Income Investing Results

[Flieger]

I thought it might be interesting to have a thread that those folks that have chosen Income Investing to fund retirement might share experiences, plans, investment decisions, and results so far if you so chose to divulge. This isn't intended to debate the investment choice/style as that has been done in other threads. This is for people that, at least for the time being, have made this strategy as their primary choice of income. I, for example, have a portion of total portfolio invested this way, while also continuing to have a smaller portion in Growth as "more" hedge to inflation. I'll start in the next post!

Flieger

 

[Fermion]

I rolled $415,000 in a IRA for a 72t two plus years ago and set it up in treasury bills and bonds for a guaranteed $25,000 yearly income withdrawal. Account has had $50k of withdrawals and currently has a bit over $406,000 in it. Does that count? Note that I still have a fair bit of other money in the S&P500 index. It has done well better than the $415,000, but it is nice to know we have that $25,000 every single year no matter what.

 

[surprising]

I am retired at 51. Before retiring I built a portfolio of income producing investments that, along with rents from rental properties, pay for basic living expenses. The income investments are a mix of bond CEFs, REITs, and BDCs. In total they yield about 10%. I also own VTI and individual stocks that I sell as necessary every month when expenses exceed income investments and rents. This strategy needs to last 8 years. After which I can tap 401k. The bulk of my investments are in 401k. Today it is invested in about 70% s&p index, 30% bond fund.

I wanted the security that basic living expenses would be covered if the market takes a prolonged downturn. Last 5 years obviously it was the wrong approach, but who could've predicted 5 years of 20% gains?

 

[Flieger]

So, After making the choice for management of my Portfolio, I determined that I would split my portfolio in to 3 categories roughly as follows:

1. Short term cash holdings (~10%)
2. Growth (~30%)
3. Income (~60%)

For a little history, I started this around October of 2024, shortly after retiring, though I did not start taking "Income" until January 2025. So as not to skew things, I am considering all numbers as starting in January even though if I included from the October start things would look better from a return and portfolio balance standpoint.

My plan is to live off of around 6% WR annually until I start SS at FRA. I hit FRA in 5 years. At that point, we will likely drop to 2-2.5%.

For January:

Portfolio Total return of 2.0% (Divs+Basis change).​

Portfolio return after taking income 1.6% (Divs+Basis change-Income)​

​

MTD February (Friday knock down, but only 1/3 of Divs for month received):

Portfolio Total return of -0.3% (Divs+Basis change).​

Portfolio return after taking income -0.7% (Divs+Basis change-Income)​

​

YTD:

Portfolio Total return of 1.7% (Divs+Basis change).​

Portfolio return after taking income 0.9% (Divs+Basis change-Income)​

​

I'll update this after Feb month end, but wanted to indicate how I was looking at the process. Returns are actual, not annualized as I don't assume calculating forward looking, especially so early, would be informative.

Ultimately, my goal is for return after income to be positive, even better with an increase to match or exceed inflation.

I hope this can be a place that likeminded folks can share their experience and how things are going!

Flieger

 

[marko]

We live on dividends, MF cap gains, SS. With an eye on that, I consider myself a dividend investor focused mainly on income.

So, 28% is in what I'd call pure income: CEFs, bonds, TBills, floating bank rates, etc. which yield about 8% annually.
72% is in growth funds/stocks, yielding 5.5% in dividends alone, combined for a total net of ~6.2% in dividends/CGS.

But here's the interesting thing: on a dollar per dollar, the growth stocks deliver twice as many dollars in the form of dividends than the income side.

This arrangement allows us enough income to cover with about 10% left over to compensate for lean years. Despite having withdrawn our original portfolio balance (via dividends) over the past 20 years, our portfolio balance is more than double our starting amount.

So I guess it depends on what you call "income". I can see how my growth stocks are not excluding dividends, pay well and provide growth. If you don't view dividends as income (a lot of controversy and discussion here on that) and limit yourself to just interest, it's a different story.

 

[Happyras]

We are primarily invested in Bonds and T-bills and preferred shares. The equities other than preferred's have been minimal and carryover mostly from when we were more fully invested. Lets say currently about 10% equities. Overall, we are invested with an annual return of 5.6%. Many positions are callable, and long term positions are only held if they return a well rated >6%. My confidence level for fixed income rates to remain or increase is >50%, but then I am optimistic we will see better times with current admin policies.

