I don't know the "how" but I do know that my uncle opted out of SS back in the 1940s or early 1950s when he was in his 20's.
He never had a job. Spent a lot of time washing his car and sunbathing most of his life. FI.
Sounds like he opted out of SS by opting out of work.
OP asks about a real practical advantage in how Retirement Feels. As soon as you ask about feelings , it is no longer about practical or logical.In theory, whether cash comes from dividends or from selling shares should make little difference if total return is the same. Yet in retirement many people seem to feel much more comfortable spending dividends than selling principal.
Is that simply psychology, or does dividend income create a real practical advantage in how retirement feels?
I ask this in light of the very strong interest many retirees show in high-yield vehicles such as PIMCO closed-end funds, even though most if not all of them have had materially substantialy weaker long-term total returns than simply owning S&P 500 through a broad index fund.
A fund paying 10%–15% can feel comforting because cash arrives without selling shares, but if principal steadily erodes or long-term growth lags, is that comfort actually expensive? In other words: are retirees buying income, or buying emotional relief? And if emotional relief matters in retirement, perhaps that itself has value.
I get all my dividend income from 3 funds in a taxable account: VTSAX, VTMFX, VWIUX.
I completely agree. Having said that, "money" is an emotional subject for almost every one. The old saying that "perception is reality" has some validity when the emotional is involved.
But... the stock value goes down by the dividend (at least in theory) so isn't it a push?
Not if you are not selling at a low to generate cash. The stock movements vary more than the dividend. The stock can drop by >20% in a down market, but for a good dividend stock, your income stays the same or even increases.
I find dividends very comforting. We currently receive ~$248,000/yr in dividends with $165,000 coming out of Roth accounts tax free. The rest are split between IRA and taxable accounts.In theory, whether cash comes from dividends or from selling shares should make little difference if total return is the same. Yet in retirement many people seem to feel much more comfortable spending dividends than selling principal.
Is that simply psychology, or does dividend income create a real practical advantage in how retirement feels?
I ask this in light of the very strong interest many retirees show in high-yield vehicles such as PIMCO closed-end funds, even though most if not all of them have had materially substantialy weaker long-term total returns than simply owning S&P 500 through a broad index fund.
A fund paying 10%–15% can feel comforting because cash arrives without selling shares, but if principal steadily erodes or long-term growth lags, is that comfort actually expensive? In other words: are retirees buying income, or buying emotional relief? And if emotional relief matters in retirement, perhaps that itself has value.
Totally agree with you, because I am on the same approach. Now, as one advisor said to me " there is nothing wrong with buy and hold index investing, there are just other methods..." So you and I took the road, less travelled perhaps. Our dividend income has increased on average 11% per annum and the net portfolio value is also up every year. In large part due to reinvestment as well as taking advantage of run ups on certain assets and repositioning. Different approach, different strokes. All good.
Agree with you fully. All roads lead to Rome.
It goes down but typically doesn't stay down. Over the past 30 years, my dividend payers have a yoy total return ~3X greater than dividends paid. If they stayed down, they'd eventually go to zero.
Where did I say that it stayed down? Be specific. Reading comprehension is hard.
Especially as we get older!!!Where did I say that it stayed down? Be specific. Reading comprehension is hard.
