Simply wrong on the dividends. I won't continue to argue that point. I did fine in all my finance courses, with good prof's.Dividends are deducted from the share price. So if you have a stock that is $100/share and pays a $1 dividend, then when it pays the dividend, you will be left with a $99 share, and $1 cash. This makes the dividend irrelevant to the return. If you hold the stock in a taxable account, then you pay taxes on the dividend which makes your holding less valuable than before the dividend was paid out. While in retirement this isn’t an issue, but during accumulation the tax drag will have a negative effect on your portfolio.
If you want a better explanation of why this is the case, look up “the irrelevance of dividends” by Ben Felix on YouTube.
Since the article in the OP referenced “he average American”, according to google the average American is 38. If a 38 year old plans to retire at 65 with $72k/yr retirement income, based on 2.5% inflation that would be the equivalent of $36k annually now. That’s just not a lot.
And that last part is the toughest.Wife retired early from the Fed with a nice pension. I hope to find someone in the next year to train to take over my business so I can get monthly proceeds from that. I plan to start taking 4% from our 401 monthly. anything we get from social security would be a bonus as I never expected it to be there. The ranch was paid for with proceeds from the sale of our dream home, just Bought our retirement house and everything else is paid for. I know we are very fortunate to be where we are at, mostly cause we made good investments in real estate, that was sold off last year at the peak. Can’t say enough about buying good properties when the market is right.
The irreverence if dividends is a theory. The theory is that a company should reinvest profits into the company instead of paying a dividend. A dividend does at add or sutract from the price of a stock. It may make some stocks more desirable to an investorDividends are deducted from the share price. So if you have a stock that is $100/share and pays a $1 dividend, then when it pays the dividend, you will be left with a $99 share, and $1 cash. This makes the dividend irrelevant to the return. If you hold the stock in a taxable account, then you pay taxes on the dividend which makes your holding less valuable than before the dividend was paid out. While in retirement this isn’t an issue, but during accumulation the tax drag will have a negative effect on your portfolio.
If you want a better explanation of why this is the case, look up “the irrelevance of dividends” by Ben Felix on YouTube.
Since the article in the OP referenced “he average American”, according to google the average American is 38. If a 38 year old plans to retire at 65 with $72k/yr retirement income, based on 2.5% inflation that would be the equivalent of $36k annually now. That’s just not a lot.
What a kind and gentle way to state that fact. He is at apples and oranges.Simply wrong on the dividends. I won't continue to argue that point.
Simply wrong on the dividends. I won't continue to argue that point. I did fine in all my finance courses, with good prof's.
I was not addressing a 38 year old retiring, so that is a misunderstanding. I am talking a person of retirement age retiring today.
So in your scenario, you would need to add the effects of inflation to the $72k.
It’s not a theory. It’s math. the money for the dividend is factored into the company’s assets. When it’s paid out, the company is less valuable and that is reflected in the share price change. Whether the company should reinvest the money into the company will depend on if they believe they can grow the money. The ability to buy and sell stock from a smart phone at no cost has somewhat made dividends outdated. Take a look at the new excise tax on share buybacks to see how the government is upset about missing out on the tax money from companies favoring share buybacks over dividends.The irreverence if dividends is a theory. The theory is that a company should reinvest profits into the company instead of paying a dividend. A dividend does at add or sutract from the price of a stock. It may make some stocks more desirable to an investor
<>If I retire at that much, I will be improving my standard of living. Cool.
My wife and I. combined, are living on less than that, now. I thought we were living pretty lavishly.
My retirement is largely in real estate, which I can no longer afford to invest in after covid. However, I have two places paying me rent income and if all goes well, that will be our retirement income as well and then hopefully, the properties will go to our kids and they will have extra income.
You left out "reasonable rates of return". With that level of capital, you ought to be able to live off interest.safe withdrawal rates.
You left out "reasonable rates of return". With that level of capital, you ought to be able to live off interest.
Well, prior to the Biden Economy, at least.
What I actually meant was, the share price didn't drop.understandable. People usually don’t.
Maybe it was in there, but it was not clear if reasonable withdrawal rates included any amount of return on that capital?What should I have said?
Maybe you didn’t notice because it gets lost in price fluctuations and it’s not something that most people even know about anyway.What I actually meant was, the share price didn't drop.
Probably 7% would be a good estimate, although it will depend on asset allocation. So if you can earn 7%, withdraw 4, then your portfolio will grow by 3, which will allow you to adjust for inflation in the future. I base my opinion on the trinity study which found success rates of portfolios in the past.Maybe it was in there, but it was not clear if reasonable withdrawal rates included any amount of return on that capital?
If your company offers a 401K, contribute up to the match from day one and never stop. When you move jobs, take that 401K and have it direct transferred to your IRA or your next employer’s plan. A 23 year old who does this from day one will not be able to take any penalty free withdrawals until age 59 1/2 (at the earliest). That’s 36 years.
Paper losses aren’t actualized until the investment is sold. The longest S&P500 bear market lasted 484 days; a little over the year. If you left your investment choices alone, it averaged about 19 months to recover paper losses. What gets people in trouble is selling at a loss. Sell your entire portfolio when it’s down 16% guarantees the loss. Riding it out is the best choice.
I'm pretty sure one may withdraw without penalty at 55, if they have been laid off.
Not positive though.