08-20-2024, 08:30 PM
(This post was last modified: 08-20-2024, 08:33 PM by ken-do-nim.)
The essential elements of this "4 bucket plan" - cash, dividends, 401k, and ROTH - are well done, but revisiting this subject, some of the points made above aren't necessary. I don't need to specifically take $1.5 million and convert it into high div payers. I simply need to make sure the $3 million portfolio pays a 4% yield, which can be done with DGI stocks paying over that like LYB & VZ, as well as those paying just under it like ABBV and SCHD.
Also, it is highly unlikely the brokerage will reach $3M and the 401k only $1.5M. More likely they will both reach about $2.5M around the same time. Since I will aim to withdraw 10% of the 401k on an annual basis, that means I will withdraw 1/10 / 12 = 1/120 each month, or 0.83%. For $2.5M, that works out to $20,750 monthly. And again, if the 401k has a bad month, I will simply draw that from the cash pile instead of the 401k. So in all likelihood, given a typical year with 3 bad months, I will only draw down 7.47% instead of 10%. Still way above the "4% rule", but I don't intend to switch out of large cap funds. The cash pile is replenished by the $120k per year of dividends, which will have no problem handling $62k of the skipped months.
Right now, barring a 2022 like year, I see myself as about 6 years out from meeting these figures. 8 years should be a given, since then I will be 59.5 and the ROTH can join in as well. The current plan is to use trimming intead of div payers in the ROTH, and go for more like 20% since it's all growth, which also will allow me to lower my 401k withdrawal significantly. Either way, I should be living pretty comfortably in my 60s (except for that elephant in the room - the US national debt - which will crash the market badly at some point)
Also, it is highly unlikely the brokerage will reach $3M and the 401k only $1.5M. More likely they will both reach about $2.5M around the same time. Since I will aim to withdraw 10% of the 401k on an annual basis, that means I will withdraw 1/10 / 12 = 1/120 each month, or 0.83%. For $2.5M, that works out to $20,750 monthly. And again, if the 401k has a bad month, I will simply draw that from the cash pile instead of the 401k. So in all likelihood, given a typical year with 3 bad months, I will only draw down 7.47% instead of 10%. Still way above the "4% rule", but I don't intend to switch out of large cap funds. The cash pile is replenished by the $120k per year of dividends, which will have no problem handling $62k of the skipped months.
Right now, barring a 2022 like year, I see myself as about 6 years out from meeting these figures. 8 years should be a given, since then I will be 59.5 and the ROTH can join in as well. The current plan is to use trimming intead of div payers in the ROTH, and go for more like 20% since it's all growth, which also will allow me to lower my 401k withdrawal significantly. Either way, I should be living pretty comfortably in my 60s (except for that elephant in the room - the US national debt - which will crash the market badly at some point)