Questioning 4% Retirement Rule
Premise:
The idea is to save/invest enough in your working years so that your can use your nest egg during retirement. Spend 4% of your nest egg the first year of retirement then adjust your withdrawals for inflation every year.
Question:
Who is main beneficiary as investments are sold, and nest egg becomes smaller?
Answer:
The sell side that collects commissions as you sell/withdraw.
Potential Problem:
What do you do when you run out savings/invested capital?
Potential Solution:
Why sell anything at all? Only live off the dividends. If you are able to live UNDER the amount generated from your stocks, you can Re-invest and increase cashflow.
This solution also gives you something to pass onto next generation when you put this portfolio in a family office / trust.
Without naming specific stocks, the position management strategy is:
- solid dividend paying stocks that have a consistent payout history are in this portfolio.
- if any stock starts yielding less (business declines and cashflows less), it is divested and proceeds are invested in another consistent cash-flowing stock.
Would like to hear the communities thoughts on this.