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Is anyone here actually living off their investments with no other incomes?


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If so, how did you do it? I see that if you withdraw funds from margin you risk a margin call while waiting for your investments to 'mature'. Could take years.

Or do you get dividends enough to cover living costs? 

Do you have a part-time gig that tops it up while waiting for investments to mature?

Do you go for some bold risk taking and make a fortune on some security each year?

Seems to me if you make some mistakes or the equity does not compound fast enough your withdrawal rate has to be very small in the first decade or two of this activity?

 

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3 hours ago, scorpioncapital said:

If so, how did you do it? I see that if you withdraw funds from margin you risk a margin call while waiting for your investments to 'mature'. Could take years.

Or do you get dividends enough to cover living costs? 

Do you have a part-time gig that tops it up while waiting for investments to mature?

Do you go for some bold risk taking and make a fortune on some security each year?

Seems to me if you make some mistakes or the equity does not compound fast enough your withdrawal rate has to be very small in the first decade or two of this activity?

 

If withdrawing day to day living expenses risks a margin call you dont have nearly enough. 

 

Otherwise, I have what I consider a part time gig. I wouldnt say I'm retired but I wouldnt say I work either LOL. The key really is not getting into categorizing anything but simply being able to both live and invest how you want to. Thats the freedom. 

 

My go to is the no interest promo credit cards. Spend day to day on them. Big ticket expenses. everything. Then when you receive income or dividends or an investment matures you manage it. It sounds silly but managing your debt is much more productive than not have any or paying to down aggressively. You can stagger no interest cards. Transfer one to the next at expiration. You can use HELOCs or cash out refis. You just have to think a little creatively. 

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As Greg said, if you are worried about margin calls, you don't have enough. The general rule of thumb is 4% of a portfolio value can be withdrawn per year (upped for inflation) and last at least 30 years. If you are younger, 3% is a safer number. I believe there is research that (based on historical returns) that a 3% withdrawal rate would never run out - even for 50 or 60 year retirements.  I think there was one country that had a .5% withdrawal rate to not run out...ouch. 

 

In general, I would say have 2-3 years worth of expenses set aside and then do the 3%-4% withdrawal depending on age. That might be overkill but it's better to shoot for safety than going back to work at 70 (in my opinion). 

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If you include multifamily residential real estate in your definition of 'living off your investments' then yes, I have been doing that for over 20 years.  My last job with an actual paycheck was in the year 2000.  I don't run investment portfolios with much, or any, idle cash but you certainly want to have cash in your actual bank accounts.  I like to keep a year's worth of expenses in the checking account.  It is very difficult to behave as you should in a weak stock market if you have nothing else to live off of and no income coming in.  Having cash in the bank and rents arriving promptly each first of the month is very helpful in bear markets.  Like Gregmal mentioned, real estate investments also complement exchange traded investments because they are very easy to access liquidity from.  We keep undrawn lines of credit on valuable under leveraged properties and we pay to renew them over and over even though we haven't drawn anything.  This ensures you can seize time sensitive all-cash opportunities and also deal with any occasional disasters that come up.  On paper it looks like we are wasting the money we pay to banks to keep these lines open, but having the liquidity is very valuable.

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4 hours ago, scorpioncapital said:

I see that if you withdraw funds from margin you risk a margin call while waiting for your investments to 'mature'. 

 

 

Not if you hedge your margin with puts in a portfolio margin account.

Edited by ERICOPOLY
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I retired at 52, eight years ago. 

+1 on Greg's margin call comment.   

+1 on Stahleyp's cash cushion. You don't ever want to be a forced seller.

+1 on CorpRaider's sequence of return risks.

 

The core issue isn't whether to go with a 3% or 4% withdrawal rate, or whether to pick 3% yielding dividend paying stocks rather than just selling 3% of no dividend growth stocks each year,  hopefully you have a proven ability to earn way over 3% annually over a cycle (or two) before even considering living off income.  The issue is being prepared for the once in a blue moon, massive drawdown like the GFC, a Spanish Flu level pandemic, a decade of high inflation or a decade of negative inflation.  Unless you want to be a Walmart greeter when you are 65, you've only got one shot at this, and you must avoid a huge permanent loss of capital at any step in the process.  Everything else will take care of itself.

