Tell me about using Dividend Funds in retirement.

[TheWizard]

Will you still take the $25K from portfolio option 2 if you are down 10% when the time comes?

Careful. Some folks use recent value ANCHORING to figure ups and downs...

 

[Stormy Kromer]

Will you still take the $25K from portfolio option 2 if you are down 10% when the time comes?

Yes I would. And I would not take more than 2.5% per year when markets are up more than 10%. Or at all.


.

 

[youbet]

The good news: I know exactly how much I'm going to be paid April 1st:

Getting back to my confusion about all this..........

My portfolio seems to be much less income-orientated than yours. Well over half is invested in low div paying equity index funds like VTSAX, VTI, SPY, and similar acquired over the decades. And I know exactly how much I'm going to be paid April 1st just like you do. (Schwab provides the number as part of the summary page.) I don't sell equities to generate spending money because I don't need to.

I do own some div paying stocks, CD's, REITs, preferred's, muni, gov't, corp and high yield bonds and bond funds, a single div-focused equity fund and CEF's in a smaller percentage of my FIRE portfolio.

Is that enough that I can proudly display the "An Income Investor Lives Here" sign in front of my house? Are there any metrics defining what it takes to qualify for that prestigious title?

 

[Stormy Kromer]

We are a lucky bunch aren't we.

I am glad to have the income I have. As long as I earned it and came on it honestly.

Dividends or total return...who cares.

 

[joejetski]

Careful. Some folks use recent value ANCHORING to figure ups and downs...

I view it as the same, whether the recent portfolio value is $500k, $1M or $2M. 10% of that is $50k, $100K or $200K. If it was me, I would struggle to withdraw on the first, very concerned on the second, and a bit uneasy on the 3rd. Did you mean something different?

I also think the PM’s example of $1 million is a bit disingenuous on this forum, given its name and those with <$1 million are likely uncommon, and even those likely have SS and maybe a small pension. For many here, any reasonable strategy will get them to the finish line in decent shape.

 

[joejetski]

Yes I would. And I would not take more than 2.5% per year when markets are up more than 10%. Or at all.


.

So you have other sources of income, or you can live (presumably in the US) on $25k? Show me your ways.

 

[Stormy Kromer]

So you have other sources of income, or you can live (presumably in the US) on $25k? Show me your ways.

I have other sources of income. I haven't started drawing on my investment portfolio yet, probably never will. My example in post #120 was using round numbers for an example.

 

[Lorenzo]

Option 3 can be invested in the SP500 or another fund.
Set up a auto monthly sell on a specific day for a specific amount for months/years.
You just created a reliable monthly income similar to higher income funds.
The only 2 questions for the future: what is the TR and/or what is the risk-adjusted returns?
The daily fluctuations or selling shares don't matter, just the above two.
I don't like the above, I sell when I need to.

Would it be fair to think of this method as the inverse of dollar cost averaging? In other words, during your working years you DCA'd into the fund, buying when the fund is up and also when the fund is down, and then during retirement you IDCA out of the fund, selling when the fund is up and also when the fund is down.

Anyway, I think it's sort of academic, as even those who call themselves total return investors generally turn to the portion of their portfolio allocated to some safe, low-volatility investment(s) to draw from for spending during a downturn. I suspect virtually nobody actually plans to rely entirely on selling depreciated stock during a downturn.

 

[Flieger]

I have other sources of income. I haven't started drawing on my investment portfolio yet, probably never will. My example in post #120 was using round numbers for an example.

Very nice position to be in!

Flieger

 

[Montecfo]

Would it be fair to think of this method as the inverse of dollar cost averaging? In other words, during your working years you DCA'd into the fund, buying when the fund is up and also when the fund is down, and then during retirement you IDCA out of the fund, selling when the fund is up and also when the fund is down.

Anyway, I think it's sort of academic, as even those who call themselves total return investors generally turn to the portion of their portfolio allocated to some safe, low-volatility investment(s) to draw from for spending during a downturn. I suspect virtually nobody actually plans to rely entirely on selling depreciated stock during a downturn.

If you have a "portfolio" then you should have some low beta. That is not at all at odds with total return investing. Mine consists of short term laddered bonds, selected equities including drugs, low beta tech, gas utilities, telecom and some cash.