That said, I did a large portion of covered calls when the VIX ran high into the 30's, but that has been a tough market in the recent past. I have kept some position in EOI which does the lifting for me, but really returns equivalent to holding SPY without calls. Its getting tempting to see the VIX recently spike, but I am looking for 30+ in the VIX to get a 8 to 12% return on covered calls.

I get advice from a trusted well informed source who believes I need to be conservative at this time. No long term bonds or green bananas for that matter, limited exposure to stocks due to high CAPE etc...but then I should likely be more like 30% equities.

With our investment mix, and commercial property triple net income, our income is easily 3x what we spend, except for our recent cash out to a $2M second home in a 55+..So from a comfort level, quality income investing is more than we need. Most of our net worth is in real estate, but only 25% produces income at this point.

Good thought to start this thread, as many have won the race and just need to maintain what they have for any future risk or lifestyle changes.

 

[PlayinwithFIRE]

i don't necessarily track this perfectly but it has become easier recently to see this on the big firms websites.

If i consider dividends+ cd interest in 2024...it amounted to about $30K...which I was surprised by. Almost as much as i expect to get in SS at 62.5 which is still some ways off.

pwf

 

[Flieger]

We live on dividends, MF cap gains, SS. With an eye on that, I consider myself a dividend investor focused mainly on income.

So, 28% is in what I'd call pure income: CEFs, bonds, TBills, floating bank rates, etc. which yield about 8% annually.
72% is in growth funds/stocks, yielding 5.5% in dividends alone, combined for a total net of ~6.2% in dividends/CGS.

But here's the interesting thing: on a dollar per dollar, the growth stocks deliver twice as many dollars in the form of dividends than the income side.

This arrangement allows us enough income to cover with about 10% left over to compensate for lean years. Despite having withdrawn our original portfolio balance (via dividends) over the past 20 years, our portfolio balance is more than double our starting amount.

So I guess it depends on what you call "income". I can see how my growth stocks are not excluding dividends, pay well and provide growth. If you don't view dividends as income (a lot of controversy and discussion here on that) and limit yourself to just interest, it's a different story.

Not sure if you mean on a weighted basis you get twice as much from Growth stocks? I don't see how that is possible. If you mean just as a total, that makes more sense to me as you have 3/4 of your portfolio in growth.

My growth portfolio are S&P500 and Nasdaq funds which average just under 1% Divs, so no comparison. My overall portfolio right now is showing 11.4% "Passive Income" which includes Div's and Interest (from cash in SPAXX, etc).

 

[Flieger]

I am retired at 51. Before retiring I built a portfolio of income producing investments that, along with rents from rental properties, pay for basic living expenses. The income investments are a mix of bond CEFs, REITs, and BDCs. In total they yield about 10%. I also own VTI and individual stocks that I sell as necessary every month when expenses exceed income investments and rents. This strategy needs to last 8 years. After which I can tap 401k. The bulk of my investments are in 401k. Today it is invested in about 70% s&p index, 30% bond fund.

I wanted the security that basic living expenses would be covered if the market takes a prolonged downturn. Last 5 years obviously it was the wrong approach, but who could've predicted 5 years of 20% gains?

I wouldn't say it's the wrong approach if you have what you need and this provides the income you want from your stash while sleeping well at night. It just didn't (in hindsight) perform better than another approach that might be right for someone trying to build their stash to be where you already have gotten.

Flieger

 

[Alex The Great]

I do have an income portfolio built in Roth IRA, which includes REIT, BDC, some CEF, high yield bonds and covered call ETFs. I try to choose those which in addition to the stable income show some growth (except bonds). Also, I reinvest all dividends and interest. In tIRA I have a high yield bond, along with 20% of index fund in 401K. In taxable, I have multiple individual growth stocks (which also pay dividends) along with large portion of S&P 500 index fund and dividend growth ETF, along with multiple CDs. So far, I do see they perform in this way: taxable is the best, then Roth and tIRA/401K is the lowest performer.
Eventually, my plan is to use Roth dividends/interest as part of living expenses. I'm concerned a bit that they won't grow much with inflation, therefore I may need to make some adjustments but hopefully the strategy would work.

 

[Koolau]

I've been taking all my RMDs from my 401(k) out of my Guaranteed Income Fund. That's my biggest income stream from my investments. I have a long way to go to drain the fund and figured I should start w*rking on it now.

 

[marko]

Not sure if you mean on a weighted basis you get twice as much from Growth stocks? I don't see how that is possible. If you mean just as a total, that makes more sense to me as you have 3/4 of your portfolio in growth.