 

 

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My wife and I became completely debt free this past year. (Mortgage free, owned vehicles, school debt free, etc.). I know that's generally not the most efficient method but we still also both fully fund Roth IRAs, HSA, 401ks and stack quite a bit in the brokerage account every year. We are still in our late 20's with no kids. Honestly from a life perspective I think the benefit of this approach is often overlooked. We will probably have kids in the next two years and my wife will likely cut her work hours by 2/3rds. Being debt free gives us flexibility, focus, and removes the fear of having one primary income. Could I have made more investing? Yeah probably. But now I'm not tied me to my job. I can do what I want  Add a few rental properties to the mix, maybe a side gig etc. 

 

To me financial freedom = flexibility and retirement = the ability to do what you want on your own terms. Frankly I have zero desire to stare at a computer screen my whole life. Say what you want about tech it pays well, is flexible and generally interesting enough. But at the end of the day staring at a screen for 30 years is soul sucking. I have zero desire to do this forever. Much rather lower my income, and do something interesting/more fulfilling. Not going to lie, some days I miss the ol Brown UPS truck....Cruising around the country side with the doors open on a sunny day doing physical work...LOL 

 

 

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4 minutes ago, stahleyp said:

 

 

Ugh, are you okay? Do you need some professional help?🤣

 

Hey man there is something to be said about physically accomplishing something every day compared to button mashing and having it all go to the ether 🤣 Long-term though...yeah I'll avoid the arthritis  haha 

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I hear you.  I'm furiously trying to get there (but not mortgage debt prepayment...I got my bank death locked in at ~negative 5% right now.  My only regret is that I was too lazy to do a yuge cash out refi).  Carpal tunnel and back and neck damage are no picnic either.  On the other hand, my wife just sent me information on a private Montessori school for the lad.  Pay through the nose to create a hippie?

Edited by CorpRaider
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Nah you’ll never regret investing in your kids. Even all the worthless toys LOL. Sometimes shits about return on life rather than return on investment. Some of the best investments I’ve made have often been things I didn’t approach strictly from an investment perspective. 

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I still work and I really enjoy my profession. I've been working with the same rotating cast of math nerds and general lunatics for over a decade, so it's always entertaining. A colleague is a 70+ year old greek woman who builds models by day and goes to Astoria and dances in these greek festivals and dance nights. And she's a genius. Another guy is an ex-cosmonaut/russian propulsion scientist...he says to me, "If you're ever in a field with an enemy sniper, don't run. You'll just be dead AND tired". So just a wacky crew, the work is rewarding and not stressful, the pay/benefits are good...I'll keep doing it for another 10 years I think.

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22 minutes ago, Castanza said:

 

Hey man there is something to be said about physically accomplishing something every day compared to button mashing and having it all go to the ether 🤣 Long-term though...yeah I'll avoid the arthritis  haha 

 

I'm just giving you a hard time. 😜

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Retired two years now, I withdraw ~2.5%/year from equity (my only income source).

 

I've three years in STT I'd withdraw from only if equity down 15% or so.

 

Should last forever (or until marry).

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1 hour ago, Gregmal said:

Nah you’ll never regret investing in your kids. Even all the worthless toys LOL. Sometimes shits about return on life rather than return on investment. Some of the best investments I’ve made have often been things I didn’t approach strictly from an investment perspective. 

Good point.  I just don't know about the expensive Montessori versus the free public (including magnets).  I'm also thinking if we're going to pay that much tuition we might as well send him to the Day School, so at least he graduates with a rolodex to which he could sell insurance or whatever.  🤣

 

I do kind of regret the worthless toys when I step on them.

Edited by CorpRaider
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My passive income from rentals exceeded my spending annually 5-6 years ago with a portfolio of single family homes and duplexes. I still work because I get to hang from the bottom of a helicopter, and honestly I would probably pay to do it 🙂 . 

