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Would appreciate all opinions! Got about 12yrs till retirement, a Roth IRA with 3 sets of stocks/preferred stocks/LPs (all high yielding) where one set pays in the months of 1,4,7,10 the next set pays in the months of 2,5,8,11 and the last set pays in 3,6,9,12. Adding to these till 54, then at 59 1/2 based on the average monthly dividend income from this portfolio asking the custodian to send me a check each month. Therefore, using only the div. income and not the principle for as long as possible. Of course, this would only be a suppliment to my pension. My concern is: WHAT could be wrong here? Can something go wrong with the Preferred stocks, the company stocks, the Limited Partnerships (these trade like stocks, e.g. BPL), or what...? Thanks for any opinions offered.
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Your idea is a good one. You could also have done
the same thing using bonds (a little safer) but currently you can get a higher rate with the preferreds and LPs.
An LP in a retirement account is good because you don't have to wrestle with the K-1 every year.
Most preferreds are callable after a period, commonly 5 years. If interest rates go down, the preferreds can be called away from you and it may be difficult to replace them in the interest rate environment that caused the issuer to call them away in the first place.
Stocks that pay an exceptionally high dividend may be about to reduce the dividend. Dividends have to be voted on each time by the board of directors, and there is nothing to keep them from omitting or reducing a dividend if the company falls on hard times.
Limited partnership distributions can also fluctuate wildly with the business climate.
Another strategy is to have shares in a growth stock and sell some as needed to raise income. I saw a presentation once which detailed this scenario: You invest $100000 in Magellan at the beginning of the Peter Lynch era. You take out cash for living expenses every month from the beginning which you raise by selling shares. You live nicely but every year you have a stake worth more than the year before. You continue this and after 20 years or so you have
millions even though you have been withdrawing from the account every month since inception.
I forget the exact numbers, but it was pretty impressive.
My bonds are structured so that in retirement I will receive interest every month; to do the same with preferreds would be reasonable. A problem I see is that preferreds seem to most all pay dividends at the end of the quarter, but it should be possible to keep some of that money for the next two months that will be quite dry and keep the investments in place and the income streaming.
Best wishes, Chris
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