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RE: Balancing dividend income throughout the year - fenders53 - 08-24-2019
I think I understand what you are up to. I am currently funding my cash buffer with dividends and conservative option premiums. My buffer is actually sitting in very short-term bonds as I don't need it until about 2022. I want to practice and see if I can maintain stability. I intend to fund it for two full years of draws before I attempt to completely stop working. This would gives me two years to react if my future income is going to decrease. I have other pensions so the dividend draw only determines if I live larger or not. I don't want to be forced to sell shares until later on in retirement.
RE: Balancing dividend income throughout the year - crimsonghost747 - 08-24-2019
(08-24-2019, 08:27 AM)fenders53 Wrote: I think I understand what you are up to. I am currently funding my cash buffer with dividends and conservative option premiums. My buffer is actually sitting in very short-term bonds as I don't need it until about 2022. I want to practice and see if I can maintain stability. I intend to fund it for two full years of draws before I attempt to completely stop working. This would gives me two years to react if my future income is going to decrease. I have other pensions so the dividend draw only determines if I live larger or not. I don't want to be forced to sell shares until later on in retirement.
Yes, now we are talking the same language. My cash buffer is actually seriously over funded at this moment but I'm planning on bringing it down to 2-3 years of expenses by investing the excess into the market slowly, or very aggressively if we do see a proper correction.
But this thread is really all about that stability of the cash buffer that you mentioned. About finding a way to calculate the withdrawal rate so that it matches your incoming cash flows, keeping that cash buffer at it's desired size through dividend raises, failed trades, sporadic lump sums etc. This 12-month trailing average cash flow is still work in progress but it certainly looks to be more promising than anything else I've found.
Btw I'd like to point out that, for the moment, I'm not taking the total value of my investments into account in any way as selling is not something I'm planning on doing anytime soon. I'm just focusing on the cash flows from my investments.
RE: Balancing dividend income throughout the year - fenders53 - 08-24-2019
(08-24-2019, 11:19 AM)crimsonghost747 Wrote:(08-24-2019, 08:27 AM)fenders53 Wrote: I think I understand what you are up to. I am currently funding my cash buffer with dividends and conservative option premiums. My buffer is actually sitting in very short-term bonds as I don't need it until about 2022. I want to practice and see if I can maintain stability. I intend to fund it for two full years of draws before I attempt to completely stop working. This would gives me two years to react if my future income is going to decrease. I have other pensions so the dividend draw only determines if I live larger or not. I don't want to be forced to sell shares until later on in retirement.
Yes, now we are talking the same language. My cash buffer is actually seriously over funded at this moment but I'm planning on bringing it down to 2-3 years of expenses by investing the excess into the market slowly, or very aggressively if we do see a proper correction.
But this thread is really all about that stability of the cash buffer that you mentioned. About finding a way to calculate the withdrawal rate so that it matches your incoming cash flows, keeping that cash buffer at it's desired size through dividend raises, failed trades, sporadic lump sums etc. This 12-month trailing average cash flow is still work in progress but it certainly looks to be more promising than anything else I've found.
Btw I'd like to point out that, for the moment, I'm not taking the total value of my investments into account in any way as selling is not something I'm planning on doing anytime soon. I'm just focusing on the cash flows from my investments.
Not that you need to be concerned with my every personal detail, but I am 57 and eligible for one pension starting last year at a reduced rate so putting it off. Another at age 60 and SS at 62. My buffer needs to be fat in three years so I can smoke Cubans and fly over to have lunch with you on one of those islands lol. I would need less Div money after those two years, but if I could maintain it that would be awesome.
I have a lot more in cash and cash like assets than these segregated funds, because I am a market timing scaredy chicken until this market gets whacked for real. The cash buffer is permanently off limits for risk on investing unless we get the mother of all corrections. Probably still off limits then.
RE: Balancing dividend income throughout the year - crimsonghost747 - 08-24-2019
Pensions etc certainly make it easier.
I do not have one, and most likely never will have anything similar to it, so I'm on my own.
And that is kinda what prompted this whole thread in the first place. It wouldn't matter much if investments were 30% of my income but they are the only regular income I will have so it's important to adjust for the swings in either direction.
RE: Balancing dividend income throughout the year - fenders53 - 08-25-2019
I am very fortunate to have an employer pension. They are a thing of the past. I think you are wise to "practice" your allocation mix in advance. It's challenging to find a sufficient yield other than stock dividends. Yields are likely to fall further. Option premiums could be some part of it, but they are going to be lumpy. Mine vary from very significant, to minimal as I shouldn't be chasing stocks very far with puts at these above average valuations. Over the course of a year the premiums are a significant part of my plan. The cash buffer is absolutely required if you want to smooth out the monthly draw. It would be easier to smooth out dividend payments with stock selection. (obviously) I think CD rates are going to go low enough to not even interest me. This is affecting current retirees already. They're almost forced to chase higher yield bonds and the risk reward may bite them from here. I think this is partially responsible for holding the market up going forward.