The great thing is even though it is a fraction of total nest egg, it has generated more value than I have needed for spending due to unexpected massive growth of some positions.

 

[FD1000]

Would it be fair to think of this method as the inverse of dollar cost averaging? In other words, during your working years you DCA'd into the fund, buying when the fund is up and also when the fund is down, and then during retirement you IDCA out of the fund, selling when the fund is up and also when the fund is down.

Anyway, I think it's sort of academic, as even those who call themselves total return investors generally turn to the portion of their portfolio allocated to some safe, low-volatility investment(s) to draw from for spending during a downturn. I suspect virtually nobody actually plans to rely entirely on selling depreciated stock during a downturn.

Many investors who believe in income use higher dividends stocks and leveraged FI CEFs.
They claim these 2 choices are better regardless of TR.
In the meltdown of 2020, QQQ lost less than IBM (higher div) and less than PDI.
See SharpCharts | StockCharts.com

Then, 2022 happened and we learned that "safe" typical bonds can lose a lot too.
And that lead me to my final conclusion: the only thing that matters are performance and for many risk-adjusted return. Higher distributions don't guarantee better performance or volatility.
In the early 80s, many experts claimed that Real Estate can smooth volatility, then came 2008,9 and proved them wrong.

Basically, a TR of -5% in 4 weeks in QQQ and PDI means that your $100k in QQQ is worth just $95K, and $100K in PDI is also worth $95K.

 

[dobig]

Many investors who believe in income use higher dividends stocks and leveraged FI CEFs.
They claim these 2 choices are better regardless of TR.
In the meltdown of 2020, QQQ lost less than IBM (higher div) and less than PDI.
See SharpCharts | StockCharts.com

Then, 2022 happened and we learned that "safe" typical bonds can lose a lot too.
And that lead me to my final conclusion: the only thing that matters are performance and for many risk-adjusted return. Higher distributions don't guarantee better performance or volatility.

Meanwhile in the selloff of 2022 QQQ lost 32%. SCHD lost 3%.

It's a little odd how you keep taking the most extremes and worst examples from income investing and using them to make your case. The ironic part is you yourself are tecnically an income investor as you mainly use a bond fund.

 

[Al18]

dobig beat me to it - SCHD for the win!

Also, I have substantial assets in CD ladders. In my lifetime, I've never lost money on a CD, but made quite a lot. The last 5 years, my CD ladders have averaged 3.59% APR

 

[FD1000]

Meanwhile in the selloff of 2022 QQQ lost 32%. SCHD lost 3%.

It's a little odd how you keep taking the most extremes and worst examples from income investing and using them to make your case. The ironic part is you yourself are tecnically an income investor as you mainly use a bond fund.

That's the idea.
To show that the future could be different.
Assumptions are useless in different markets.

BTW, while I recommended SCHD for many years, it was a poor choice for 3 years during 2023-25. It's back this year.
Another reason why I always have owned leading categories and funds. It doesn't mean I know exactly when to switch, since 2000, I never owned lagging categories too long.

And in critical situations, for certain investors, selling to MM is a great choice.

 

[yhoomajor]

Discipline in capital spending/expenditure.

All else being equal, companies that pay dividends have to have more discipline in how they spend money. Hypothetical examples:

Company A: Worth $100. You own 5% of it as passive investor. Has $10 in income (after all expenditures for the whole year). To keep things simple, lets assume it issues all income as dividends.

Company B: Worth $100. You own 5% of it as passive investor. Has $10 in income. Company B gives higher %of stock based compensation to its executives. To control the dilution, it buys back its own stocks with $10.

I understand these are very high level generalizations, but you can take a look at all the shenanigans' happening at Mega cap tech companies in silicon valley that barely pay any dividends and games they play with Stock based compensation to enrich their executives.

There are bad apples in both scenarios. There are companies that are playing the dividend games even though they are not growing and their revenues are declining. Those are the dividends based companies you want to avoid.

But point is - companies that have growing revenues and pay significant dividends, have less maneuvering to enrich their executives at the expense of shareholders.

 

[FD1000]

Discipline in capital spending/expenditure.

All else being equal, companies that pay dividends have to have more discipline in how they spend money. Hypothetical examples:

Company A: Worth $100. You own 5% of it as passive investor. Has $10 in income (after all expenditures for the whole year). To keep things simple, lets assume it issues all income as dividends.

