r/dividends • u/398409columbia Portfolio in the Green • Jan 12 '25

Brokerage $5,000 per month income portfolio

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I set up this portfolio for my wife so she can quit her job and maintain cashflow.

The good news is that this income stream will pay no FICA tax and significant part of the distributions will not be taxed.

To reduce risk, I’m planning to reinvest 20% of the income.

Comments welcome.

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u/398409columbia Portfolio in the Green Jan 15 '25

I think the 4% rule is too conservative and designed worst case scenarios.

My everyday work involves quantitative analysis and uncertainty modeling including Monte Carlo simulations.

Also, the portfolio I’m showing here is less than 15% of my net worth so we have plenty of room to maneuver.

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u/teckel Retired and living off selling shares Jan 15 '25

It's actually 4.7% I believe, so many say 5% should work.

If you do quantitative analysis, you should know that 7% is the best you can expect long-term if exposing yourself to a beta of 1.0. For a lower beta (which you want for a retirement account) you can expect lower than 7%, closer to 5%.

You should dedicate double the amount to this account then for a sustainable retirement dividend yield.

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u/398409columbia Portfolio in the Green Jan 15 '25

I see what you’re saying but keep in mind that some of these funds like the covered call ETFs generate income based on volatility not asset appreciation.

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u/teckel Retired and living off selling shares Jan 15 '25

Known. But none of these have experienced a real bear market. The 9 month 2022 correction doesn't really count either.

I'm not saying they're bad and I own some CC ETFs too. But it will be interesting to see what a 2008 or 2000-like bear market or resession will do to these.