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Old 03-20-2015, 08:58 PM   #21
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I agree that total return with proper AA is the prudent way to go. But mentally I couldn't do it. I have probably now 40% of mine in preferred stock concentrated mostly in electric utilities and insurance companies. I like safe 6-7.5% dividends, what can I say? It's just all mental gymnastics to get me in the market and out of CDs and IBonds, knowing if they crater 25% I will be made whole in about 4 years if they don't come back. In fact, I will just buy more.
I fully acknowledge it certainly isn't a "better way" or even safer necessarily. But, I don't live off my investment money either, so I don't have to follow the most prudent of plans.


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Old 03-20-2015, 09:25 PM   #22
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"Know Thyself" is the most important criteria in choosing an investment plan. If it doesn't suit you, you won't stick with it, no matter how clever or rational it appears.
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Old 03-21-2015, 11:02 AM   #23
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total return - it is all that matters at the end of the day..
Same here, retired at end of last year. If Vanguard and Fido say it's the best approach that's good enough for me, they have all my money anyway.
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Old 03-21-2015, 03:13 PM   #24
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I read the WSJ piece. I guess I'm not really appreciating the significance of the debate. I tend to think that most retired investors use a hybrid strategy, with appropriate modifications at various stages, which is probably preferable to a rigid strategy on either side of the spectrum. But it's entirely possible that I'm missing something in the distinction as well.

I suppose we lean toward the income side. We elected the annuity payout on two DB pensions and have income-producing real estate. Those income streams cover 70% of expenses, with taxable dividends covering most of the remainder. And this is all pre-SS. We do very little selling (except to rebalance), yet we also have a substantial equity position for inflation protection and growth. But even the equity portfolio is skewed toward large dividend payers and dividend growth; and 20% of the bond allocation is high-yield corporate.

So, yeah, we like income, especially guaranteed income from pensions, and later SS. But we still have a substantial diversified portfolio of stocks/bonds/real estate, which we expect to provide a nice balance of income and asset appreciation with reduced volatility, to hedge all the unknowns that the future inevitably holds (inflation, lengevity, LTC).
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Old 03-21-2015, 03:44 PM   #25
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I read the WSJ piece. I guess I'm not really appreciating the significance of the debate. I tend to think that most retired investors use a hybrid strategy, with appropriate modifications at various stages, which is probably preferable to a rigid strategy on either side of the spectrum. But it's entirely possible that I'm missing something in the distinction as well.

I suppose we lean toward the income side. We elected the annuity payout on two DB pensions and have income-producing real estate. Those income streams cover 70% of expenses, with taxable dividends covering most of the remainder. And this is all pre-SS. We do very little selling (except to rebalance), yet we also have a substantial equity position for inflation protection and growth. But even the equity portfolio is skewed toward large dividend payers and dividend growth; and 20% of the bond allocation is high-yield corporate.

So, yeah, we like income, especially guaranteed income from pensions, and later SS. But we still have a substantial diversified portfolio of stocks/bonds/real estate, which we expect to provide a nice balance of income and asset appreciation with reduced volatility, to hedge all the unknowns that the future inevitably holds (inflation, lengevity, LTC).
That's my approach too. I don't use any of my retirement savings for income, I just have them in an 75/25 AA of low cost index funds and let them accumulate. I get my income from rent, a pension and eventually from SS checks from the US and the UK. I am doing IRA to ROTH rollovers to mitigate RMDs, but I expect to reinvest most of my RMDs once they start.
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Old 03-22-2015, 12:30 PM   #26
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Thanks for all the responses.
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Old 03-22-2015, 03:21 PM   #27
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We are in the decumulation stage and our "style" is dividend growth, relying on income from dividend paying stocks to pay the bills.
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Old 03-22-2015, 10:52 PM   #28
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Total return got me to ER... "and I'm dancing with the girl that brung me".

I have no problem if we have a year and I end up spending "principal" because I saved it to spend it once I retired, so it seems silly that principal is so sacrosanct.
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Old 03-23-2015, 11:00 AM   #29
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Total return got me to ER... "and I'm dancing with the girl that brung me".

I have no problem if we have a year and I end up spending "principal" because I saved it to spend it once I retired, so it seems silly that principal is so sacrosanct.
Good attitude to have. I think many are afraid to touch principle, even though they saved and depending on financial circumstances it can be the right thing to do,

My only comment on the discussion is that I believe it is important to have some inflation protection, and therefore you need the growth component as well as the income component. Specific AA is dependent on your risk tolerance and volatility concerns.
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Old 03-23-2015, 11:39 AM   #30
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The primary reason to alter a total return approach would be for tax reasons.
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Old 03-23-2015, 11:47 AM   #31
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Total return got me to ER... "and I'm dancing with the girl that brung me".

I have no problem if we have a year and I end up spending "principal" because I saved it to spend it once I retired, so it seems silly that principal is so sacrosanct.
In principle, I plan to not touch my principal
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Old 03-23-2015, 12:55 PM   #32
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Total return got me to ER...
What does that mean, exactly? To me, the distinction between these two strategies is only meaningful for retirees. But maybe I'm missing something.
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Old 03-23-2015, 03:17 PM   #33
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The primary reason to alter a total return approach would be for tax reasons.
Could you expand on this? I understand I may take a capital gains tax hit on selling investments, but they should be LT gains which would be taxed at the same rate as qualified dividends. And I can probably choose which shares to sell which may allow me to harvest a loss, take a lesser gain, or maybe take a larger gain if I still have room to take 0% tax in the 15% bracket. I will usually come nowhere close to having all of my sales be taxable income.

