Retirement income generation (RE and Others)

[LivingAlmostLarge]

Since we started accidentally on another thread perhaps here is a place to start generating ideas and conversation about retirement income.

How do you plan on generating retirement income? I've come to the realization awhile ago that if my DH and I got into RE investing we'd probably be retired now. I think and suspect but it's not proven that we could be generating enough to live on based on what we have saved.

RE is how Mr MM retired with his paid for home and retired with a family of 3 and of course his wife worked another 10 years part-time for her family business and health insurance.

But RE even on the ER boards a big thing is insurance. Another is generating enough passive income because before it was easier with CDs and Bonds. Now the interest rates make that next to impossible.

What are you projecting to use to generate your retirement income? Pension? Annuity? CD? RE?

For us right now we are definitely at a cross roads. DH isn't ready to retire anytime soon so we're not in a position of needing to be careful or plan. I'd say we're not even 5 years away. That being said we're very aggressive investors in the stock market both % of income and how we invest. He's started to scale back and move towards ETFs with less time.

Ideally I'd like DH to have the option in 7 years to stop working at 45 no matter what. Laid off, tired, etc. As of right now I think we're solidly on track. And he's got his literal dream job so how can I tell him to stop? That being said DH is anti-RE because he wants to just retire and not do RE property management. I'm thinking maybe Trust Deeds? 97guns has mentioned it and others as a way to generate 8-10% returns. This is something I think would be feasible for us since we're not into property management.

What is everyone else doing?

[disneysteve]

I haven't worked out any kind of detail but taxable accounts generate interest, dividends, and capital gains that I've always reinvested but in retirement can draw from instead.

Retirement accounts will be tapped as needed and as required by law.

I may also continue to do some part time work as long as I'm physically and mentally able to do so. The urgent care job that I started a few months ago is perfectly suited for that.

[FLA]

My plan was to continue to invest the majority of my holdings in stock index funds until I got much closer to retirement age of say 55 or preferably, 62. I'm 46. Then I would probably switch up my bond to stock ratio as I aged. But I haven't really thought that far out yet. Real estate is not for me, beyond what I already own as my own dwelling.

I'd like to live as low income as possible and not touch assets until I absolutely have to. When my folks pass, I will own 3/4 of this house which I will sell and move to a condo or apt, I will receive several life insurance policies and half of their other assets. I'm not counting on any of that money as it may have to be used to pay for their care. The house is in a trust so that wouldn't be touched.

Best case scenario, I get better and get back to working and depositing into retirement accts like crazy.

it sounds like Texashusker has some ideas.

[feh]

If you can't access your retirements accounts (your are less than 59.5), but you have taxable accounts, you simply sell shares when you need to pay for living expenses. A monthly dividend/income stream is not necessary.

Folks get hung up on the idea of dividends/income. What most don't realize is that receiving dividends is exactly like selling shares, except you don't have control over when that event occurs.

[james.hendrickson]

If you can't access your retirements accounts (your are less than 59.5), but you have taxable accounts, you simply sell shares when you need to pay for living expenses. A monthly dividend/income stream is not necessary.

Folks get hung up on the idea of dividends/income. What most don't realize is that receiving dividends is exactly like selling shares, except you don't have control over when that event occurs.

Feh - this seems a common misconception. When you receive dividends you get your cake and eat it too. The shares produce cash which can be used for whatever you want (buying more shares, buying shares in other companies...withdrawing the funds, etc.).

However, if you sell the shares you lose the potential to receive those dividend payments in the future.

[97guns]

i always hear people say i need x.x million to retire, with this train of thought their plan is to draw down on savings through retirement. if generating income was in their plans it would take less than x.x million. money is a tool and if used right it will work very hard for you instead of you working for it

[feh]

Feh - this seems a common misconception. When you receive dividends you get your cake and eat it too. The shares produce cash which can be used for whatever you want (buying more shares, buying shares in other companies...withdrawing the funds, etc.).

However, if you sell the shares you lose the potential to receive those dividend payments in the future.

Sorry, but no. What you just described is the common misconception. Dividends are not free money. When dividends are distributed, the value of the shares is reduced.

