Preserving Principle and Dividends

[DebER]

Hi,
I will be inheriting a good sum of cash soon. I'd like to have this money in a fund where I draw a cash dividend each month w/o touching the principle. Any suggestions on a good, stable fund?

 

[DblDoc]

Vanguard's Wellesley fund is popular here - I don't use it as I'm a total return investor. Presumably this will be in a taxable account so you may want to reconsider as income funds are not very tax efficient.

DD

 

[unclemick]

pssst Wellesley. A little tongue in cheek. Good place to start looking. Then factor in personal circumstances - age, tax bracket, etc.

heh heh heh - not up to snuff on dividend type ETFs myself but yet another place to investigate.

 

[rescueme]

Another vote for Wellesley:

VWIAX Vanguard Wellesley Income Adm, mutual funds, quote, price - Morningstar

PS - DW/me each hold the Admiral series (above). If you are investing less than $50k, here's the investor series info:

http://quote.morningstar.com/fund/f.aspx?t=VWINX

 

[LOL!]

There may be better, more tax efficient ways to achieve the same goal of a monthly income depending on everything else in your portfolio.

I've never been one to not touch the principal because that also has problems. One of the problems is the behavioral finance trap of treating inherited money different from your other money.

For an idea of what else you might wish to consider, please read this from Vanguard: https://institutional.vanguard.com/iip/pdf/WP_TotalRet.pdf

 

[Nords]

Hi,
I will be inheriting a good sum of cash soon. I'd like to have this money in a fund where I draw a cash dividend each month w/o touching the principle. Any suggestions on a good, stable fund?

Guys, am I the only long-term poster here who thinks we should hold our recommendations until we know more about the poster's asset allocation, risk profile, and long-term goals?

Because the way this question is worded, the fiduciary answer is [-]TIPS[/-] "CDs".

 

[DblDoc]

^ Good point. And if it is a sizeable amount be sure to spread it around so it is FDIC insured while trying to figure out what to do with it long term.

DD

 

[Alan]

Guys, am I the only long-term poster here who thinks we should hold our recommendations until we know more about the poster's asset allocation, risk profile, and long-term goals?

Because the way this question is worded, the fiduciary answer is [-]TIPS[/-] "CDs".

Agreed.

Also, the thread title says to preserve principal but the post says to not touch principal (quite different). The post also says monthly dividends are required and funds like Wellesley only pay quarterly.

More information required for sure.

 

[rescueme]

Yeah - you guys are right (as normal).

DW/me have Wellesley Adm. but for both of us, it's in a Roth - so there are no tax considerations.

Additionally, even though it pays quarterly, we "mentally" split it up to use as income over three months.

Different situation (but I still like the fund)...

 

[clifp]

Another option to consider is the Vanguard Managed Funds. They are designed provide a monthly income without dipping into the principal. The distribution is fixed for a year, but is adjusted every year. They have the misfortune of being launch in May 2008, a few months before the crash. However, they seem to have recovered pretty well and the income/distribution checks which were cut in 2009 is back up to almost 2008 levels.

 

[easysurfer]

Invested in Vanguard Managed Payout fund about a year ago, but then decided to get out. Reasoning for that decision was it seemed too much effort if I wanted to calculate that in my allocations.

Yet, sometimes I'm tempted to invest in them again as some extra monthly payout sounds nice.

 

[clifp]

Invested in Vanguard Managed Payout fund about a year ago, but then decided to get out. Reasoning for that decision was it seemed too much effort if I wanted to calculate that in my allocations.

Yet, sometimes I'm tempted to invest in them again as some extra monthly payout sounds nice.

I view them as buy and forget strategy. I am too much an active trader to consider them now. However, after reading about the trouble older people have making good financial decisions. They are a very tempting options when I get much older. Honestly, if you understand about AA and actually go through rebalancing than they don't buy you much.

I think they are also a potential alternative to annuities for people who are uncomfortable investing.

 

[rsingh6675]

Does anyone have----?

Has anyone invested in------
PCKDX
PIXDX
PIPDX
PETDX

I don't have any money invested in these, but wondering if anyone has invested in these high dividend funds?

