Where are the retirement planning software tools for dividend investors?

Really enjoy your articles, and have been drinking the Kool-Aid on dividend growth investing for about 10 years now – really wish I had understood the power of the model decades sooner.

I’m now approaching retirement with dividend income from a regular brokerage account (qualified dividends and one MLP) and an IRA (withdrawals taxed as ordinary income). We’re fortunate in that the combined total should cover our expenses in retirement.

I have a spreadsheet with various projections and tax models, but wanted to get a more sophisticated and wholistic look at my retirement income and expense scenarios. So far I’ve entered all our data into Maxifi and MoneyGuidePro (through TDAmeritrade), and even had a two hour consult with my TDA rep yesterday.

Both tools use the ‘standard’ approach of assuming an X% drawdown of assets each year, based on Y% of growth in underlying assets, forecast out over expected lifetime, followed by a Monte Carlo analysis to assess probability of success. I must have spent an hour of the two hours arguing with our rep – it makes absolutely no sense to be selling 2-3-4% of our assets in retirement when my dividends are generating more than 4% a year without selling a thing.

Neither software package adapts well to a dividend-funded retirement.

I’ve searched on Google and can’t find anything – are you aware of any comprehensive retirement planning tools like those that are either specifically built for dividend scenarios, or which at least include them as an option?

Thank you.

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Jun 25, 2020
Dividend software
by: Mike

Great question - I've actually never used software to model income in retirement. I can do some searching but really unaware of anything at this stage.

I really just view my portfolio like it is my own business (which is really what it is - lots of small stakes in various businesses). Nearly all of them do send me dividend checks and I have to decide what to do with those. Effectively, either spend or reinvest. If your dividend income exceeds your expenditure then there is no need to sell the securities (unless for other reasons).

That said, in a perfectly rational world it shouldn't matter if you spend the income (dividends) or sell a few shares yourself to generate your own income (this is what you could have done effectively by owning stocks like Berkshire Hathaway or Amazon through the years). The problem is that the world is not perfectly rational and there are times when it can be unattractive to sell those stocks. It is not an easy call and there is no perfect answer - every situation is unique to that individual.

It sounds like you are doing well and congratulations on building enough passive income to cover your expenses. In this situation, I (and this is my personal view) would just let the dividend income cover my expenses unless there is a real reason to sell one of your stocks. Clearly I can't advise you directly but it sounds like you are a prudent and sensible investor so maybe you don't even need any software. You can't always make optimal decisions (and nor can software) but all you can do is manage your own position with care and prudence, taking into account that the situation (including markets) can always change rapidly and without warning. Also keeping some cash on the side is always sensible too.

I apologize for the messy response I've just written. I was really just writing what first came to my mind!

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