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.

Glad you joined us.  That's a good privacy strategy.  Most us us don't share dollar amounts.  I like to share percentages when it makes sense as otherwise the info is fairly useless to others.  Most of us will say things like, nibbled some AAPL today, now have a full position in JNJ,  sold half my MO.  Eventually we'll understand your risk tolerance and goals better.  If I sell 2% of a large position I don't want you to get the impression I am running scared from a stock you are maybe considering acquiring.  i think you'll find most of us here are truly trying to help other members.              

I'll comment more on your retirement plan when I get a chance.

[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.

[cemanuel]

(12-07-2021, 08:39 PM)fenders53 Wrote: 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.

"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."

For me the "To SS benefit or to not SS benefit at 62" question will come down to this:

At 62 I will be closer to being able to meet my retirement needs - I think (for all my budgeting until I'm retired I won't be retired) due to continued dividend growth. But I expect to still need to sell some AAPL and GOOGL. So the key item I need to figure out is:

Would my returns from keeping AAPL and GOOGL in my taxable account be greater than the annual 8% SS benefit increase?

The question is simple - the answer will involve math and this is more complicated than it may seem on the surface.

For example, say my AAPL and GOOGL have had 12% gains over the previous five years - take SS, right?

But suppose at age 65 and Medicare eligibility I can meet my needs from dividends alone? SS benefits continue to increase beyond that.

I run cash flows for farmers looking at large capital purchases as part of my real job. I can modify how I do that to assess taking SS vs selling shares. The key is coming up with the right assumptions and I always run at least three - optimistic, pessimistic and neutral. The SS 8% is set so I just need to look at stocks as the comparison.

I don't like math which is funny as sometimes it's a big part of my job. But this retirement planning thing sure has a lot of it. 

"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." Sorry for the variability - trying to figure if inline bold or italicized quotes look better.

I like giving gifts. I have no kids but as soon as they had enough earned income I gave each of my nephews enough to start a Roth. Actually transferred funds through Fidelity into one. One-time deal though if they ever need money - their parents are doing fine so I doubt they come to me anyway - I'd be happy to help out.

Thank you for your thoughts.

[fenders53]

The state of the market probably should play a role in your decision when you approach 62. The decision might be easy if AAPL and/or GOOGL have become 30% over or undervalued at that time. It sounds lke you are way up in those stocks, but I am still not selling them at a deep discount just because the market dipped. My first few years of IRA draws are sitting in cash to avoid problems like this the best I can.

[cemanuel]

(12-08-2021, 07:11 AM)fenders53 Wrote: The state of the market probably should play a role in your decision when you approach 62.  The decision might be easy if AAPL and/or GOOGL have become 30% over or undervalued at that time.   It sounds lke you are way up in those stocks, but I am still not selling them at a deep discount just because the market dipped.  My first few years of IRA draws are sitting in cash to avoid problems like this the best I can.

That's a good point though it still comes down to expected performance going forward. But if I think they have had their "runs" and are likely to show reduced gains going forward then I can't rely on prior years. The old "prior returns are no guarantee of future returns" saying. Though I always think this should carry a coda, "Yes but the best indicator of future behavior is past behavior." One reason why management change is so important, and so tough to assess - how many people saw Nadella coming?

How much cash I have remaining on hand will factor in as well. My plan is stock sales first, cash only if the market - or at least AAPL and GOOGL - are trading low. If I still have a chunk of cash left at 62, delaying is an easy call - my returns on cash are nothing - even using rolling CDS, which I do now (have used MMs), rates are well below even average inflation, let alone what's happening today.

[fenders53]

Haven't updated for a month. Made some progress the past few weeks towards a portfolio that needs less babysitting. It's about time as retirement is about 4-5 months away. I've been slowly eliminating less than high conviction tickers and adding to my index ETFs which include SPY-QQQ and Russell 2000. I'll sell calls against some of the positions and generate reasonable income in addition to dividends. The reality is selling options against individual stocks instead of ETFs pays about twice as much per month. Not quitting that game after all my effort to learn it, but I'll have a smaller amount of funds for those trades. It will force me to be much more selective and not force trades when the market isn't right for those tactics. I'll be halfway to my income goal just selling boring calls on some of my index funds every month.

[ken-do-nim]

I've heard you mention IWM, SPY, and QQQ, but is SOXX still in your port?

[fenders53]

Not at the moment. I would add if on a dip. I make a lot of income off the index ETFs and it requires I own 100 share lots. SOXX is spendy like QQQ and SPY.

[NilesMike]

(01-03-2022, 07:42 PM)fenders53 Wrote: Not at the moment. I would add if on a dip. I make a lot of income off the index ETFs and it requires I own 100 share lots. SOXX is spendy like QQQ and SPY.

<100 shares? Just sell call spreads.

[fenders53]

(01-03-2022, 10:25 PM)NilesMike Wrote:

(01-03-2022, 07:42 PM)fenders53 Wrote: No interest in SOXX this high anyway.  A good dip and I'll like SOXL for trades.  I won't hold it like Ken.  I'd make too much money. 

Vanguard is not option friendly and platform is a joke.  Have to separate legs into individual trades which make anything slightly complex impossible.  The call sell portion would be naked when it really isn't.

[NilesMike]

100% agree regarding Vanguard. They are so old and stodgy it's brutal to do much more than buy and hold or covered calls with them.

I tried with them but got totally frustrated.

[fenders53]

(01-03-2022, 11:03 PM)NilesMike Wrote: 100% agree regarding Vanguard. They are so old and stodgy it's brutal to do much more than buy and hold or covered calls with them.

I tried with them but got totally frustrated.

I have 1000 option trades with Vanguard but they are simple.  I will mostly keep them simple but it's ridiculous I can't do a spread.