 

 

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Lots of good advice. So do people target a specific aggresiveness/risk portfolio based on what they have as the initial capital? Say you are somewhere between have enough to buy a no growth dividend stock and live off it forever and need a 10 bagger high risk stock which may go to zero but you need it. Do you try to be aggressively opportunistic while controlling risk?

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10 hours ago, stahleyp said:

As Greg said, if you are worried about margin calls, you don't have enough. The general rule of thumb is 4% of a portfolio value can be withdrawn per year (upped for inflation) and last at least 30 years. If you are younger, 3% is a safer number. I believe there is research that (based on historical returns) that a 3% withdrawal rate would never run out - even for 50 or 60 year retirements.  I think there was one country that had a .5% withdrawal rate to not run out...ouch. 

 

In general, I would say have 2-3 years worth of expenses set aside and then do the 3%-4% withdrawal depending on age. That might be overkill but it's better to shoot for safety than going back to work at 70 (in my opinion). 

 

It would depend on your investment return as well.  If you are only getting 1-2% in gains/income, you would probably run out even at 3% including inflation.  Now if you are getting at least 6%...you would be ok with inflation.  Cheers!

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7 hours ago, Castanza said:

My wife and I became completely debt free this past year. (Mortgage free, owned vehicles, school debt free, etc.). I know that's generally not the most efficient method but we still also both fully fund Roth IRAs, HSA, 401ks and stack quite a bit in the brokerage account every year. We are still in our late 20's with no kids. Honestly from a life perspective I think the benefit of this approach is often overlooked. We will probably have kids in the next two years and my wife will likely cut her work hours by 2/3rds. Being debt free gives us flexibility, focus, and removes the fear of having one primary income. Could I have made more investing? Yeah probably. But now I'm not tied me to my job. I can do what I want  Add a few rental properties to the mix, maybe a side gig etc. 

 

To me financial freedom = flexibility and retirement = the ability to do what you want on your own terms. Frankly I have zero desire to stare at a computer screen my whole life. Say what you want about tech it pays well, is flexible and generally interesting enough. But at the end of the day staring at a screen for 30 years is soul sucking. I have zero desire to do this forever. Much rather lower my income, and do something interesting/more fulfilling. Not going to lie, some days I miss the ol Brown UPS truck....Cruising around the country side with the doors open on a sunny day doing physical work...LOL 

 

 

 

Congratulations!  That's a huge accomplishment before you even turned 30.

 

Yes, you may have given up some investment gains, but you can sleep at night no matter what the situation is.  As long as the family is healthy, you've got it all at a young age.  All you have to do is slowly keep building on it even as you grow your family!

 

Otherwise, the heavy lifting is done!  Cheers!

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6 hours ago, LC said:

I still work and I really enjoy my profession. I've been working with the same rotating cast of math nerds and general lunatics for over a decade, so it's always entertaining. A colleague is a 70+ year old greek woman who builds models by day and goes to Astoria and dances in these greek festivals and dance nights. And she's a genius. Another guy is an ex-cosmonaut/russian propulsion scientist...he says to me, "If you're ever in a field with an enemy sniper, don't run. You'll just be dead AND tired". So just a wacky crew, the work is rewarding and not stressful, the pay/benefits are good...I'll keep doing it for another 10 years I think.

 

If you like your work and the people you work with...that's not really work!  That's a happy life!  Cheers!

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3 hours ago, Fitz said:

My passive income from rentals exceeded my spending annually 5-6 years ago with a portfolio of single family homes and duplexes. I still work because I get to hang from the bottom of a helicopter, and honestly I would probably pay to do it 🙂 . 

 

 

 

You're not just financially independent...you're a hero!  Cheers!

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17 minutes ago, Parsad said:

 

It would depend on your investment return as well.  If you are only getting 1-2% in gains/income, you would probably run out even at 3% including inflation.  Now if you are getting at least 6%...you would be ok with inflation.  Cheers!

 

That's true. The 3% (or 4%) withdrawal rate is typically based on a generic 60% stock 40% bond portfolio. 

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