Yesterday, I talked about the 4% rule for withdrawals from a portfolio in retirement. I stopped working and have been living on my dividend income from 1999. When making my financial plans for using my portfolio to live off of, I started off using the 8%, 4% rule. The 8%, 4% rule means that you should count on making 8% a year on your investments and you should count on spending 4% a year from your investments.
However, I changed my mind in 2001 after having my portfolio ravaged by the stock crash. At that time I thought it might be best to change my plans to try and only take out money equal to my income. I realized that would leave an estate but I did not want to be old and have no money. I did not plan to work again and I was not at retirement age, so I thought this would be best.
My plan of attack was to do some switching to stocks with higher dividends, control increases to my budget let dividend growth stocks do the thing they do best, that is grow dividends. Dividend growth stocks tend to growth dividends overall at a faster rate than inflation.
By 2006, I was taking out slightly less money from my portfolio than I was earning. I am taking money from my RRSP accounts and in these accounts I have moved to higher dividends by cashing in stocks that have the lowest relative yield for money to be used in withdrawals.
I went from using 140% of the income to using 85% of my income in 2014. I expect 2015 to be the same. However, when I turn 71 the amount I need to take from my RRSP accounts turned RRIF accounts will be high as will be my taxes. To ensure I have enough cash for withdrawals will cost me income as interest rates are low. So I expect that in the future my income will go down.
On my other blog I am today writing about Thomson Reuters Corp. (TSX-TRI, NYSE-TRI) ... continue...
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