Why I chose dividend investing vs 4% rule to retire early

Why I chose dividend investing vs 4% rule to retire early

02:18 - S&P 500 Dividend growth vs share price over time
06:27 - Pros & cons with dividend investing to retire early
11:56 - Pros & cons with the 4% rule to retire early
16:58 - Why I chose Dividend investing over the 4% rule to retire early

More about dividend growth investing:

I'm not a financial advisor and the content discussed today is merely my opinion and intended only for your entertainment. The content expressed in this video should not be considered as professional financial advice. This video may contain links through which we are compensated when you click on or are approved for offers. The information in this video was not provided by any of the companies mentioned, and has not been reviewed, approved, or otherwise endorsed by any of these entities.
#DividendGrowthInvesting

[enonknives]

Money can't buy happiness, but poverty can buy unhappiness.

[richardthorne]

I took early retirement from the Fed Reserve Bank and I will NEVER rely on selling shares (4%) to live my lifestyle. I am predominantly a long term passive growth dividend investor (MCD, PEP, PG etc) and I sell covered calls strategically to generate income. Last year I made $63K selling options and my dividend portfolio brings in $70K. Lost decades do happen like 2000-2013 and my mom tried selling shares and ran into sequence of return risk. So i have transitioned her to a income strategy that also has a total return perspective.

[mikowagstaff]

We have a very similar if not exact journey. We considered both strategies when we early retired in 2020 and decided on dividend. Everything pro and con and point you made is right on track. I loved seeing you growth chart, the last few years look like mine. It was complete confirmation for me, the growth is not there but the dividends keep rolling in 🤑 Hindsight being 20/20, we would choose dividend investing again. BTW, I’m a long time follower your videos really helped in the initial years, thanks 😊

[samuelwilliams]

I am half and half. I like keeping the growth for future conversions to dividends. May go more dividend as I get closer to retirement.

[GuyIsFly]

I really like the blended approach; my wife and I have our dividend growth investing portfolio (blend of SCHD/DGRO (the dividend simple path to wealth) and stocks) and a growth portfolio (blend of XLK, QQQM, and SCHG). Using hypothetical calculators, I have found this will let us reach our FIRE goal faster and give us options! We want options in our future life!

[dnah]

I don't like the 4 percent since you have to sell your assets. My work retirement is set up for that sell style. But my dividend strategy is buy and hold.

[JPDuval-xyyy]

I think a blended strategy is a great idea

[Madchris]

Apparently according to some of the financial gurus im a moron for dividend investing. "I'm too young to care about dividnends, my return will be bad" yadi yada. Its all noise to me. I do dividend and growth investing and their opinions of me are irrelevant. Alot of these guys online didn't even make most of their money from investing, but rather their business or real estate they own anyways. Finally share price only matters when you sell to begin with when it comes to super low dividend producing assets. They won't pay your bills until you have a crazy amount of money in them anyways

[evilzzzability]

I'm pursuing a similar strategy as I approach the latter stages of pot building.
40% high yield strategy, 40% all-weather strategy, 20% in mutual funds that fit with my world view.
You don't need to be all-in on any strategy - think of it as diversification amongst strategies.
The S&P is a great growth vehicle, but not the best for distributing it in retirement. Why should it be? They goal in each scenario is fundamentally different.

[zachv]

Thank you for this honest picture of the pros and cons of dividend investing!

[jarc]

About 36% of my total portfolio is in the TSP and 100% in the C Fund (S&P 500). Through Feb I have a 11.35% avg annual return over 13 years. I now contribute 5% to get the full match. My contribution is 100% to the Roth portion. The match is traditional. I hope to retire in 7-8 years (I will be 65-66 when I retire). I plan on rolling over the TSP and investing in dividend stocks. I don't want to rely on taking any percentage of my retirement to live. I can role the Roth TSP to a Roth and the traditional to a regular IRA. I hope to eventually do a back door Roth conversion of the traditional. I don't want to have to pay taxes on the dividends from my IRA which currently produces roughly 62% of all my dividends.

[badass]

I have not heard of anyone actually using the 4% rule.
It will actually take a lot of skill and discipline to use 4% rule.
Most people do not realise the S&P 500 has become more expensive over the last 20 years we simply do not know if this trend will continue or indeed be reversed in the next 20 years.

Good video highlighting some of the risks of dividend vs growth investing.

[njkl]

On the pro of dividend being generational wealth: since long term total growth rate is lower for dividend focused approach, long term expected generational wealth should be lower, assuming equivalent staring investment and planned outflows.

On con of 4% being boom or bust: the 4% rule was based on looking at worst case scenarios for a 30 year retirement over the past 100 years, assuming you retired right before Great Depression, or right before the extended high inflation of late 60's to early 80's. You should only start to fear 4% is too much if recent market trends are worse and longer lasting than those cases and/or you plan to have the money last longer than 30 years.

[Dividendflywheel]

Interesting content. I have friends that are using both strategies. One has saved up 30x his annual expenses and is comfortable using the 4% rule. Another uses dividend income as the source for all his retirement income. Ultimately personal finance is personal.

[projectndv]

Great Video!!! Thank You. You explained the dividend philosophy unbelievable well. Better than what I have been able to come up with, to explain to people. I will be sharing this video with all my folks. If they don't understand it after watching your video, I don't know what else I can tell them. Its a "slow and steady wins the race" approach.

Thank You Again!!!

[johnwilson]

I go back and forth between the two strategies. The 4% Rule is simpler, easier - but I don't like the idea of selling things off over time. Although a company might cut or eliminate dividends, as a whole they can offer some stability. Especially if you live off 75-90% of them, and always reinvest a portion to create diversification and increasing income.

[organic]

I don’t agree. For me the most valuable thing of dividend investing (if u have enough money to invest) is opportunity to retire early, 20s, 30s or whatever. With 4% rule you can’t retire until you are old.

[robevans]

I alwsys thought of investing in dividend stocks like owning both stocks and bonds in one package.

[Antandthegrasshopper]

30% down in a 35 year retirement equates to 10.5 years. That means that may years you'll be dreading to take out 4% from your portfolio....

[Jayvazquez]

Great video and I have the same mindset of dividend investing and passing it down to my kids😊