What might I be missing that you were thinking of?
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Old 03-23-2015, 03:46 PM   #34
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Could you expand on this? I understand I may take a capital gains tax hit on selling investments, but they should be LT gains which would be taxed at the same rate as qualified dividends. And I can probably choose which shares to sell which may allow me to harvest a loss, take a lesser gain, or maybe take a larger gain if I still have room to take 0% tax in the 15% bracket. I will usually come nowhere close to having all of my sales be taxable income.

What might I be missing that you were thinking of?
Sounds like you are on top of it and are not missing any tax savings.
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Old 03-24-2015, 08:59 AM   #35
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What does that mean, exactly? To me, the distinction between these two strategies is only meaningful for retirees. But maybe I'm missing something.
I think he's saying exactly what I thought - using a total return strategy on portfolio built your egg to the level at which you could (safely, based on FireCalc) ER.

You keep dancing with the one that brung ya, in other words, because it works.
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Old 01-15-2016, 11:18 AM   #36
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With January being my traditional annual withdrawal month (i.e. the spending money bucket needs replenishment), I'm just glad that I set aside dividends instead of having to sell anything in the current market.

But that's just me.
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Old 01-15-2016, 11:40 AM   #37
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With January being my traditional annual withdrawal month (i.e. the spending money bucket needs replenishment), I'm just glad that I set aside dividends instead of having to sell anything in the current market.

But that's just me.
But this isn't the big, bad bugga-boo that people make it out to be.

Peel that onion back, just a tiny bit...

A) An investor probably gets ~ 2% from divs to begin with? So no selling there.

B) A conservative investor (one afraid of selling at market dips) probably has a WR of < 4%, but let's go with that.

C) That conservative investor probably has at least 25% in non-equity investments. In a falling market, rebalancing would have you selling from the non-equity side.

D) Even at 4% WR, only 2% would need to be sold. So there is no forced selling of equities for over a decade (round numbers). And even if there was, is selling 2% at a non-optimum time a deal breaker? Heck, a conservative 50/50 portfolio would have ~ 15% dip if the market dipped 30%. In comparison, a 2% withdraw is a pretty small effect.

E) People tend to look at these dips from the peaks, and get all excited. But your non-equity side probably didn't experience the peak like the market did - so it's a false comparison. They didn't fall, because they never rose. So maybe selling on a dip is still 'selling high', in relative terms?

Maybe next week I'll start a thread about whether our fear of volatility isn't completly irrational. It is the long term gain that matters - are the dips really hurting us, or is the desire to avoid dips hurting us more?

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Old 01-15-2016, 11:42 AM   #38
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My total return is mostly equity related. If I can get $2K a month in dividends, $2K a month in SS, another ~1500 a month in pensions, that takes care of my needs. That is part of the plan. Plus some rental income for a bonus.

I buy mostly IVV, with a 2.25% dividend at today's prices. Most high dividend yields do not retrn much more.
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Old 01-15-2016, 12:14 PM   #39
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But this isn't the big, bad bugga-boo that people make it out to be.

Peel that onion back, just a tiny bit...

A) An investor probably gets ~ 2% from divs to begin with? So no selling there.

B) A conservative investor (one afraid of selling at market dips) probably has a WR of < 4%, but let's go with that.

C) That conservative investor probably has at least 25% in non-equity investments. In a falling market, rebalancing would have you selling from the non-equity side.

D) Even at 4% WR, only 2% would need to be sold. So there is no forced selling of equities for over a decade (round numbers). And even if there was, is selling 2% at a non-optimum time a deal breaker? Heck, a conservative 50/50 portfolio would have ~ 15% dip if the market dipped 30%. In comparison, a 2% withdraw is a pretty small effect.

E) People tend to look at these dips from the peaks, and get all excited. But your non-equity side probably didn't experience the peak like the market did - so it's a false comparison. They didn't fall, because they never rose. So maybe selling on a dip is still 'selling high', in relative terms?

Maybe next week I'll start a thread about whether our fear of volatility isn't completly irrational. It is the long term gain that matters - are the dips really hurting us, or is the desire to avoid dips hurting us more?

-ERD50
My point was a little more simple:
This being January, I'd guess a lot of folks replenish their spending bucket at this time (I do). My annual expenses are almost exclusively covered by dividends and SS.

If as a total return investor, one's only option is to sell equities (which had had the dividends reinvested) to refill the bucket, this would not be a good time to do so.
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Old 01-15-2016, 12:22 PM   #40
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My point was a little more simple:
This being January, I'd guess a lot of folks replenish their spending bucket at this time (I do). My annual expenses are almost exclusively covered by dividends and SS.

If as a total return investor, one's only option is to sell equities (which had had the dividends reinvested) to refill the bucket, this would not be a good time to do so.
A total return investor does not necessarily reinvest dividends. I sure don't. All total return means to me is that I focus on getting the best overall return on my money rather than focusing on getting a high dividend yield to live off of. For income I use a combination of dividends (which I don't reinvest), distributions (also not reinvested), interest, and sale of assets if needed. I've got plenty in the bucket right now and have not had to sell any shares in this downturn.
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