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I need dividend income until I can go on Social Security!
Old 08-29-2016, 11:43 AM   #1
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I need dividend income until I can go on Social Security!

I am currently 60% VTI and 40% BND. I have $300K in my Fidelity Account.

I am unemployed and counting the days when I will be able to collect Social Security in October 2017.

I don't want to burn through my assets (Principal) so I was thinking about trying to live on high yield ETF's until October 2017 that pay about 10% yield. Things like Business Development Companies, Mortgage REIT's, Junk Bond Funds, etc.

Here are some options:

BDCL, BIZD, PSEC, NLY, YYY, FAX, MAIN, KBWY, GOOD, REM, PDT, PCEF

What do think?
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Old 08-29-2016, 11:49 AM   #2
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Originally Posted by Forced to Retire View Post
I am currently 60% VTI and 40% BND. I have $300K in my Fidelity Account.

I am unemployed and counting the days when I will be able to collect Social Security in October 2017.

I don't want to burn through my assets (Principal) so I was thinking about trying to live on high yield ETF's until October 2017 that pay about 10% yield. Things like Business Development Companies, Mortgage REIT's, Junk Bond Funds, etc.

Here are some options:

BDCL, BIZD, PSEC, NLY, YYY, FAX, MAIN, KBWY, GOOD, REM, PDT, PCEF

What do think?
I have never faced this situation, and I understand how you might feel pressured. Still, it is likely best to live as frugally as you can, get some sort of temporary job and stay safe with your investments.

Ha
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Old 08-29-2016, 12:06 PM   #3
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I have never faced this situation, and I understand how you might feel pressured. Still, it is likely best to live as frugally as you can, get some sort of temporary job and stay safe with your investments.
What he said, definitely!

High yield means high risk, no way around that. You could very well end up much worse off than now.

It means living very frugally, as much as you can for a bit over a year. Probably most of us on the board here have had to do that and could do so again if necessary. One year is not the rest of your life.
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Old 08-29-2016, 12:09 PM   #4
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It is pretty well proven that high yield ETF silently burn through "principal" when they pay out dividends, so you are not getting something for nothing. You might as well live cheaply, take the dividends from VTI and BND, but if they are not enough, sell some shares.

Besides having to sell a few shares should be very motivating to live frugally.

I am about to sell a few shares of VTI myself because I have to pay some credit card bills before I go on another vacation.
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Old 08-29-2016, 12:57 PM   #5
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What about something like closed end fund ETY? Yes they are returning a portion of capital but at approx 9%+ distributions for Forced to Retire to use it for 13 months and then sell into something else could potentially get the return needed and maintain the principal value when sold in Oct - Nov 2017. It is a 1.7 Bil fund - anyone else have thoughts on this strategy?
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Old 08-29-2016, 01:47 PM   #6
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^Sounds stupid to me. I'd rather be in control of "return of capital" for myself by choosing for myself when to sell and what to sell. That way, I can control the taxes, too, and probably not have to pay any taxes.
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Old 08-29-2016, 02:32 PM   #7
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Only you can know what seems comfortable. As a total return investor, I'd be happy to leave the portfolio in VTI and BND, same allocation, and sell 10% to cover the year you need while keeping your 60/40 balance. Much preferred to buying a whole bunch of new stuff just so they'll give you 10% back and then buying back the stuff you really want.

We're selling 5% to 6% of our portfolio for a few years until SS and pension start up. All part of the long-term plan.

If you end up losing a little principal, you can plan on saving some of your SS to your portfolio to make it up.
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Old 08-29-2016, 03:07 PM   #8
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Only you can know what seems comfortable [to you].
While that statement on the face of it is true, comfortable doesn't pay the bills sometimes and many people are fooled by their own comfortable biases.

Sometimes one has to get out of their comfortable zone.
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Old 08-29-2016, 03:13 PM   #9
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I know I'm in the minority on this --and this is not a recommendation-- but I've owned high yield funds (TRPrice PRHYX) for many years. Last year's dividends totaled 5.9% and with Cap Gains brought me up to 7.2% with an 8% total return YTD.

This should only be part of one's portfolio, but in my personal case, I've been happy with the results. It's been a good performer.
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Old 08-29-2016, 03:13 PM   #10
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While that statement on the face of it is true, comfortable doesn't pay the bills sometimes and many people are fooled by their own comfortable biases.

Sometimes one has to get out of their comfortable zone.
I agree with this. Success has little to do with what is comfortable, and a lot to do with what is rational in the circumstances.

Ha
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Old 08-29-2016, 10:56 PM   #11
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There is no magic, these don't get the dividend out of the air, they are risky, so when SHTF, they will fall a lot and cut the dividend.

You will lose money and be worse off.