RE: Balancing dividend income throughout the year - rayray - 08-25-2019
I'm 12-14 years away from retirement--looking at 60 to 62 to hang it up. I'm lucky like fenders with a traditional pension, albeit, a small one but it's something--as we speak there is a cash option or a monthly annuity option. I'll actually be pension eligible at a reduced rate in two years but the amount is so small it's not even worth my effort to crunch the numbers--the most I can do is just look at it, would you look at that....Just look at it...lol...youtube "just look at it" and you'll get it...lol..
Anyways, if available, I will most likely take the cash option on the pension and roll it over into an IRA. The 401k mutual funds (most of them distribute long/short term capital gains and dividends) but they will be re-distributed into mostly dividend paying stocks. I'm not a fan of the funds because when the market is doing well there's really nice distributions and when the market is not doing well there's little to nothing--so--it's like they force you to buy high and bupkis when the market is doing poorly.
I don't factor in SS into any of our calculations--so any of that income will be a bonus. I'm thinking the divi income will suffice, it should, as we speak but who knows? The cash buffer will be a mix of cash and maybe layered CD's that an "x" amount will come due every month.
So, that's the plan unless I'm dead
RE: Balancing dividend income throughout the year - Kerim - 08-25-2019
Well there's 12 minutes I'll never get back looking at "just look at this" videos....
RE: Balancing dividend income throughout the year - fenders53 - 08-25-2019
That's pretty much what I did Ray. I had a GOV plan that was basically a 401K IRA and I could buy an annuity upon retirement like everybody else I ever worked with did. It was not a good plan. If you die in ten years your family gets ripped off badly. I did the math and it was obvious I should flip the money into an IRA I control. I could buy riders for my wife or ten year guaranteed payouts. that would significantly reduce month checks. I couldn't think of a scenario that made an annuity a good idea unless my wife or I live to be 95. Not certain it even made sense then. It appears I need about a 2% return to put things much in my favor.
RE: Balancing dividend income throughout the year - rayray - 08-26-2019
(08-25-2019, 01:05 PM)Kerim Wrote: Well there's 12 minutes I'll never get back looking at "just look at this" videos....
lol...sorry Kerim!
My wife and I giggle like little kids! That guy does another one as "Mumbles" this cowboy character walking around Philly asking people questions as he mumbles.
@Fenders Yes, as long as they give us the cash option and interest rates are favorable I'll take the cash option on the pension. They didn't always offer it and there's always talk of it not being a choice, only the annuity. I do know some guys that took the annuity and are extremely happy, usually the guys who didn't want to deal with the market. Just within the last few years, the spouse gets something if the employee passes away--the living spouse use to get nothing if that happened. I knew so many guys that died and their spouses were in a world of hurt, very sad. Thank gawd for SS and medicare--I might be a conservative but I'm not a nutjob.
The younger guys at work don't have traditional pensions, they have enhanced k-plans where they get higher company matches then someone like myself. When that way first came out, a current employee with an "x amount" of years had a choice between sticking to the traditional pension or taking the enhanced kplan--I had too many years to walk away from the pension, even with the enhanced company match I wouldn't have made up the money. But these younger kids, now in their 30's might make out better over the long haul with the enhanced vs the pension.
I wouldn't be opposed to employee-sponsored type pensions, that the employee along with the employer adding dollars for a guaranteed pension. It would be a good option to have for employee's.
RE: Balancing dividend income throughout the year - fenders53 - 08-26-2019
ray-ray,
Where I worked the lack of financial knowledge was astounding. Before I left I sat down with every one of my employees one at a time. In about an hour they had a much better understanding, and half of them altered their strategies so they have a chance to succeed. Several of them still thank me when I see them. HR should have done a MUCH better job at this important task.
We are going to be hearing a lot of bad news from corporate pension plans very soon. Many of them are GROSSLY insolvent in just a few years. Their investment return projections will be wildly inaccurate when rates hit the floor and potentially stay there for years. Not that I would have benefited, but some of this stock buyback windfall needs to be diverted to making sure plans are honored. But that doesn't help the stock price. I am invested in MET and PRU. They may be caught up in some of this blow back.
Young employees have to take care of themselves from the beginning. Trusting us boomers with the finances may not be wise. The pension funds have little choice but to put some pension assets in equities. You and I do it willingly with our own money, but that plan could blow up on a corporation for a decade or more. I predict it's gonna get ugly.
Now back to the actual subject......... sorry Crimson.
