What Are the Best Ways to Generate Income in Retirement? Ken Fisher Answers
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- Опубліковано 26 кві 2021
- In this video, Ken Fisher addresses retirement investors’ common desire to generate income from their portfolios and why folks may approach this incorrectly. Many believe generating retirement income means they need to rely exclusively on things like stock dividends and bond coupon payments without touching their principal. But thinking this way could severely limit your investment options and jeopardize your long-term retirement goals.
Ken Fisher explains a better way to think of generating income in retirement is to focus on total return-price appreciation plus income-over time, and how much of that total return you’re prepared to spend. Then, Ken says, when you look at your portfolio and consider the total return concept, you can plan to minimize the components that could potentially result in higher income taxes. Strategically selling appreciated assets to generate cash flow can be a powerful strategy during retirement.
This process of strategically selling down some investments (your principal) to generate income is a practice Ken refers to as generating “homegrown dividends.” He believes this method can provide more investment flexibility and a potential tax benefit as well. Watch the video to learn more about this process and how Ken Fisher thinks about retirement income and cash flow differently than most in the industry.
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Investing in securities involves a risk of loss. Past performance is never a guarantee of future returns. Investing in foreign stock markets involves additional risks, such as the risk of currency fluctuations. The foregoing constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice. Nothing herein is intended to be a recommendation. The opinions expressed are subject to change without notice.
Knowledge is knowing what others are saying and Ken says it well so investors take advantage of the tax implication of income. This lessens the tax and increases what one keeps in retirement. Finance 101 FI style.
So you're saying it's better to pay capital gains than interest and dividends?
Drawing from this pot is what make your bottom line grow. Like our Guru expounds upon. Its seeing the forest through the trees so to say. Macro vs micro managing can be so more rewarding and leave more for future endeavored like philanthropy. Helping the causes that help others.
Great advice
Speaking of homegrown dividends and cash flow
If you only spend dividends you become significantly more immune to stock market swings, not needing to sell significantly discounted stocks.
Aren't qualified dividends taxed the same as capital gains? Do qualified divdends raise your income for tax purposes? I didn't think so. I don't get what he is saying.
Okay let me see if I have this straight. I have a dividend paying stock. I bought it with the intention at first to buy more shares with the dividends and then live off the dividends. So if I understand Ken correctly I'm to sell the shares not the dividends? Then use the dividends to buy more shares so as to keep the income level the same are growing? Not sure here.
Actually, (especially if you have some investments that have appreciated for more than a year), Ken is saying to feel free to sell a “small” amount of stock to generate cash flow for ourselves. Only some of the sales proceeds will be a taxable gain, so the tax impact will be comparatively low. We don’t need to be saddled with the belief that we must avoid spending any of the principal, which had been a common approach to investing for a long time. (If we’ve invested well, our principal has grown over time, so selling some will still leave us with plenty of principal.)
So, let’s say your investments have appreciated 20% but your overall dividend yield is about 3%. You can give yourself a homegrown dividend by selling a “small” part of one or more of your long term investments. He doesn’t talk about how to choose which one to harvest, however. But if you need to rebalance your portfolio anyway, then this is an opportunity to obtain any needed cash flow.
@@dmulvany Very well explained - Sincerely appreciated!
I don’t know if that’s what ken is saying but if you sell the dividend bearing shares you reduce both your dividends and principle I would think?
G Tyg g
How on earth does selling shares not result in a larger taxable event than tax on dividends? Isn't the Capital Gain Tax 20%-40% and the Dividend Income Tax 15% generally?
You have them mixed up. Long Term Capital gains and Qualified Dividends are taxed at 10, 15 or 20% depending on income. Short Term Capital Gains (held less than 1 year) and Ordinary Dividends are taxed at 0-37% depending on income.
Qualified divs get LT cap gain tax, but the entire dividend is taxed. $100 stock + $2 div => tax on $2. If a stock goes from $100 to $102 and you sell $2 worth of stock, then very little of that $2 is cap gain (approx 2% or $.04) and thus less tax paid.
@@aaronbraskcapital you should have done this podcast
I think Aaron’s points are very good, but isn’t another aspect of this is that high dividend stocks are typically not high growth in terms of share price, so the capital gain from selling shares bought will be relatively small as the capital appreciation of those shares will be small.
One thing genius doesn't mention is having to burn off growth holdings during bear markets for income .. something that you can ride out with a balanced dividend paying portfolio
No he never answered the question. How do you generate income retirement blah blah but he never said anything about it. So don’t bother listening to this man. I’m so tired of him talking and talking and never says much of anything.
Thats why he is wealthy
MMCapri - Ken states loads of wisdom and it seems many have not grasp the key concepts: 1) Total Return trumps dividends 2) High dividend equities or interest bearing investments trail broad market index 3) Estimate a reasonable portfolio return and withdraw the amount - dividends first as already taxed & then sell principle for shortage 4) Mistake to focus on high dividend / interest bearing investments for cash flow - hope that helps