 03, 2022 10:59 am I’ll be a contrarian here, as most will say to not invest for income and definitely don’t do it in a taxable account! I’ve taken the opposite path as of late.
I'm hoping you'll let us know from time to time how it's going, since I've been reading/thinking about what to do in our taxable brokerage account also. My wife and I max out IRAs and HSA so the rest is going to the taxable account. I'd like to make it a better source of income than it currently is, so your experience, if you care to post about it from time to time, will be interesting to me. Thanks.
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CuriousTacos
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Re: Living on dividends during retirement

Post by CuriousTacos »

Stef wrote: Wed Dec 07, 2022 12:27 am
sc9182 wrote: Thu Dec 01, 2022 7:04 am Is this 10th thread this month (technically, last month: Nov) on living-on/preferring Dividends? Always look-out for Total Return, not simply dividends .. though it sounds "better" -- Dividends as a factor hasn't been a good factor for long term success, nor long-term out-performance (Vs. Total Return).
How so? Wasn‘t value investing pretty great for decades until 2009?
value =/= dividends
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Stef
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Re: Living on dividends during retirement

Post by Stef »

CuriousTacos wrote: Wed Dec 07, 2022 1:12 am
Stef wrote: Wed Dec 07, 2022 12:27 am
sc9182 wrote: Thu Dec 01, 2022 7:04 am Is this 10th thread this month (technically, last month: Nov) on living-on/preferring Dividends? Always look-out for Total Return, not simply dividends .. though it sounds "better" -- Dividends as a factor hasn't been a good factor for long term success, nor long-term out-performance (Vs. Total Return).
How so? Wasn‘t value investing pretty great for decades until 2009?
value =/= dividends
I‘m not aware that there are value stocks with low dividends?
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HanSolo
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Re: Living on dividends during retirement

Post by HanSolo »

Stef wrote: Wed Dec 07, 2022 3:14 am
CuriousTacos wrote: Wed Dec 07, 2022 1:12 am
Stef wrote: Wed Dec 07, 2022 12:27 am
sc9182 wrote: Thu Dec 01, 2022 7:04 am Is this 10th thread this month (technically, last month: Nov) on living-on/preferring Dividends? Always look-out for Total Return, not simply dividends .. though it sounds "better" -- Dividends as a factor hasn't been a good factor for long term success, nor long-term out-performance (Vs. Total Return).
How so? Wasn‘t value investing pretty great for decades until 2009?
value =/= dividends
I‘m not aware that there are value stocks with low dividends?
Berkshire Hathaway would be the classic example.

I see that the OP disappeared. (They tend to do that when threads shift away from answering the OP's question and into soapbox mode.)

I think the OP's question was answered long ago (i.e., someone corrected the OP by pointing out that VBTLX dividends are paid monthly).
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scrabbler1
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Re: Living on dividends during retirement

Post by scrabbler1 »

I am a 59-year-old early retiree and have been living off the monthly dividends from a bond fund for the last 14 years. I have other holdings in my taxable account, some of them smaller bond fund holdings which act as "slush funds" I can tap into should a large, unforeseen expense arise. I have a significant holding in a stock index fund, too, and that acts as an inflation guard.

The value of my main bond fund doesn't matter. What that bond fund's monthly dividends per share are does matter.

I am not old enough to access SS and my former company's frozen pension. I am old enough (maybe) to access my rollover IRA, as I turned 59.5 a few months ago. I have no need to access the IRA now because I have more than enough in my taxable account to pay my bills.
dbr
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Re: Living on dividends during retirement

Post by dbr »

scrabbler1 wrote: Wed Dec 07, 2022 7:37 am I am a 59-year-old early retiree and have been living off the monthly dividends from a bond fund for the last 14 years. I have other holdings in my taxable account, some of them smaller bond fund holdings which act as "slush funds" I can tap into should a large, unforeseen expense arise. I have a significant holding in a stock index fund, too, and that acts as an inflation guard.

The value of my main bond fund doesn't matter. What that bond fund's monthly dividends per share are does matter.

