My retirement plan has changed from a defined benefit plan to a defined contribution plan. My retirement therefore will be dependent on my investments ability to produce income. I have been doing pretty well investing so far, but it is mostly through a stocks growth. I am curious how I change my investments to produce more income as I get closer to retirement.Right now my portfolio produces about 1.8% yield from dividends. Even if I achieved a million bucks in stock that is only 18,000$ a year - not much of a retirement salary.Does anyone know a good book or have good ideas on how to slowly convert your stocks into income producing investments. Of course I would like to preserve the principal and not chip away at it :)Thanks Cyclelex
It certainly does make sense to move more conservative investments as you approach retirement, but do not think that you need to leave stock entirely. And also, you need not make your retirement income purely off of dividends/interest, etc.Typically it is suggested that you limit your annual withdrawals to 4% of your balance. Doing this with a portfolio of 50% stocks/50% bonds, over the history of the last century or so, you never would have run out of money (that doesn't mean you can't, but its what we got :) ). The bonds provide good income and the stocks provide the growth you need going forward.In other words, I wouldn't feel bad about using some of your principal, so long as your withdrawals are low enough, and so long as you maintain enough in stocks to continue to benefit from their growth.You may wish to check out this:http://www.retireearlyhomepage.com/and this:http://www.retireearlyhomepage.com/novtips.html
You should be thinking in terms of real return rather than just dividend yield. Real return is how much you get from your investment from growth and dividends over and above inflation. When you withdraw money from the account it doesn't matter much whether the money comes from growth or dividends. The important thing is that its value grows to support the withdrawals you will be making.That being said, however, most would recommend that you decrease your stock/bond ratio as you approach retirement but this is for safety and risk reduction reasons rather than increasing dividends.Bob
Thanks for the input. I like the sounds of that approach. I will investigate the webpages you recommend.
I am curious how I change my investments to produce more income as I get closer to retirement.Here's a detailed example of how to manange your investments in retirement:http://bobsfiles.home.att.net/retireCH.htmlAs you approach retirement, start building a 5-year bond/CD ladder.Vickifool
...Does anyone know a good book ...“The Bogleheads' Guide to Investing” is a good beginning book and easy to read, the “Four Pillars of Investing” is also good but a bit more advanced. The last time I checked Amazon had these at a good discount. Greg
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