 

[Pete44]

Hi,
I will be inheriting a good sum of cash soon. I'd like to have this money in a fund where I draw a cash dividend each month w/o touching the principle. Any suggestions on a good, stable fund?

I think your question is too vague. It all boils down to how much risk do you want to take?
AGNC pays 19% interest. Risk...you betcha.
STHTX is a high yield mutual fund paying about 8%. Look at what happened to HY mutuals in 2008.
HYG is similar to above but an ETF. You could set stops to bail if it heads south, pays 9%.
Or you could buy Consolidated Edison ED or At&T. Stocks that kick a 5% dividend and have appreciated. ED was up 25% this year.

So lots of ways to skin a cat including annuities. Get some advice and don't do anything you don't understand.

Disclosure-I own all of the above

 

[LOL!]

One may be interested in following this thread on the subject: Bogleheads :: View topic - "Living Off the Dividends (and Interest)"

 

[WilliamG]

Yeah - you guys are right (as normal).

DW/me have Wellesley Adm. but for both of us, it's in a Roth - so there are no tax considerations.

Additionally, even though it pays quarterly, we "mentally" split it up to use as income over three months.

Different situation (but I still like the fund)...

Interesting. Do I read this correctly that you are taking all your Roth dividends now for spending purposes rather than holding Roths for later in retirement?

 

[rescueme]

Interesting. Do I read this correctly that you are taking all your Roth dividends now for spending purposes rather than holding Roths for later in retirement?

True.

In our case (and only for us), we use a mixture of both tax-deferred and non-taxable funds (e.g. Roth) to keep us well under the current minimum tax structure.

We're uncommon, in that our total estate net worth is quite high (not trying to impress anybody, believe me) and will be used at our passing to additionally fund an established trust for our (disabled) adult son, with the excess going to our named non-profit charities.

I know that our way of doing things is different than the generally acceptable way (e.g. tax deferred, then Roth) of doing things, but then again, we have "special circumstances" that will not apply to most folks, and is upon the review of our estate/tax attorneys.

In our case, most of our tax-deferred funds (not added to our son's SNT trust) will flow to our established non-profit charities, who will benefit (from the current tax laws) of being able to receive our tax-deferred funds without tax due, to fully fund their respective "good works". It’s a reversal that we don’t keep non-taxable funds in reserve, since the taxable funds are expected to become non-taxable, upon our deaths.

It's an unusual situation, not applicable to most folks. However, it is a way to make best use of our retirement assets, not only to ourselves in the current time, but to others after our passing.

We've been "blessed" (financially); we're just trying to see that we are able to "pass it on" in the best manner that not only makes sense (tax wise) while we're "above ground", but to those that follow after we're well gone.

 

[WilliamG]

Rescueme - thank you very much for your reply.

Although our situation is more the norm, we have tried "to keep .. well under the current minimum tax structure" also, by supplementing IRA withdrawals with already taxed $. Regular IRA is currently about 75% of our portfolio and have kept at about 15% tax rate but not above since retiring in 2000. Have even done some Roth conversion thinking would be advantageous later on and help keep RMDs from getting really large early on in 70's.

Our already taxed $, except for IBonds, are down now and we have planned to supplement IRA at marginal tax bracket with Roth and/or IBonds. Roths are approximately 15% and IBonds 10% of total portfolio. Those IBonds by the way are vintage 3.4% and greater real return kind, so cashing in will be very hard! Have also thought might want to convert Roths or part of Roths to Wellesley and take the dividends that way supplementing IRA some every year, so your post rang my bell! Wellesley is 1/3 of our portfolio allocation already but is all located in the IRA.

Thanks again for the reply. My in-laws are planning for disabled son and I know this can be a challenge. Glad your situation sounds blessed financially.

 

[TN_INVEST]

Knock yourself out:

PMF.......PIMCO Muni-bond
MUS......Blackrock Insured Muni
EMB......IShares Emerging Market Bond
DEM......WisdomTreeEmerging Market Equity Income
PFF.......IShares S&P US Preferred Stock Index
HYG......IShares High Yield Corporate Bond
JXI........IShares S&P Global Utilities
UHT.......Universal Health Realty Income