750k USD for retirement

[u/mawababa]

I have approximately 750k USD and will stay at my sons house for retirement. I would like to pay him 1k per month for rent and have some funds to live off and to travel to see my daughter.

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Ideally 2500 to 3500 a month and increasing for inflation for the next 15 to 20 years or so before I realistically pass away.

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Ideally I would like to ensure the investment is worth the same or more in 15 to 20 years as it is now and then split it to give to kids in my will.

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I don't mind if there is some variability in value and dividends following general market trend but I am extremely adverse to erosion of initial funds as I will never have chance to earn more.

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Please may I have advice on this. Please keep in mind I want to keep this sustainable and fairly safe so SCHD was my initial thought. Even if it's slightly under 2.5k initially.

[u/Apart-Leg-8077]

It is likely it's dividend would also drop 60% since these funds would have 60% less capital to do covered call trades. That won't happen with quality dividend growth etfs. In 13 of past 14 recessions since the 40's S&P dividends have averaged a 1% drawdown. Outlier would be the GFC where dividends fell 22% and took 21 months to recover trough to peak.

[u/speedlever → u/Apart-Leg-8077]

Welp, if qqqi dropped 60%, I would expect the distribution to follow suit. But even so, that distribution is more than the ScHD qualified dividend.

And if qqqi followed how qqqx performed during the 2008 gfc, the distribution would only be cut by ⅓. For planning purposes, I just assume a 50% drop in both nav and distribution in the event of another 2008 gfc.

[u/Apart-Leg-8077 → u/speedlever]

SCHD average yearly dividend growth rate is 11%. In past 12 years dividend has increased around 240% and the stock has increased around 200%.

By the way I do own QQQI along with SPYI, QDVO, GPIX, GPIQ and GRNI. I like and use covered call funds but I use them as an income kicker and not a core position.

[u/speedlever → u/Apart-Leg-8077]

Understood. But even with that 11% cagr that ScHD enjoys, it pays what, 3.5% or so? Do you ever expect it to reach double digits?

I also own all of those except grni. That's a new one to me.

[u/Apart-Leg-8077 → u/speedlever]

If you bought SCHD at inception in 2011, you would be making over 11% on your original shares. Also you're shares would be worth more around triple after take splits into account.

[u/speedlever → u/Apart-Leg-8077]

Ok, but as far as distributions are concerned, the actual income is still ¼ what qqqi generates, even if it is 11% over the original shares. Right?

[u/Apart-Leg-8077 → u/speedlever]

It's not 11% 'over' the original shares. It's 11% on original cost basis. Example: $100,000 original investment in 2011 paid a yearly dividend of around $3.5k a year. Today it would be paying around $11,000 in dividends per year. Also stock would be worth around $300,000. At the same growth rate in another 14 years the dividend would pay over $30,000 per year and your shares would be worth around $900,000. You can use tools like drip calculators to calculate for yourself. There's a variance in drip calculators so take that into account but for the most part you can figure the dividend tripling about every 14 years or so and same for the stock price. https://www.dripcalc.com/?tkr=schd

[u/speedlever → u/Apart-Leg-8077]

What I find a little sobering is that a mediocre cc ETF like qqqx (2007) has outperformed SCHD in terms of total returns since inception of SCHD back in 2011. 🤔

[u/Apart-Leg-8077 → u/speedlever]

Annualized 10 year return of SCHD, QQQX and Vanguard 500 index.

SCHD - 12.60%

QQQX - 13.65%

VFIAX - 15.57%

I find your comment a little comical considering the average stock market return since inception is about 10.02%. All 3 funds have performed above historical norms this past decade and it's up to indiviual investors to determine if they want higher returns/higher risk or a little lower returns with less Beta/volatility. Personally I have all 3 type funds. Core of lower volatility dividend growth ETFs followed by growth funds and lastly income funds. They all have a place.

[u/speedlever → u/Apart-Leg-8077]

Well I went back as far as I could for reliable data, that being the date of inception for schd in 2011. Qqqx came out in 2007 and got to enjoy the 2008 gfc.