05-05-2024, 12:42 PM
(This post was last modified: 05-05-2024, 12:48 PM by ken-do-nim.)
Here's the basic plan; please critique.
Current age: 51
Earliest possible retirement age: 55
Minimum Threshold for 55-59 retirement
Taxable account: $3 million
401k: $1.5 million
When I decide to retire, I take $1.5 million of the taxable account and put it into high dividend payers - my favorite being OMF - and average 8%. 8% of $1.5 million = $120,000 per year. I let that cash build up in a high yield savings account. I keep the 401k in a strong performing fund like the S&P 500 index or a similar large cap growth fund. I start taking funds monthly from the 401k to live on, at a $200,000 per year rate. However, if the market is down in a given month, like this April was, I suspend the 401k payment for that month and probably a couple more, and draw from the cash in the savings account instead. So, if the 401k has a good first year and earns say 13.3%, it will stay at $1.5 million. Furthermore, it probably can do less well than that and maintain, because on bad months I draw from the dividend-produced cash instead, so it gets time to build back up.
Meanwhile, the other $1.5 million or more in the taxable account is still invested in growth. Every year, I trim some of that growth and make the dividend payer side larger. Ideally 4-5 years into it, it has grown from $1.5 million to $2 million, and thus to $160,000 a year of cash producing. Furthermore, if the cash pile in the savings account ever reaches $400,000, I cap it there. That's already 2 years of savings to live off of in case of a nasty market downturn, so dividends produced beyond that go to reinvesting in the growth side of the portfolio.
At age 59.5, the ROTH IRA kicks in. There too, I split it in half, with half going to high dividend payers, and the other half staying in growth. I can't really tell what it's going to be then, but if it manages to reach say $1 million, then with $500k at 9% payers, that's $45,000 additional a year tax free. If I haven't managed to amass enough funds prior to 59.5, I would think the ROTH coming in puts me over the edge.
Beyond age 60, the dividends should reach the point where I don't even need to draw from the 401k anymore.
The main flaw in this plan is I think retiring right at the start of a 2022 like year. The dividend payers won't have built up the cash yet, and I won't want to draw from the 401k yet either. I could try to live off $120k a year instead of $200k until market conditions improve (and that's assuming dividends aren't cut), I could postpone retirement, or I could convert more of the growth part of the portfolio to dividend payers. $3 million at even 6% = $180k per year. When market conditions improve, I could start tapping the 401k, and then put some of the taxable portfolio back into growth.
High div payers I like are OMF, HTGC, ARCC, BXSL. I'm going to research and find more.
Current age: 51
Earliest possible retirement age: 55
Minimum Threshold for 55-59 retirement
Taxable account: $3 million
401k: $1.5 million
When I decide to retire, I take $1.5 million of the taxable account and put it into high dividend payers - my favorite being OMF - and average 8%. 8% of $1.5 million = $120,000 per year. I let that cash build up in a high yield savings account. I keep the 401k in a strong performing fund like the S&P 500 index or a similar large cap growth fund. I start taking funds monthly from the 401k to live on, at a $200,000 per year rate. However, if the market is down in a given month, like this April was, I suspend the 401k payment for that month and probably a couple more, and draw from the cash in the savings account instead. So, if the 401k has a good first year and earns say 13.3%, it will stay at $1.5 million. Furthermore, it probably can do less well than that and maintain, because on bad months I draw from the dividend-produced cash instead, so it gets time to build back up.
Meanwhile, the other $1.5 million or more in the taxable account is still invested in growth. Every year, I trim some of that growth and make the dividend payer side larger. Ideally 4-5 years into it, it has grown from $1.5 million to $2 million, and thus to $160,000 a year of cash producing. Furthermore, if the cash pile in the savings account ever reaches $400,000, I cap it there. That's already 2 years of savings to live off of in case of a nasty market downturn, so dividends produced beyond that go to reinvesting in the growth side of the portfolio.
At age 59.5, the ROTH IRA kicks in. There too, I split it in half, with half going to high dividend payers, and the other half staying in growth. I can't really tell what it's going to be then, but if it manages to reach say $1 million, then with $500k at 9% payers, that's $45,000 additional a year tax free. If I haven't managed to amass enough funds prior to 59.5, I would think the ROTH coming in puts me over the edge.
Beyond age 60, the dividends should reach the point where I don't even need to draw from the 401k anymore.
The main flaw in this plan is I think retiring right at the start of a 2022 like year. The dividend payers won't have built up the cash yet, and I won't want to draw from the 401k yet either. I could try to live off $120k a year instead of $200k until market conditions improve (and that's assuming dividends aren't cut), I could postpone retirement, or I could convert more of the growth part of the portfolio to dividend payers. $3 million at even 6% = $180k per year. When market conditions improve, I could start tapping the 401k, and then put some of the taxable portfolio back into growth.
High div payers I like are OMF, HTGC, ARCC, BXSL. I'm going to research and find more.