I am not old enough to access SS and my former company's frozen pension. I am old enough (maybe) to access my rollover IRA, as I turned 59.5 a few months ago. I have no need to access the IRA now because I have more than enough in my taxable account to pay my bills.
It would be interesting to know what fund that is. I looked up some data on VBMFX as an example and noticed that the dividend per share has gone from $.069 in 1987 to $.021 now. How do you adjust to changing payouts like that?
ktdintex
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Re: Living on dividends during retirement

Post by ktdintex »

I don’t believe the OP has said whether tax deferred money would be used to create a dividend portfolio. If the intent is to use pre-tax money, then there likely will be a tax cost for selling the investments and buying the dividend investments. Unless of course the OP is going to use a chunk of cash.

To move this conversation from theoretical to the real world, I have a friend who has been living off of stock dividends for more than a decade. He owns around 10 individual stocks that have historically paid steady dividends. Could he have done better with another strategy? Maybe but he seems pretty comfortable with his situation.
chris319
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Re: Living on dividends during retirement

Post by chris319 »

To move this conversation from theoretical to the real world, I have a friend who has been living off of stock dividends for more than a decade. He owns around 10 individual stocks that have historically paid steady dividends. Could he have done better with another strategy? Maybe but he seems pretty comfortable with his situation.
This is good to know.
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burritoLover
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Re: Living on dividends during retirement

Post by burritoLover »

ktdintex wrote: Wed Dec 07, 2022 8:04 am To move this conversation from theoretical to the real world, I have a friend who has been living off of stock dividends for more than a decade. He owns around 10 individual stocks that have historically paid steady dividends. Could he have done better with another strategy? Maybe but he seems pretty comfortable with his situation.
Comfortable or not, that is a highly risky strategy.
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vineviz
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Re: Living on dividends during retirement

Post by vineviz »

chris319 wrote: Tue Dec 06, 2022 8:50 pm
The bottom line is that a person can absolutely jigger around investments to produce some kind of income stream that is smooth enough to do the job and large enough to be what a person wants.

In general that is a somewhat onerous task that might or might not lead to a less than desirable asset allocation and choice of investments. It still does not relieve the investor of estimating how much can be safely spent for how long.
Not onerous at all. There are perfectly good ETF's nowadays which have high yields; I named three such funds above. SCHD is good if you are allergic to or don't understand covered-call strategies. This may be the exception where a managed fund is preferable to an index fund inasmuch as we are interested more in income than growth. I like the way DIVO blends growth and income (from covered calls).
The "onerous" part is not, I'd argue, finding funds with high yields NOW.


It's finding funds you can count on to continue providing yields that move along with inflation, portfolio values, and your consumption needs such that you're not constantly having to redesign the portfolio to generate a "not too much and not too little" amount of dividend and interest income.
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Riprap
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Re: Living on dividends during retirement

Post by Riprap »

This guy has a great blog on dividend investing. If I recall correctly Warren Buffett mentioned him in his annual shareholder's letter a few years ago. It won't appeal to many BHs, but for those interested in dividend investing, this guy seems pretty squared away.

https://www.dividendgrowthinvestor.com/
delamer
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Re: Living on dividends during retirement

Post by delamer »

scrabbler1 wrote: Wed Dec 07, 2022 7:37 am I am a 59-year-old early retiree and have been living off the monthly dividends from a bond fund for the last 14 years. I have other holdings in my taxable account, some of them smaller bond fund holdings which act as "slush funds" I can tap into should a large, unforeseen expense arise. I have a significant holding in a stock index fund, too, and that acts as an inflation guard.

The value of my main bond fund doesn't matter. What that bond fund's monthly dividends per share are does matter.

I am not old enough to access SS and my former company's frozen pension. I am old enough (maybe) to access my rollover IRA, as I turned 59.5 a few months ago. I have no need to access the IRA now because I have more than enough in my taxable account to pay my bills.
If your relative expenses are low enough or your relative account balances are high enough, many strategies will work.

