Fender's final approach to retirement.

[fenders53]

(12-07-2021, 05:12 PM)cemanuel Wrote: This thread is near and dear to my heart. I am retiring at the end of this year and as we get the week between Christmas and New Years off guess what - two weeks from tomorrow is IT! I have given a lot of thought to funding my retirement. Here's how I plan to do it.

I have a little bit of income outside of stocks from three partnerships I am in. It isn't much and not the same year-to-year so I'm not using it in my retirement budgeting. Calling it bonus money. Could fund a trip, could bank it.

For stocks I have three accounts These are, with the % of my total:

Taxable Account - over 60%

403b, to roll over to an IRA in spring, 2022 (I'm 59,5 on February 19 but have two months' vacation, may as well wait until the last employer contribution) - about 35%

Roth, just started when I got into stocks in March, 2017 - 2.3%

The following bullet list is copied from an SA post: https://seekingalpha.com/instablog/48196...o-not-work

Here's my plan for funding my retirement:

• My retirement will be 100% funded from my taxable account
  
  
• Dividends will give me about 80% of what I have budgeted; this % should gradually rise through ongoing dividend growth
  
  
• The 20% gap or shortfall will be made up by periodic sales of AAPL and GOOGL, supplemented by saved cash
  
  
• Other than those two companies I will do little trading in this account; I'll pretty much hold unless the dividend investment scenario changes for a company, negatively
  
  
• This account likely will not beat the market. Its main purpose is dividend income. And I'll gradually be selling two of the best companies, from a potential growth standpoint, in it.
  
  
• I haven't set a firm number but I will be looking for a 6-8% increase annually from dividend income. AAPL is such a low payer that it won't have much effect and right now the account has a 9.30% "organic" projected DGR (no dividends reinvested, based on 5-year DGRs for companies held).
  

I had this idea until this spring that I would fund my retirement 100% from dividends and that I'd make up my 20% taxable account shortfall once I did the IRA rollover. 

The idea was that I would have income-generating assets and I'd never need to sell a single bit of an asset. Makes sense, right?

In May I took the IRS 1040 ES form and worksheets and started figuring. From a tax standpoint it makes far more sense to tale LT cap gains on some stocks in the taxable account. They're only taxed at 15%. In the IRA, the IRS doesn't care that what I withdraw is from dividends; it's taxed as income. So the change.

Why GOOGL and AAPL?

GOOGL doesn't pay a dividend.
AAPL doesn't pay much of a dividend AND the last 3 raises have been very disappointing. I can take low yield if the company is giving my good raises. MSFT is the perfect contrast. It also yields very low but it has consistently raised it over 10%.

AAPL could easily raise it that much if it wanted - look at the cash flows and all the buybacks. After three years this seems to me to be a new established policy. So it's saleable.

At 62 I could take SS which would make up for my "dividend gap." I don't know if I will but it's an option.

I get two more "raises" in retirement:
65 - Medicare
67 - Mortgage paid off

Until June I had been using dividends received to buy more stocks in my taxable account. I have stopped doing that as well as adding new money to my accounts. If the market - at least GOOGL and AAPL - are trading soft, I could use more cash.

I look at cash flows quarterly as all my companies pay 4 times a year. First time I should need to take cash out will be late March. Right now I'm thinking of taking the amount I need to live on for a quarter but I could change my mind and go monthly.

I shouldn't need to use either IRA at all, ever, thought the IRS will make me starting in 2034. Roth conversions are a possibility, if allowed, to try to keep the RMDs down a little.

I have a lot more - 9 retirement planning posts on SA but this should be for a conversation, not an info-dump. I'll be posting my Taxable Account portfolio shortly.

I am happy to answer any questions. I'm pretty much an open book with one exception - I don't tell strangers on the internet dollar figures even though I'm sure you're all fine people. But there are bots and such that look for people to go after.

The "when to draw SSA" is a very personal issue I have given much thought to.  I am sure an accountant can run the math and tell me to delay my SSA.  You what he can't tell me?

-How long will I live?  Knowing my family history the answer is probably about 80 at best before I belong in a nursing home. 

-How long do I have to enjoy my life passions without much assistance?  The answer is probably 10 years, maybe 15 years at best.

-SSA mostly dies with me.  I could survive with no SSA.  If I take it early and add it to my pensions I can reduce my IRA draws and still live large enough.

I lived modestly and invested my whole life for a goal, to retire earlier than most.  I am going to draw my SSA, live life for ten years and have the ability to seed a nice IRA for my only child that can grow for 35 years so she can retire at 60 instead of 67.  If things go well at all I can also give her a little money sooner and watch her enjoy it.  She is a nurse in training.  I think I can show her the value of keeping Dad out of an expensive nursing home for a couple extra years when I am a PITA.  Is that bribery?      Might sound silly but that is a conversation we are going to have at an appropriate time. 

It's a decision I think all of us need to think out fully.  We can wish we are 90 and in good health but that is unlikely.  There is no cookie cutter answer that fits all. What are your thoughts on your own plan at this time?

And BTW I am completely onboard with some growth stocks in the port. I do the same. I took a few years break from that and I don't like that plan any longer. All in on dividend yield is not what I am going to do.