12-13-2018, 01:33 PM
(12-13-2018, 10:29 AM)Otter Wrote: It's a mental thing for me. The thought of selling the principal gives me extreme anxiety. I get the statistics and understand the 4% rule, but it's just not for me. If I needed to, I could live off of the dividends generated by my DGI portfolio today. It would be a bare subsistence sort of Lean-FIRE existence, and not really pleasant or what I'm aiming for long-term. So, I have every expectation that in 20-30 years' time, when I am contemplating a proper "retirement," the income stream will be sufficient to meet my goal of living off the eggs and leaving the golden goose alone.
Well, we all have our own little quirks and we definitely need to adjust to those. I do know how you feel like, I've always been a bit skeptical about butchering that golden goose. But I've run all sorts of calculations (monte carlo simulation is a good one to play around with) and quite frankly it just makes sense to withdraw a little when you need it. Or constantly, it's up to you. Personally I wouldn't go as far as the 4% but rather stick to 2% or 3% and adjust as necessary.
The s&p 500 div yield is currently around 2%. We mostly tend to leave out the non-divi payers so how about we say that our portfolios are expected to generate around 3% div yield? If you add withdraws of 2%, you basically add 67% more income. And with 2% withdrawal, unless something terrible happens, your portfolio will still, on average, keep growing faster than inflation.
It's a win-win. But again, if it makes you uncomfortable then there is no point doing it. But at least consider it as an option, a lot of things (including you) might change in the next 20-30 years.
