Retirement who uses dividend stocks

[Atretes1]

I'm about 5 years from retirement at age 55. I'll have a six-figure pension (no COLA), and my current liquid investment portfolio is around $810k.

Between now and retirement, I plan to:

• Max out my 457(b), Roth IRA, and HSA every year.
• Invest as much as I can into a taxable brokerage account.

My stretch goal is to reach $2 million in liquid investments by retirement. Realistically, I think I'll end up somewhere around $1.6 million+.

Outside of my investment portfolio, I also own about $1.6 million in rental properties with roughly $600k remaining in debt.

The nice thing is my pension should cover my normal living expenses, so retirement shouldn't require me to change my lifestyle. That said...I definitely plan on spending a little more on the fun stuff. A new truck is on the list, and maybe even a dream car like a Corvette ZR1X. I also want to do a lot more traveling.

If I can grow my portfolio enough, I'd love to withdraw around 3%–4% annually, giving me roughly $60,000+ per year for travel, vehicles, and other extras while letting my pension handle the necessities.

One thing I've been thinking about is income investing. Does anyone use SCHD or other dividend-focused ETFs/stocks in retirement to create a steady stream of income instead of periodically selling shares?

I'd love to hear your thoughts.

[Fishindude77]

We've got a bunch of stock in a company that pays quarterly dividends, approx. $5,000 4X annually.
It's a 6-7% return and has been consistent for 15-20 years now. Makes a nice supplemental retirement income, continues to increase in value per share, and can always sell shares if ever in need of a lump sum of cash.

[Atretes1]

We've got a bunch of stock in a company that pays quarterly dividends, approx. $5,000 4X annually.
It's a 6-7% return and has been consistent for 15-20 years now. Makes a nice supplemental retirement income, continues to increase in value per share, and can always sell shares if ever in need of a lump sum of cash.

What is it?

[bjl584]

We are making around $16K annually in dividends right now from various investments. All are currently reinvested.
Our STR cash flows around $2500 a month as well. Currently, all that money either goes to CAPEX or paying down the mortgage

In retirement, all that will serve as supplemental income.
I'd suspect the numbers to keep growing as our portfolio of stocks and rental properties grows

[Atretes1]

We are making around $16K annually in dividends right now from various investments. All are currently reinvested.
Our STR cash flows around $2500 a month as well. Currently, all that money either goes to CAPEX or paying down the mortgage

In retirement, all that will serve as supplemental income.
I'd suspect the numbers to keep growing as our portfolio of stocks and rental properties grows

My rentals make about 46k a year not figuring maintenance and vacancies. Most of my funds are in the 457 and ROTH. I am going to bolster my taxable with VTI and maybe SCHD in the next 5 years along. Then if I knock out some rentals near retirement my rental income could be closer to 85k.

[LivingAlmostLarge]

dividends are just a way of paying out for companies not growing. I think schd is a solid way to do it without hasseling as much as individual stocks. personally i prefer etfs like VTI VGT QQQ with minimum dividends so i can control my income more. And sell stock to manage.

[Ava01]

Given that your pension should cover normal living costs, I wouldn’t feel pressured to rebuild the whole portfolio around dividend income. You already have a dependable income floor, which gives you more freedom to focus on total return and sell shares when you actually need money.

[Atretes1]

Yeah, I might just concentrate on VTI.

[Fishindude77]

My rentals make about 46k a year not figuring maintenance and vacancies. Then if I knock out some rentals near retirement my rental income could be closer to 85k.

The $46 or $85k numbers are gross income.
What do you wind up with after maintenance, repairs, vacancies, taxes, etc.?

[Atretes1]

The $46 or $85k numbers are gross income. What do you wind up with after maintenance, repairs, vacancies, taxes, etc.?

The 46 and 85 numbers are net after all bills are paid besides vacancies and maintenance/cap ex.

I gross over 100k.

[disneysteve]

Dividends are "income" in the eyes of the IRS but not when you really look at what they represent. They are a tax-inefficient way to get money out of your portfolio. Those dividend payments come every quarter whether you want them or not. You're stuck paying taxes on that money even if you didn't actually need that income. Compare that to owning a good ETF like VTI. That will continue to grow over time and create little to no tax burden until you decide to sell some shares. And you can sell just enough to meet whatever cash need you have at that time.

Total return is what many focus on instead of just dividends. Would you rather have a fund that pays a 4% dividend and grows 2%/year or a fund that pays no dividend but grows 8%/year?

All of that said, there is some comfort in knowing those dividend payments are coming every quarter, which is the big appeal. Some people want the comfort and predictability of that income stream without having to decide what to sell when.

Personally, I do some of each. We do have some dividend-paying investments but the bulk of our portfolio is in growth and income holdings. Several times since retiring in 2024 I have sold blocks of shares to liquidate cash to help fund our lives.