There's absolutely no difference between owning 95 shares of a stock at $100 and owning 100 shares of a stock at $95. This article explains what I mean more clearly:

https://portfoliosolutions.com/latest-learnings/blog/income-portfolio-versus-total-return-portfolio

This article mentions a couple other advantages of the total return approach:

http://www.dividend.com/news/2015/10/28/the-total-return-vs-dividend-growth-smack-down/

[james.hendrickson]

Sorry, but no. What you just described is the common misconception. Dividends are not free money. When dividends are distributed, the value of the shares is reduced.

There's absolutely no difference between owning 95 shares of a stock at $100 and owning 100 shares of a stock at $95. This article explains what I mean more clearly:

https://portfoliosolutions.com/latest-learnings/blog/income-portfolio-versus-total-return-portfolio

This article mentions a couple other advantages of the total return approach:

http://www.dividend.com/news/2015/10/28/the-total-return-vs-dividend-growth-smack-down/

Ah yes! Its been a while since anyone brought this up. Mathematically thats entirely correct. But it seems that the impact on share prices is only short term - at least in the real world. If the company is profitable then presumably their market value will continue to increase despite the dividend payment and thus value of shares in the company will escalate in the long term even factoring in the loss of the cash asset/dividend payment.

[feh]

Ah yes! Its been a while since anyone brought this up. Mathematically thats entirely correct. But it seems that the impact on share prices is only short term - at least in the real world. If the company is profitable then presumably their market value will continue to increase despite the dividend payment and thus value of shares in the company will escalate in the long term even factoring in the loss of the cash asset/dividend payment.

Even if the value of the stock continues to increase, the decline caused by the dividend is never recouped. You can tell yourself otherwise, but there's no evidence to the contrary.

In the end, a dividend is no different from the sale of shares. And it is worse in the sense that you cannot control when it happens, and you will pay higher taxes (compared to capital gains).

[creditcardfree]

Military pension is the goal in about 7 years. My husband will be 54, I will be 51. We also save over 15% of our income so we will have retirement savings, a majority in Roth IRA. I can already tell our expenses will go down with out kids, and we look to have smaller homes in our later years.

I also expect we may start a business (ha, therefore not exactly retired), but the goal is to not NEED to rely on the business income. The business ideas are in their beginning stages. We have a lot of ideas, but some are easier to start than others.

[TexasHusker]

I find it interesting that all of the big guns in the financial world - with their commercials of some guy on a yacht or tending his wine vineyard - talk a lot about getting you there, but "how much" and "what to do then" seem to be scarce as hens' teeth.

The truth is, besides selling you an annuity and lining their pockets with the resulting commissions, they don't have the slightest clue with how to invest your nest egg for income.

[Outdoorsygal]

We checked out a few properties today which we could live offgrid in a less populated area
Plan on building a few tiny cabins and renting them out, along with our inheritance. I also hope to work one 24 hr (asleep) shift per week.

[disneysteve]

The truth is, besides selling you an annuity and lining their pockets with the resulting commissions, they don't have the slightest clue with how to invest your nest egg for income.

Your constant bashing of traditional investing is really getting old.
Just because most folks don't do it your way doesn't mean we don't know what the hell we're doing.

My 86-year-old mother has lived quite comfortably for nearly 3 decades on the traditional investment portfolio (stocks and bonds) that she and my late father put together along with the help of a series of financial professionals over the years.

Stocks pay her dividends. Bonds pay her interest. Between that income and her SS, she does just fine and has only very recently dipped into principal which I don't think is a bad thing at all for an 86-year-old person to do. We had to talk her into that because she's never had to touch principal before. But I sat down and showed her how long her money would last even if it earned 0% for the rest of her life and she took out 3 times more per month than she actually needs. Unless she's planning to live into her 120's, she'd be just fine.

[kv968]

In the end, a dividend is no different from the sale of shares. And it is worse in the sense that you cannot control when it happens, and you will pay higher taxes (compared to capital gains).

The tax rate on qualified dividends and long-term capital gains are the same.

[feh]

The tax rate on qualified dividends and long-term capital gains are the same.

Correct, although not all dividends are qualified.