Company B: Worth $100. You own 5% of it as passive investor. Has $10 in income. Company B gives higher %of stock based compensation to its executives. To control the dilution, it buys back its own stocks with $10.

I understand these are very high level generalizations, but you can take a look at all the shenanigans' happening at Mega cap tech companies in silicon valley that barely pay any dividends and games they play with Stock based compensation to enrich their executives.

There are bad apples in both scenarios. There are companies that are playing the dividend games even though they are not growing and their revenues are declining. Those are the dividends based companies you want to avoid.

But point is - companies that have growing revenues and pay significant dividends, have less maneuvering to enrich their executives at the expense of shareholders.

The above are all speculation.
Your best assumption could be off next month, year, on not in the next 5 years.
High dividend is an old school philosophy. Several decades ago, think the 50-60s, maybe 70s, a healthy company paid dividends. Then the tech revolution started and these companies had better use for this money, such as R&D, or stock options, or buybacks.
These companies stocks made a lot more.
The world is a lot more connected and sophisticated
Someone in London may post something about
a higher div company and it's price will dive 20% regardless of your opinion. The opposite can be true too.
If stock prices were rational, we all would know exactly what to buy.

 

[yhoomajor]

The above are all speculation.
Your best assumption could be off next month, year, on not in the next 5 years.
High dividend is an old school philosophy. Several decades ago, think the 50-60s, maybe 70s, a healthy company paid dividends. Then the tech revolution started and these companies had better use for this money, such as R&D, or stock options, or buybacks.
These companies stocks made a lot more.
The world is a lot more connected and sophisticated
Someone in London may post something about
a higher div company and it's price will dive 20% regardless of your opinion. The opposite can be true too.
If stock prices were rational, we all would know exactly what to buy.

Mega cap tech companies playing the Stock based compensation game (and not counting that as expenses) is not speculation.
Just like big tech AI infra companies buying stuff from each other and investing in each other to keep the AI hype cycle going is not speculation either.

Markets can stay irrational longer than you can stay solvent.

Just an example (there are many more in the tech world)
Tesla's revenues have been declining, yet stock is at elevated levels. Tesla's 2025 Stock based compensation surged over 41% to over $2.8 billion.

As of early 2026, Tesla’s (TSLA) P/E ratio is extremely high due to lower earnings, with headline P/E hovering around 369-381. When adjusting for non-recurring items or adding back stock-based compensation (SBC), the valuation is in range 240-280.

And I didn't say high dividend paying companies are better. Or the other way round. Just that companies that don't pay dividends, often use that money with less constraints and a good chunk ends up in top level executives pockets via stock based comp. Relatively.

 

[FD1000]

What you said just reinforce my view.
Are high dividend companies guaranteed to have better performance and volatility?
No, why concentrate on better performance and making more money.
If reminders me of Buffett, for decades he claimed he didn't understand tech and then he bought Apple. Within several years it was more than 40% of his portfolio.
You learned two things, don't restrict your self in advance, diversification doesn't mean better performance and/or better volatility.
I questioned every investment assumption I have read about and learned how to improve my portfolio risk-adjusted returns.

 

[Koolau]

When I was considering throwing in my lot with Fast Eddie 25 years ago, the local proprietor seemed to favor dividend investing. He wanted me to invest in CEFs. I was hesitant to use leverage. My only previous foray into the use of leverage when investing turned disastrous. I fear that between that unpleasant circumstance and Fast Eddie's high-pressure sakes pitch, I haven't thought much about dividend investing since (or Fast Eddie).

BUT I'm so impressed by our new friends from the FIDO Forum that I almost wish I'd looked more closely at dividend investing back in the day. Very impressed, indeed. (But still glad I didn't go with Fast Eddie).

 

[Montecfo]

Mega cap tech companies playing the Stock based compensation game (and not counting that as expenses) is not speculation.
Just like big tech AI infra companies buying stuff from each other and investing in each other to keep the AI hype cycle going is not speculation either.

Markets can stay irrational longer than you can stay solvent.

Just an example (there are many more in the tech world)
Tesla's revenues have been declining, yet stock is at elevated levels. Tesla's 2025 Stock based compensation surged over 41% to over $2.8 billion.

