"Some prospective retirees are quite divided between using dividends to fund retirement and simply drawing down from the portfolio. Indeed, there are tax advantages to realizing capital gains when one's no longer in the workforce, but, of course, it would be nice to be able to be sustained by the dividends and distributions from companies owned within a portfolio so that one doesn't need to think about what to pare (that's a lot of portfolio management in any given month, not to mention mounting commission fees)."
"Additionally, by not having to sell any stocks in one's retirement fund, the portfolio can have what it takes to keep growing. In an era where inflation is heated (and could get even hotter), it's important to maintain a growth mindset, even after one officially enters retirement."
"Living off dividends is a realistic dream, but the magic number will differ depending on one's desire for growth and monthly retirement budget. For younger retirees, settling for less yield and more growth is a shrewd move. Are you ahead, or behind on retirement? SmartAsset's free tool can match you with a financial advisor in minutes to help you answer that today. Each advisor has been carefully vetted, and must act in your best interests. Don't waste another minute; learn more here.(Sponsor)"
Some prospective retirees weigh funding retirement with dividends versus drawing down the portfolio. Tax advantages exist for realizing capital gains after leaving the workforce, but avoiding frequent stock sales reduces portfolio management and commission fees. Keeping stocks intact allows continued growth, which helps offset inflation risk and supports long retirements. Yield is crucial, yet growth potential should not be sacrificed, especially for younger retirees pursuing long time horizons like FIRE. The required dividend yield varies by desired growth rate and monthly retirement spending needs.
Read at 24/7 Wall St.
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