How do you live off a portfolio

Everything should be specific to your situation.

  • It's important to recognize that individual circumstances vary, and what works for "everyone" may not necessarily work for you due to unique factors. This is particularly crucial to keep in mind when planning for retirement. Your financial situation, goals, risk tolerance, and other personal factors all play a significant role in determining the most suitable retirement strategy for you. Therefore, it's essential to tailor your retirement plan to your needs and circumstances rather than relying solely on generic advice or strategies.

What is considered a reasonable withdrawal rate

Regarding dividends, it's all about finding the right balance between the payout you receive and the level of risk you're comfortable taking.

On the other hand, if you're willing to take on more risk, you might seek higher dividend payouts, potentially aiming for a higher income percentage per year. This could allow you to retire earlier because you're generating more income, but it also comes with increased exposure to market volatility and the possibility of greater losses.

Imagine you're planning for retirement, and you aim to generate around 2% income per year from the market through dividends. This can be considered a relatively safe approach, as it offers a steady stream of income without relying solely on the fluctuations of stock prices. However, it might require you to wait longer to accumulate enough wealth to retire comfortably.

So, the decision ultimately comes down to your individual preferences and financial goals. Some may prioritize safety and are willing to wait longer to retire, while others may prioritize retiring earlier and are comfortable with taking on more risk. There's no one-size-fits-all answer here; it's about finding the balance that aligns with your circumstances and risk tolerance.

Chance of sustaining the portfolio

According to the chart, sustaining a portfolio indefinitely often involves aiming for withdrawal rates of 6% or less, with the 4-5% range being particularly beneficial for longevity.

However, individual circumstances may vary. For instance, if you're willing to deplete your portfolio over time, you might consider withdrawing a larger percentage annually, despite higher risk.

In conclusion

Withdrawing a higher % increases the risk of being unable to sustain your portfolio over the long term. This is because higher dividend withdrawals can deplete the portfolio faster, leaving fewer resources for future growth and sustainability.

Expense Calculator






Please use this calculator to determine the capital needed to support your retirement. A common rule of thumb is to withdraw around 4% of your retirement savings annually.

However, it's essential to adjust this rate based on your financial situation, goals, and risk tolerance. Feel free to input your preferred withdrawal rate, and the calculator will provide insights into how it aligns with your retirement goals.

Time to make a choice

Depending on your preferences you have 2 options from here.

Option 1

Dividend style

The dividend-style retirement approach revolves entirely around generating income from dividends. Rather than relying on other sources of income such as capital gains or interest, this strategy prioritizes investments that provide regular dividend payments.

  • Here's a key strategy for maximizing your retirement income: aim to secure dividends that match or exceed your withdrawal rate.

    By doing so, you create a scenario where your investment returns through dividends cover, or even exceed, the amount you withdraw each year for living expenses. This approach minimizes reliance on the stock's growth alone to sustain your portfolio.

    Instead, you rely on consistent dividend payments, providing a more stable income stream and potentially reducing the impact of market fluctuations on your retirement funds.

  • Dividends can offer a safer source of income compared to relying solely on stock prices. Unlike stock prices, which can be heavily influenced by investor sentiment and market conditions, dividends are primarily influenced by the cash supply of the company. This means that even during volatile market periods, dividends tend to remain more stable. They are less prone to fluctuations driven by investor emotions.

    By prioritizing dividends in your investment strategy, you can potentially create a more reliable income stream that is less susceptible to the ups and downs of the market.

  • An important consideration when relying on dividends as your main cash source is that they typically offer lower withdrawal rates compared to the potential returns from some stocks. Most dividends hover around the 4% mark, which might be lower than what some investors expect or desire. While dividends provide stability and reliability, this lower rate of return could potentially impact your overall income stream.

    It's essential to weigh this drawback against the benefits of stability and consistency that dividends offer when designing your investment strategy.

  • Choosing a dividend-focused retirement plan can simplify the setup process significantly. Unlike other retirement strategies that require constant calculations and estimations of yearly gains, a dividend-based approach offers more predictability and stability.

    With dividends, you receive regular income payments from your investments without needing to worry as much about market fluctuations or estimating future gains. This simplification can make managing your retirement portfolio easier and less stressful, allowing you to focus more on enjoying your retirement years with confidence in your financial stability.

Option 2

Withdrawal style

The withdrawer style of retirement centers on leveraging stock price growth. Instead of relying solely on dividends for income, this approach involves periodically selling a portion of your stocks to fund living expenses. The idea is to capitalize on the appreciation of your investment portfolio over time, selling off assets strategically to maintain a consistent stream of income throughout retirement.

  • Here's the key to success with this strategy: make a solid estimate of your yearly compounding rate. This rate reflects how your investments grow over time, taking into account factors like dividends and capital appreciation. It's crucial to make an accurate estimation, considering potential market fluctuations.

    Being prepared to adapt your spending to your compounding rates is essential. If your investments perform better than expected, you may have more income available for spending.

    Conversely, if they underperform, you may need to adjust your spending accordingly. By staying flexible and proactive, you can ensure that your retirement plan remains resilient in the face of changing market conditions, ultimately helping you achieve your long-term financial goals.

  • Although this strategy can still be relatively safe when implemented with the right stocks and execution, it's essential to understand that it carries a slightly higher level of risk compared to the dividend style. This increased risk primarily stems from being subject to market fluctuations and investor sentiment.

    Unlike dividends, which provide a more stable income stream regardless of market conditions, relying on capital appreciation involves the potential for your investment values to fluctuate based on market sentiment and economic factors.

  • The primary allure of this strategy lies in its potential for higher withdrawal rates, which can accelerate your progress toward your financial goals. Unlike some other investment approaches, this strategy offers the opportunity to withdraw a larger percentage of your portfolio annually, providing more immediate access to your investment returns.

    By leveraging higher withdrawal rates, you may find it easier to achieve your desired financial milestones, such as funding retirement or achieving specific savings targets. This accelerated access to funds can offer greater flexibility and freedom in managing your finances, allowing you to pursue your goals with more confidence and efficiency.

  • This strategy can be more challenging to start and manage due to the need to adapt spending or recover from market downturns. It requires proactive monitoring and adjustments to ensure financial stability during volatile periods.