[USER]

I’m 40 and achieved my FIRE number (25x annual spending). No real estate. All investments in VTSAX.

Half in brokerage, half in retirement accounts. Is it better to take the dividends from VTSAX and sell shares as needed to meet spending needs or switch to a higher yielding dividend ETF?

I prefer to keep life simple…

Thanks!

[David]

Make sure you have enough in your taxable brokerage to get to 59.5. I don’t think Rule of 55 is available to you, but I would need to learn more about it to say.

Your retirement account can stay in VTSAX for the next 15 to 18 years.

Otherwise take 3 to 5 years your annual spending and either build a bond ladder out of it or just let it ride in a HYSA or money market fund. Use your dividends to keep funding the back end of this bucket.

If the market is performing well, sell some assets to make-up the replenishment gap in your 3-5 year low risk pool. If the market is in a downturn, delay asset sales and ride the 3-5 year buffer.

Without knowing about your tax or health care situation, it is hard to get beyond this generic advice.

Managing your income to maximize a the ACA subsidy would impact how much you hold in dividend-paying vs appreciating assets and when you sell.

You would also need to manage your investments and when you realize gains to minimize taxes throughout your retirement.

It’s a balancing act, but spreadsheets will help you model it out.

[Harman]

Why would you wanna risk your capital with for yield trap?

[Tolga]

You are playing it extremely risky if you plan on retiring with 100% stocks. Common wisdom would be to have 3-5 years of spending money in bonds or more conservative investments like CDs, Treasuries, HYSA, money market etc.

the rest can stay in VTSax and grow at 7-8% average. What you don’t want to do is having to sell stocks when markets go down 20% and stay down for a few years.

That’s called sequence of returns risk. The way to handle it is by being prepared to not sell anything for 3-5 years.

[John]

You are thinking of selling VTSAX and incur the tax then place the money into a high dividend etf? Sounds like a whole lot of unnecessary tax to me.

I personally dislike dividends, because I’m still in the accumulation phase, dividends force me to incur tax now.

I’m trying to lower my tax.

[Sandy]

If the dividends aren’t enough to cover all of your spending, you might want to consider keeping a few years of expenses in cash or short term treasuries.

Retiring with 100% stock when you will need to sell some to meet your spending needs is pretty risky.

Switching all to a stock ETF that will provide enough income to meet your income needs will likely mean giving up future growth.

And given your age, make sure you’ve got some spending flexibility as 25x’s your income doesn’t give you a ton of room for error if we see several low return, high inflation years in the near future.

[Risgaard]

I don’t know anything about VTSAX, but a few years before I FIREd, I started dumping everything into high yielding stocks and funds.

When I retired I could completely live off the dividends.

(Most have had better returns than the S&P500 funds, so I don’t pay attention to people that assume dividends means lower total return.)

I find it simpler to not have to sell anything and just pull cash from my brokerage to my banks to pay bills.

[Wilson]

Congrats! I have a similar allocation except 90% in vtsax and 10% in international, I also reached 25x expenses at age 31.

I am still working since I am young, I think with your side hustle it’s okay to be 100% stocks, you’re more likely to have the flexibility to ramp that up in down years so you don’t have to sell stocks

[Doyle]

Time to rebalance…..
UNLESS, you have guaranteed earnings /income from pension(s), disability and SS.

Then, continue to buy and hold.

[Scott]

Or continue to auto reinvest dividends, set stop orders to protect your gains, and sell when you need to.

[Rob]

If you switch to an ETF, won’t you have to pay taxes on gains from the shares that you sell?

[Author]

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