I don’t withdraw anything from my accounts because pensions plus Social Security cover all expenses. But that doesn’t really help the OP.
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scrabbler1
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Re: Living on dividends during retirement

Post by scrabbler1 »

dbr wrote: Wed Dec 07, 2022 7:55 am
scrabbler1 wrote: Wed Dec 07, 2022 7:37 am I am a 59-year-old early retiree and have been living off the monthly dividends from a bond fund for the last 14 years. I have other holdings in my taxable account, some of them smaller bond fund holdings which act as "slush funds" I can tap into should a large, unforeseen expense arise. I have a significant holding in a stock index fund, too, and that acts as an inflation guard.

The value of my main bond fund doesn't matter. What that bond fund's monthly dividends per share are does matter.

I am not old enough to access SS and my former company's frozen pension. I am old enough (maybe) to access my rollover IRA, as I turned 59.5 a few months ago. I have no need to access the IRA now because I have more than enough in my taxable account to pay my bills.
It would be interesting to know what fund that is. I looked up some data on VBMFX as an example and noticed that the dividend per share has gone from $.069 in 1987 to $.021 now. How do you adjust to changing payouts like that?
It's a Fidelity bond fund. Yes, the DPS has dropped since I began with the fund in late 2008, from about 5 cents per share per month down to 3 cents. I have added lots of shares to offset this gradual decline through either rebalancing or reinvesting excess dividends back into the fund (mostly the latter). At times, I have supplemented my income with the quarterly stock fund dividend distribution. My expenses have dropped a lot starting in 2020, so the lowered bond fund dividends alone are covering my expenses.
chris319
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Re: Living on dividends during retirement

Post by chris319 »

burritoLover wrote: Wed Dec 07, 2022 8:23 am
ktdintex wrote: Wed Dec 07, 2022 8:04 am To move this conversation from theoretical to the real world, I have a friend who has been living off of stock dividends for more than a decade. He owns around 10 individual stocks that have historically paid steady dividends. Could he have done better with another strategy? Maybe but he seems pretty comfortable with his situation.
Comfortable or not, that is a highly risky strategy.
Why is that strategy any more risky than owning an index fund?
Financial decisions based on emotion often turn out to be bad decisions.
dbr
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Re: Living on dividends during retirement

Post by dbr »

chris319 wrote: Wed Dec 07, 2022 1:42 pm
burritoLover wrote: Wed Dec 07, 2022 8:23 am
ktdintex wrote: Wed Dec 07, 2022 8:04 am To move this conversation from theoretical to the real world, I have a friend who has been living off of stock dividends for more than a decade. He owns around 10 individual stocks that have historically paid steady dividends. Could he have done better with another strategy? Maybe but he seems pretty comfortable with his situation.
Comfortable or not, that is a highly risky strategy.
Why is that strategy any more risky than owning an index fund?
Some ideas are here:

https://www.investopedia.com/investing/ ... ification/

https://www.mindfullyinvesting.com/arti ... ification/

A problem is that a single anecdote over a time as short as ten years or so does not provide a good estimate of how well or how badly owning a few individual stocks could go, whatever the criteria for picking those stocks might be.

Probably a more serious question would be to ask that while it is entirely possible to live from the dividends from a small set of picked stocks, is there any consistent advantage to doing that.

Also, remember risk is known by counting up how often something does not work rather than listing a few instances of when something does work.
deikel
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Re: Living on dividends during retirement

Post by deikel »

Jamech wrote: Sat Dec 03, 2022 8:20 pm
The fund that doesn't pay dividends will have shares that increase in value faster than those of the fund that does pay dividends.
I believe this is true.

Would the fund whose shares increased in value faster also have a higher "risk profile" than the fund that pays dividends?
This would need a disclaimer of sorts saying "all else being equal"

....but that's the point, dividend paying stocks are not 'equal', in fact dividends are typically paid by utilities for example and very untypically by tech companies or in general companies in a start/growth period

Or arguably, dividends are paid by stagnating companies operating in markets that are not significantly expanding, whereas non dividend paying companies are in the growth category

If you invest heavily in dividend paying funds - you tilt your portfolio, possibly in a direction you do not want, taking on risk you do not want since you may not realize it
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Re: Living on dividends during retirement

