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Author: Morla Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76079  
Subject: early retirement and future planning Date: 12/7/1998 8:31 PM
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Thanks to Dear Old Dad, I have a portfolio of blue chips which pay enough in the way of dividends that I think I will have enough to live off so that I won't have to dip into the principal. So, is there anything wrong with this plan? I did see my Westinghouse (now CBS) stock cut it's dividend in half a few years back. Is this a rare occurence? (I hope so) Or should I be thinking about hedging my bets with a few Tbills? I'm plowing my way through TMFPixy's compilation so if the answer's in there somewhere, just say so.
Thanks,
Morla
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Author: gapfan Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7100 of 76079
Subject: Re: early retirement and future planning Date: 12/7/1998 10:36 PM
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Just a far out suggestion if some of those stocks have high capital gains tied to them, and depending on that and other family considerations. I made use of a Charitable Remainder Trust which gave me various tax advantages and income of about 5.5% of amount contributed plus growth each year. I posted details in messages #10,11, and 14 on the "Retired Fools" board. I have been very satisfied with the results.

From a neighbor to your North, gapfan :-)

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Author: JABoa Big gold star, 5000 posts Feste Award Nominee! Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7101 of 76079
Subject: Re: early retirement and future planning Date: 12/7/1998 10:56 PM
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Sounds as though Dad was a Prince! I think that you will see if you read the financial literature for the last few years that the tendency is for companies not to pay much in the way of dividends. For example, Wal-Mart is paying the same dividend, pretty much, when its stock is at 70 as it did when it was at 20. And Microsoft probably will never pay a dividend even though they're sitting on $15 billion cash, or whatever it is now. Shareholder value is increased through things like stock buybacks. This makes some sense now that long-term capital gains are taxed at 20% and not as ordinary income as dividends are.

The high yield stocks always used to be utilities -- Consolidated Edison, that sort of thing. But they were regulated and their profits were assured. But competition is coming to utilities too, and I see no way that you will get (say) 6% dividend out of a utility 5 years from now.

If stocks continue to appreciate then it makes sense to sell some occasionally and realize come cash. Also, as the Fool will tell you somewhere, you want to look at your portfolio at least once a year to see whether it is still in consonance with your investment goals and whether it has become skewed in some fashion. So, inevitably, I think you will have to do some active management of your money even if (and my customary apologies in advance if I am misreading you) your inclination is to forget about it and just collect.

Morla, one of my retirement options that is still open is to find a wealthy woman. I hope you will not mind if I follow your posts.

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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7122 of 76079
Subject: Re: early retirement and future planning Date: 12/9/1998 1:53 PM
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Greetings, Morla, and welcome. You wrote:

<<Thanks to Dear Old Dad, I have a portfolio of blue chips which pay enough in the way of dividends that I think I will have enough to live off so that I won't have to dip into the principal. So, is there anything wrong with this plan? I did see my Westinghouse (now CBS) stock cut it's dividend in half a few years back. Is this a rare occurence? (I hope so) Or should I be thinking about hedging my bets with a few Tbills? I'm plowing my way through TMFPixy's compilation so if the answer's in there somewhere, just say so.>>

Like JABoa, I don't think one can rely on dividends exclusively anymore. Companies don't have to pay them until declared by Boards of Directors, and the trend is away from increasing them each year. As you noted, they are also sometimes cut, and that's not as rare of an occurrence as retirees would like it to be. Personally, I could care less if my retirement income comes from dividends, interest or capital gains. All I'm really interested in is that I can sustain it while concurrently achieving growth so I don't lose the purchasing power of my dollar. T-Bills will throw off interest income while doing an excellent job of preserving principal, but they will do absolutely zilch for growth in the process.

Regards….Pixy


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