Tuesday, January 12, 2016


Just read an interesting article in Money magazine about making your money last during retirement.  They gave the current standard advice to take 4 - 4.5% of your money out each year to make it last at least 30 years or more.  But what if you live longer than that?

So I decided to do the math on my dividend portfolio to see how well it would hold out if I followed their advice and withdrew 4.5% of my money, raising the amount by 2% a year to account for inflation.  My portfolio consists of a mix of individual stocks, stock funds and bond funds.  I was pleasantly surprised to find that, if I followed these guidelines, my money would not only last over 30 years, but it would never run out!

Why would I never run out of money?  Because my current dividend income exceeds the amount I'd be withdrawing by over 30%!  So even if I increased my withdrawals by 2% each year, the extra 30% being reinvested would increase income more than the 2% increase in withdrawals.  Which means I'd never touch my capital, I'd be withdrawing dividend cash only.  I'd planned on doing this when I retired anyway, but with a target amount in mind, it's nice to see how well the plan will work out.  Now here's the crazy part.  I could start taking 4% a year withdrawals right now, while I'm still working and still not run out of money.  I'm not going to, but it's nice to know I could.  Just another good reason to be a dividend investor.  

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