Post by burritoLover »

chris319 wrote: Wed Dec 07, 2022 1:42 pm
burritoLover wrote: Wed Dec 07, 2022 8:23 am
ktdintex wrote: Wed Dec 07, 2022 8:04 am To move this conversation from theoretical to the real world, I have a friend who has been living off of stock dividends for more than a decade. He owns around 10 individual stocks that have historically paid steady dividends. Could he have done better with another strategy? Maybe but he seems pretty comfortable with his situation.
Comfortable or not, that is a highly risky strategy.
Why is that strategy any more risky than owning an index fund?
Because it takes more than 10 stocks to mitigate idiosyncratic risk in a portfolio (maybe something like 100+ spread across different sectors).
chris319
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Re: Living on dividends during retirement

Post by chris319 »

By my count SCHD holds stocks of 99 companies in addition to a few other assets. Its yield is 3.36%. That's enough diversification for me.

https://www.schwabassetmanagement.com/p ... #portfolio

If that's not enough diversification for you or too risky, there's VOO with a yield of 1.64% or VTI with its yield of 1.6%.
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Riprap
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Re: Living on dividends during retirement

Post by Riprap »

Talk about risky...underfunded pensions seem riskier than a basket of dividend paying stocks.
bugleheadd
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Re: Living on dividends during retirement

Post by bugleheadd »

Hoping my vti/VOO divs will more than cover my annual expenses when I retire. Current holdings are giving off 15k per year, goal is 3x that
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Re: Living on dividends during retirement

Post by LadyGeek »

Rajsx has a similar question which is in a new thread. Looking at VYM in place of Bonds in Taxable

Rajsx - To avoid mixing answers with the OP, I removed your duplicate post from this thread.
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Re: Living on dividends during retirement

Post by HeavyChevy »

My portfolio consists of 32% LCV 32%MC and 36% HY Bonds.

Many here have told me all the outsized risks I am taking. I don’t agree.

My LCV includes VYM, SCHD, FLCOX, and VEIRX. My bonds are 50/50 VWEAX and FAGIX.

Port folio yield above 4%.

Retired and living very comfortably on portfolio income.

I don’t recommend my portfolio for anyone but me. But plenty of people thrive on non-total-return portfolios denigrated by BH on this forum.

YMMV
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Houdini563
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Re: Living on dividends during retirement

Post by Houdini563 »

I have set up monthly withdrawals from VWIAX through Vanguard. It was easy and quick. Anytime I need to modify the withdrawal a call to their customer service is a stressless experience.

VWIAX (Vanguard Wellesley Income Fund Admiral Shares) provides significant quarterly dividends which I reinvest. I am pulling $63,000 annually from VWIAX which approximates my estimated dividend yield.
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Re: Living on dividends during retirement

Post by ncbill »

HeavyChevy wrote: Mon Jun 05, 2023 6:06 pm My portfolio consists of 32% LCV 32%MC and 36% HY Bonds.

Many here have told me all the outsized risks I am taking. I don’t agree.

My LCV includes VYM, SCHD, FLCOX, and VEIRX. My bonds are 50/50 VWEAX and FAGIX.

Port folio yield above 4%.

Retired and living very comfortably on portfolio income.

I don’t recommend my portfolio for anyone but me. But plenty of people thrive on non-total-return portfolios denigrated by BH on this forum.

YMMV
Such approaches are riskier than the market portfolio but as long as one realizes they're taking on more risk...
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Re: Living on dividends during retirement

Post by HeavyChevy »

ncbill wrote: Tue Jun 06, 2023 9:32 am
HeavyChevy wrote: Mon Jun 05, 2023 6:06 pm My portfolio consists of 32% LCV 32%MC and 36% HY Bonds.

Many here have told me all the outsized risks I am taking. I don’t agree.

My LCV includes VYM, SCHD, FLCOX, and VEIRX. My bonds are 50/50 VWEAX and FAGIX.

Port folio yield above 4%.

Retired and living very comfortably on portfolio income.

I don’t recommend my portfolio for anyone but me. But plenty of people thrive on non-total-return portfolios denigrated by BH on this forum.

YMMV
Such approaches are riskier than the market portfolio but as long as one realizes they're taking on more risk...
Total asset base allows "risk." My risky HY bonds have already delivered significant returns vs "less risky" alternatives. In a total crash I will likely remain ahead. To each his/her own.
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