My growth portfolio are S&P500 and Nasdaq funds which average just under 1% Divs, so no comparison. My overall portfolio right now is showing 11.4% "Passive Income" which includes Div's and Interest (from cash in SPAXX, etc).

As I said, I get twice as many dollars from my growth side which delivers about 5.5% in dividends/MFCGs. My point was that even a growth portfolio can bring in a decent "income' (provided you want to consider dividends income. Note that MFCGs play a role but I lump them in as dividends)

For me, "dividends as income" is more a matter of methodology than anything else. I get paid every month with a predictable amount, it is automatic and deposits the cash directly to checking and in an extended market downturn doesn't require me to sell shares at their low point. Dividends are paid on the amount of shares, not their value. YMMV.

 

[Flieger]

As I said, I get twice as many dollars from my growth side which delivers about 5.5% in dividends/MFCGs. My point was that even a growth portfolio can bring in a decent "income' (provided you want to consider dividends income. Note that MFCGs play a role but I lump them in as dividends)

For me, "dividends as income" is more a matter of methodology than anything else. I get paid every month with a predictable amount, it is automatic and deposits the cash directly to checking and in an extended market downturn doesn't require me to sell shares at their low point. Dividends are paid on the amount of shares, not their value. YMMV.

That's impressive. I would love to know the funds you invest in for your Growth Portfolio? Or do you use that part of your portfolio for more active, individual stock investing? I have't been able to get CLOSE to a 5.5% level of Div off of mine (less than 1% average). I don't include gains, just Divs, but even if I did would not even approach. My Growth is in VOO, ONEQ, FXAIX.

Flieger

 

[marko]

That's impressive. I would love to know the funds you invest in for your Growth Portfolio? Or do you use that part of your portfolio for more active, individual stock investing? I have't been able to get CLOSE to a 5.5% level of Div off of mine (less than 1% average). I don't include gains, just Divs, but even if I did would not even approach. My Growth is in VOO, ONEQ, FXAIX.

Flieger

As noted, that number also includes MF Cap Gains which account for a bit less than half of the 5.5%. I get 3.8% pure dividends from growth-ish funds like TRPrice's Midcap fund, Capital appreciation, Equity Income fund and a few others. Not every fund pays the same, but the first two paid around 10% as Year End Cap Gains. Remember that I lump CGs as 'dividends' for my math.

 

[target2019]

We've used one taxable brokerage account for income investing and other needs. Inherited stock and gifts were the original basis.

The account is 15% of total portfolio, and produced about 10% of our taxable income last year.

 

[Flyfish1]

We retired on dividend/interest income. The portfolio at present is roughly 7% BDC's, 12% property REIT's, 10% Large Cap and growth, 5% Healthcare, 37% Fixed income, 10% mortgage REIT's, 5% Energy, 13% other. We reinvest a variable percentage of dividends every month, I was shooting for a 25% reinvestment are but alas it ended up at about 18% in 2024. Even with that our dividend income grew by over 14% last year. We don't sell shares to live on, only to rebalance or move to a more attractive dividend payer. I will increase that reinvestment rate over time as our lifestyle settles down a bit. In addition we have holdings in private real estate funds that pay around $36K per year and cash value life insurance that we are slowly drawing down on. I'm quite happy with this approach and I enjoy self managing the portfolio, no FA's for the last 15 years!

 

[Flieger]

We retired on dividend/interest income. The portfolio at present is roughly 7% BDC's, 12% property REIT's, 10% Large Cap and growth, 5% Healthcare, 37% Fixed income, 10% mortgage REIT's, 5% Energy, 13% other. We reinvest a variable percentage on dividends every month, I was shooting for a 25% reinvestment are but alas it ended up at about 18% in 2024. We don't sell shares to live on, only to rebalance or move to a more attractive dividend payer. I will increase that reinvestment rate over time as our lifestyle settles down a bit. In addition we have holdings in private real estate funds that pay around $36K per year and cash value life insurance that we are slowly drawing down on. I'm quite happy with this approach and I enjoy self managing the portfolio, no FA's for the last 15 years!

Sounds like what I am working to do as well. Thanks for the info! I am currently using about 50-60% of divs, along with DW's SS and some income from a p/t bartending gig. I reinvest the other 40-50% to increase the Divs. Once I start SS (plan is at FRA in ~5 years) I will require even less of the Div's., or we will work on BTD spending.