The first two: BDCL, BIZD, both are worth less than they were 5 , 3 years ago (the max time for each, both are down about 25% (eyeballed) which is terrible considering the stock market has boomed for over 5 years.
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Old 08-29-2016, 11:22 PM   #12
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While being very cautious is certainly safe, if the OP had bought a bunch of REITS at the beginning of the year they would have done exactly what is being asked for and I don't think with a great deal of risk, although that last part is certainly just an opinion. That ship may have sailed, but there are a good number of pretty safe options available that pay a lot more than BND. OP didn't say how much more income was needed. Something higher than BND but more stable than an mREIT or CEF returning capital might be enough.


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I need dividend income until I can go on Social Security!
Old 08-30-2016, 09:33 AM   #13
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I need dividend income until I can go on Social Security!

I think anyone who invests in Mreits needs to pass a proficiency test in understanding them. My Lord, I would flunk it every time. They make synthetic adjustable income STRATS look like a child's bedtime story. How high would these blow into the sky if the yield curve flattens completely or inverts?


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Old 08-30-2016, 10:54 AM   #14
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While being very cautious is certainly safe, if the OP had bought a bunch of REITS at the beginning of the year they would have done exactly what is being asked for and I don't think with a great deal of risk, although that last part is certainly just an opinion. That ship may have sailed, but there are a good number of pretty safe options available that pay a lot more than BND. OP didn't say how much more income was needed. Something higher than BND but more stable than an mREIT or CEF returning capital might be enough.


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True, hindsight is fantastic.
I always imagine how rich I'd be if I bought: AAPL, FB, GOOG, MS all at the right time (near their beginning).
I don't try to imagine how poor I'd be if I bought ENRON, at the wrong time.
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Old 08-30-2016, 03:59 PM   #15
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I went on a website I found that gives you the returns for any stock or mutual fund for any time period and punched in those high dividend funds I talked about in the first post. You are right the huge dividend yield can take lots of value out of these index funds so the base price of the stock will drop even in good markets. But if you look out over a ten year period they all made money if you count the dividend.

They would give me some high income while I wait for Social Security without having to sell the stocks for a withdrawal. But over ten year periods I would generally make less money with these super dividend funds in total return vs. a 2% yield Index Fund ETF like DIA, SPY or VTI.
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Old 08-30-2016, 04:45 PM   #16
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I think you are better off staying the course than chasing yield/risk. I'll bet that the income and appreciation of the 60/40 mix of VTI/BND that you have over the last few years has done pretty well with less risk than these bets that you are considering.

Over the last 10 years a 60/40 mix has returned ~7% a year... that is $21k on your $300k nestegg and probably better than any of these high fliers you are considering. You need to consider appreciation (changes in share price) in addition to income... with these income investments you are considering you give up that appreciation potential.
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Old 08-30-2016, 04:54 PM   #17
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I think you are better off staying the course than chasing yield/risk. I'll bet that the income and appreciation of the 60/40 mix of VTI/BND that you have over the last few years has done pretty well with less risk than these bets that you are considering.

Over the last 10 years a 60/40 mix has returned ~7% a year... that is $21k on your $300k nestegg and probably better than any of these high fliers you are considering. You need to consider appreciation (changes in share price) in addition to income... with these income investments you are considering you give up that appreciation potential.
That's what I was thinking, VTI and BND have had a good year, should be able to skim off the top and keep on going.
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Old 09-04-2016, 10:14 PM   #18
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Only you can know what seems comfortable. As a total return investor, I'd be happy to leave the portfolio in VTI and BND, same allocation, and sell 10% to cover the year you need while keeping your 60/40 balance. Much preferred to buying a whole bunch of new stuff just so they'll give you 10% back and then buying back the stuff you really want.

We're selling 5% to 6% of our portfolio for a few years until SS and pension start up. All part of the long-term plan.

If you end up losing a little principal, you can plan on saving some of your SS to your portfolio to make it up.
I plan on trying Social Security beginning May 2017. Not that different from what Forced to Retire is thinking about doing.

So from what I gather you were saying, is to take the amount that I need from my investments, hold it aside in cash, and let the rest continue to grow? It's not that many months but it is disconcerting to draw out. That's why I was thinking of working one more tax season and then walking away.

I still think Forced to Retire could work a tax season to make up that difference (which is about 4 months) and that would give him unemployment for another 6 months taking him up to Social Security

Of course that would involve:
  • swallowing pride
  • going to free tax school with kids
  • accepting minimum wage jobs + commissions
  • punching a time clock
  • AT 60+
As a CRTP with a decade of experience I can only get $25 hr
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Old 09-04-2016, 10:45 PM   #19
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Check out Runningman's thread

5% Withdrawal Rate Portfolio
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Old 09-05-2016, 07:13 AM   #20
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PONDX and PTIAX are stable enough for me to sleep at night, and >5% div.
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