4% Rule vs Spending Dividends. Comparing Retirement Income Strategies.

Retirees have different options when choosing a retirement income strategy for their portfolio. The 4% rule retirement income strategy and the spending dividends only retirement income strategy are two retirement income strategies to consider. The 4% rule typically provides more cash flow than the spending dividends only strategy. Retirees using the 4% rule retirement income strategy or spending dividends will face issues with both strategies. Yields on most investments are under 4%. Since portfolio income will be less than portfolio distributions, retirees using the 4% rule will need to periodically liquidate investments to cover ongoing cash flow needs. Over time, these liquidations can make it difficult for a retiree using the 4% rule to grow their portfolio value. Retirees using the spending dividends only retirement income strategy will typically have less retirement cash flow than someone using the 4% rule for the same portfolio value. Retirees intent on using the spending dividends only strategy will need to get by on less income or save more. In the video we show long term results for both the 4% rule and spending dividends using 26 year illustrations with SPY and VBIAX as portfolio investments for a $ 2 million dollar retirement portfolio. We show the dividend growth for SPY and VBIAX over the last 26 years as well as price growth. This video will educate investors on how to decide which retirement income strategy is best suited for their needs.

Timestamps

00:00 Intro
00:23 4% Rule Explained
00:48 Spending Dividends Explained
1:16 Issues Investors Face
4:42 4% Rule Illustration
5:20 4% Rule Vanguard Balanced Fund
5:58 4% Rule with SPY
7:26 Spending Dividends with SPY
8:03 Power of Dividends
8:38 SPY Dividend Growth
10:11 SPY Dividend History
10:35 VBIAX Dividend History
11:13 VBIAX Dividend Growth
12:59 4% Rule & Liquidation


This video is for educational and illustrative purposes and is not financial advice. Your broker or advisor will charge you fees or commissions to make investments and therefore your returns will be less than indexes. For example, if you invest in the S&P 500 ETF, SPY, you will pay a fee to the company managing the ETF, State Street Global Advisors. Your return on the S&P 500 ETF, SPY, will be less than the S&P 500 Index TR because of the fee paid to State Street Global Advisors. Additionally, you may pay a fee or commission to your broker or financial advisor, further reducing your return, below the index. Consult your advisor or broker for a detailed list of their fees or commissions before you invest. Investing involves risk and you can lose money.