Currently looking like this, which includes both Div's from Income Portfolio along with Interest from Short term which is better than historical averages right now at around 5%

Flieger

 

[Flyfish1]

Sounds like what I am working to do as well. Thanks for the info! I am currently using about 50-60% of divs, along with DW's SS and some income from a p/t bartending gig. I reinvest the other 40-50% to increase the Divs. Once I start SS (plan is at FRA in ~5 years) I will require even less of the Div's., or we will work on BTD spending.

Currently looking like this, which includes both Div's from Income Portfolio along with Interest from Short term which is better than historical averages right now at around 5%

View attachment 54446

Flieger

Sweet! That's a strong reinvestment rate. You should see nice income growth with that.
Yeah I like this approach, granted not for everybody as we have seen on prior posts.
I'm 6 years away from FRA , but DW SS's income starts this summer, small but it will help increase my reinvestment rate.

 

[Flieger]

Sweet! That's a strong reinvestment rate. You should see nice income growth with that.
Yeah I like this approach, granted not for everybody as we have seen on prior posts.
I'm 6 years away from FRA , but DW SS's income starts this summer, small but it will help increase my reinvestment rate.

Yes, my DW's is ~$24k/year, but helpful nonetheless! The beta on my Income portfolio is 0.52, so market swings are (so far) less impactful. Backtesting to 2020 and in some fund cases to 2008 shows little to no impact on Div ($ wise) which is part of my requirement to hold, so I am hoping that will steady the "income" Let's keep our fingers crossed!

Flieger

 

[pb4uski]

My retirement portfolio is income focused.

• minimal common stocks (~5% of portfolio)
• 30% investment grade preferred stocks yielding ~6.7%
• 3% in a ~4% money market fund
• remainder in brokered CDs, Treasuries, TIPS, GSE and investment grade corporate bonds yielding ~5.3%

 

[Fishmasterdan]

Just wanted to jump in here an say thank you for this. I am new to investing/managing money. I have had a fund managed for me for the last 35 years. I am getting ready to take control of my IRA. However I have no confidence. I took 20k out of my saving account and started buying stocks, ETF.s ect. Trying to learn what is what. I have only lost money so far LOL. I really like all the different strategies so far. If you don't mind can you list some of the CEF's and ETFS your have purchased for dividend income. Seems to me some the CEFS are kinda sketchy when looking from a beginners perspective. I would really love to come up a dividend based strategy with ETFS that can grow. Along with some consistent CEFS.

 

[Flieger]

For me, "dividends as income" is more a matter of methodology than anything else. I get paid every month with a predictable amount, it is automatic and deposits the cash directly to checking and in an extended market downturn doesn't require me to sell shares at their low point. Dividends are paid on the amount of shares, not their value. YMMV.

This is the purpose for my strategy right now. Thanks for putting it so succinctly.

Flieger

 

[CyclingInvestor]

I started income investing in 1993, almost entirely in individual stocks. I retired in 2006 at 48 when the dividend flow reached my salary (adjusted for taxes, health insurance, etc), mostly in my IRA. Everything runs smoothly now - take the accumulated dividends from my IRA each quarter, convert them to my Roth, spend from there as needed, then buy more stock in the Roth with what is left over. My dividend flow is about 5 times what it was at retirement (not surprisingly after 18 years of increases and some re-investing).

My biggest holdings are BIP and BEP, along with some BCDs. I do not care about price changes, only the health of the businesses. Drops of 43% in 2009, 53% in 2020, and 40% in 2023 caused no lost sleep.

 

[marko]

This is the purpose for my strategy right now. Thanks for putting it so succinctly.

Flieger

Thanks, just remember that some here will comment (rightly) that dividends are not income. It's the old total return vs dividend argument. I get it but as I said it is more about a methodology than anything else. It's just how I think about it and how I get it done mechanically. There's 100 ways to skin a cat.

 

[Flieger]

Thanks, just remember that some here will comment (rightly) that dividends are not income. It's the old total return vs dividend argument. I get it but as I said it is more about a methodology than anything else. It's just how I think about it and how I get it done mechanically. There's 100 ways to skin a cat.

I've heard all of the "money is fungible" statements, which is why I started a thread that is targeted to this method and hope to avoid this debate, but "math is math". If I have money coming in, I call that income - whether it is capital gains, gain in basis, or dividends. As you pointed out earlier, the continuous stream of dividend, independent of the basis, is what I am looking for in my "income portfolio".

Flieger