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View Poll Results: What is your annual cash investment income as % of(.04*Invested Assets)
<=25% 9 24.32%
>25%<=50% 8 21.62%
>50%<= 75% 9 24.32%
>75%<=100% 6 16.22%
>100%<=125% 2 5.41%
>125% 3 8.11%
Voters: 37. You may not vote on this poll

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Poll:For retirees- what is your cash income as % of (.04*Invested Assets)
Old 11-23-2010, 06:46 PM   #1
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Poll:For retirees- what is your cash income as % of (.04*Invested Assets)

People who are earning income, please post about that, but do not use it in answering the poll. This intends to find how much of a hypothetical 4% SWR you are funding with cash from interest, dividends, purchased annuities or other cash flow from investment sources. If you include purchased annuity cash flow, include the purchase price of the annuity in total invested assets to be multiplied by the 4% hypothetical SWR amount. Do not count capital gains or capital losses as cash flow, whether they are from mutual funds or individual securities.

Do not include pensions or SS, though please post about these rather than use them in answering the poll.

We talk about these things all the time, but I don't believe we have ever tried to drill down on it.

My cash investment income is greater than 100% of 4% SWR. I really would not feel comfortable otherwise. But most of this is dividend income, so I expect to have reasonably good income response to moderate inflation, over time and on average.

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Old 11-23-2010, 07:00 PM   #2
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I am getting around 1% or less of dividends and interest income from my portfolio. My risk tolerance is high as I still have part-time earned income. When I fully retire, I may scale back a bit. But it is my nature to want lots of cap gains. It makes life less dull. :-)

PS. As my superior memory serves , I remember that there was a thread where the OP asked people about the dividend yield of their portfolio. However, it was not in the form of a poll.

PPS. It's this one: What Does Your Portfolio Yield These Days?
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Old 11-23-2010, 07:06 PM   #3
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Quote:
Originally Posted by NW-Bound View Post
I am getting around 1% or less of dividends and interest income from my portfolio. My risk tolerance is high as I still have part-time earned income. When I fully retire, I may scale back a bit. But it is my nature to want lots of cap gains. It makes life less dull. :-)
Thanks for posting NW. You interpreted the poll as I intended, and I wasn't sure that I had been clear. our post ressured me that the poll is at least reasonably unambiguous.
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Old 11-23-2010, 08:17 PM   #4
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Not retired, so did not vote. I do not intend to use a 4% rate, but if I did, the cash tossed off of my FI and divvies would fall into the 75-100% range, actually right at 85%. If things go to plan (which would be a first), the throw-off will be more than my cash needs for a very long time. I am trying to balance growth and current income, so I am at 60/40, with a lot of dividends in the 60 along with some growth stocks and funds, and some nice yielding GO munis in the 40. Excess cash will be reinvested in the process of rebalancing and eventually some may eventually be gifted to the kids/grandkids, depending on what happens with estate and other taxes...as I get to the point that I see I can't use it all and can't take it with me.

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Old 11-23-2010, 08:24 PM   #5
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Investment income and rental income covers my expected living expenses by 146%. Investment income accounts for about two thirds of the total.
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Old 11-23-2010, 09:54 PM   #6
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Current yield of portfolio is 3.1% (which is what I try to live on), so 77%.
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Old 11-23-2010, 10:00 PM   #7
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Originally Posted by CyclingInvestor View Post
Current yield of portfolio is 3.1% (which is what I try to live on), so 77%.
There is no doubt that if someone has the combination of frugality and assets to allow a cash income that covers expenses including taxes, that is a very big help in building a solid long term portfolio success.

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Old 11-23-2010, 10:34 PM   #8
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I'm not fully retired, so I didn't vote.

FWIW: I suspect once I am fully retired I still wouldn't know the answer to the question. My stock and bond funds produce some return from dividends/interest, but also some returns (incl some negative returns) due to changes in price. I know some folks like to separate the income from the price appreciation components, but the ratios will vary a lot from year to year. Total return is what I'll probably be watching a lot closer than that portion of total return attributable to sub-factors.

As a generalization, dividends account for about 50% of the total return of stocks over time. Since I'm nearly 100% equities, I guess it would follow that dividends would account for about 50% of my withdrawals over time.
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Old 11-23-2010, 10:37 PM   #9
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Quote:
Originally Posted by samclem View Post
I'm not fully retired, so I didn't vote.

FWIW: I suspect once I am fully retired I still wouldn't know the answer to the question. My stock and bond funds produce some return from dividends/interest, but also some returns (incl some negative returns) due to changes in price. I know some folks like to separate the income from the price appreciation components, but the ratios will vary a lot from year to year. Total return is what I'll probably be watching a lot closer than that portion of total return attributable to sub-factors.
To me these polls are easy to answer, if someone can accept the instructions. Of course there are a lot of other ways of looking at things, and some perhaps even better. But it's like football, you can always make your own rules but then it's not football anymore.

Ha
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Old 11-24-2010, 06:10 AM   #10
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My invested assets are 52% taxable accounts and 48% tax free/defer accounts. Since I am living on the interest and dividends from the taxable account, I am living on 50% of (.04 * invested assests). The taxable account is 89% CD ladder, 11% dividends. Since the tax free/defer accounts are about the same AA, it should be 100% or higher. In other words, I don't expect to cash in CDs or sell stock for my 4% SWR.
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Old 11-24-2010, 09:15 AM   #11
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I have non-COLA pensions that cover the basics and need ~2.5% from my nest egg to cover the target income.

Of that 2.5%, I should get ~1.85% of that from dividends and interest this year so I voted >50% <=75%.
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Old 11-24-2010, 09:56 AM   #12
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Not retired, but if I follow all the other directions, then 81%...
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Old 11-24-2010, 10:40 AM   #13
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We have set our spending to equal the sum of portfolio yield and pension after taxes. Portfolio yields about 3.2% all equities and will be about 60% of total income. Could easily reduce spending by 20% if had to. 3.2/4=80% 60 years old pension partially cola'd
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Old 11-24-2010, 04:12 PM   #14
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I'd guess that interest/dividends are in the neighborhood of 4% of current market value. I'm guessing because I've got money in a bond fund and I don't particularly care about coupon yields there. That's not the same as FireCalc 4% SWR because I'm dividing by current value rather than CPI adjusted value on the day I retired. But I picked 75%-100% anyway.
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Old 11-25-2010, 07:00 AM   #15
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We live on my pension and her salary. Confortably enough. My penison will be seriously reduced when I reach 65. Ive got cash on annual deposits that yield 2,9 % before taxes.
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Old 11-25-2010, 11:35 AM   #16
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All of our investments put off some level of income...dividends or interest. This is an important part of our approach to investing at this point in our life. DW has a small amount of pension income, but not nearly enough to cover expenses. We pull additional $$ from taxable account (at this point) as needed to cover expenses, so do not pull any set %. This may change as we've only been doing this for a couple years.

To the original question, at this point, income from our accounts covers all expenses and would exceed a hypothetical 4% SWR.
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Old 11-25-2010, 11:50 AM   #17
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How you calculate interest income might be pretty important too. You can get pretty different results when looking at LTM distributions and "yield to maturity" considering how many bonds are trading at very significant premiums.

Consider the case of someone who's 100% invested in Vanguard's ST Investment Grade bond fund. His portfolio yield based on his LTM distributions was 3.37%. So he might say that his investment income covers 84% of his expenses. But the SEC yield on that fund is only 1.75%, which means that his income is really only covering 43.8% of his expenses and the balance is a consumption of his principal.
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