As of early 2026, Tesla’s (TSLA) P/E ratio is extremely high due to lower earnings, with headline P/E hovering around 369-381. When adjusting for non-recurring items or adding back stock-based compensation (SBC), the valuation is in range 240-280.

And I didn't say high dividend paying companies are better. Or the other way round. Just that companies that don't pay dividends, often use that money with less constraints and a good chunk ends up in top level executives pockets via stock based comp. Relatively.

A lot of charges here, no actual data though.

 

[joejetski]

I have other sources of income. I haven't started drawing on my investment portfolio yet, probably never will. My example in post #120 was using round numbers

Discipline in capital spending/expenditure.

All else being equal, companies that pay dividends have to have more discipline in how they spend money. Hypothetical examples:

Company A: Worth $100. You own 5% of it as passive investor. Has $10 in income (after all expenditures for the whole year). To keep things simple, lets assume it issues all income as dividends.

Company B: Worth $100. You own 5% of it as passive investor. Has $10 in income. Company B gives higher %of stock based compensation to its executives. To control the dilution, it buys back its own stocks with $10.

I understand these are very high level generalizations, but you can take a look at all the shenanigans' happening at Mega cap tech companies in silicon valley that barely pay any dividends and games they play with Stock based compensation to enrich their executives.

There are bad apples in both scenarios. There are companies that are playing the dividend games even though they are not growing and their revenues are declining. Those are the dividends based companies you want to avoid.

But point is - companies that have growing revenues and pay significant dividends, have less maneuvering to enrich their executives at the expense of shareholders.

Most solid dividend companies are established wide moat household names. Their growth days are in the rear view mirror. They are highly profitable and compensate their executives and shareholders because they have “won the game”. Hopefully, most growth companies pile their revenues back into the company, and that is reflected in share price, like NVIDIA. I am sure their CEO is also well compensated. It doesn’t have to be “either or”.

 

[FD1000]

Most solid dividend companies are established wide moat household names. Their growth days are in the rear view mirror. They are highly profitable and compensate their executives and shareholders because they have “won the game”. Hopefully, most growth companies pile their revenues back into the company, and that is reflected in share price, like NVIDIA. I am sure their CEO is also well compensated. It doesn’t have to be “either or”.

VUG=growth companies compared to VTV=VALUE have...
Higher moat
Better financial health, growth and profitability.

All an investor should care which index will make her more money in 5-10-20 years.
If she can't decide, the SP500 is a good compromise. It is tilting growth. The index is based correctly on the price because it makes sense.
The price is the best indication of success, not the dividends.
There is a good reason that Bogle built Vanguard based on that and Buffett recommended it too.

 

[joejetski]

VUG=growth companies compared to VTV=VALUE have...
Higher moat
Better financial health, growth and profitability.

All an investor should care which index will make her more money in 5-10-20 years.
If she can't decide, the SP500 is a good compromise. It is tilting growth. The index is based correctly on the price because it makes sense.
The price is the best indication of success, not the dividends.
There is a good reason that Bogle built Vanguard based on that and Buffett recommended it too.

My comment was to @yhoomajor focused on companies that pay dividends or not, and unscrupulous companies that don’t pay dividends so they can overcompensate their CEOs. My point was there can be good growth companies like NVIDIA that have highly compensated CEOS but also return shareholder value in share price, along with well established companies (what you call value) that return shareholder value in dividends because their products or services are profitable with high market share.

But I agree with you. Go with the S&P. It got me to the door to retirement.

 

[Quattro73]

Adding on to that. VTV is hardly “traditional” value based on its current PE (near 21x PE).

Further, usually we expect it to perform “better” in turmoil. This current volatility is certainly not a panacea of all future behavior. But value has dropped 3.95% (VTV) vs growth (VUG) dropped 0.82% over the past month.

This is not the safe lower volatility behavior you expect (yet any way).

 

[dobig]

VUG=growth companies compared to VTV=VALUE have...
Higher moat
Better financial health, growth and profitability.

All an investor should care which index will make her more money in 5-10-20 years.
If she can't decide, the SP500 is a good compromise. It is tilting growth. The index is based correctly on the price because it makes sense.
The price is the best indication of success, not the dividends.
There is a good reason that Bogle built Vanguard based on that and Buffett recommended it too.

Nah. I'll concentrate on what keeps me the most money for the next 5-10-20 years.

Growth is great!......Until it isn't.