Did I Achieve My Goal?

This October comes with an additional anticipation for me as this is the month I turn 53 and I had set a personal goal for my portfolio to generate dividend income equal to 57% of my expenses.  This past Thursday was the official day I turned 53 and of course, the big question is did I achieve this?  But before we get to that answer here is a quick summary of how the goal was created.

Back in 2018 I performed an analysis that led me to setting two dividend income goals:

  • At Age 53 Dividend income is equal to 57% of expenses
  • At Age 60 Dividend income is equal to 115% of expenses

The analysis was based on using one of the worst bear markets in history that ran from 1964 to 1984.  During that time, we also had high long-term inflation making this period one of the worst economic times in U.S. History.  I decided to analyze a portfolio where someone would retire in 1973 with a dividend growth portfolio where at the start of retirement in 1973 dividend income was equal to 100% of expenses.  

The results were rather shocking as it showed the purchasing power of the dividend income eroded at a faster rate than its ability for growth and by 1984 the dividend income was able to cover only 63% of expenses and would not meet 100% expenses until 1991.   

Using this as my basis, I ran 5 additional models using varying dividend incomes at the start of retirement and I concluded that a portfolio that generates dividend income 25% greater than expenses would have been able to weather the onslaught of inflation and that anything less you would need varying amounts reserve cash to close any gaps.

At the time in 2018 I did not believe I had the capital to achieve 125% of expenses and instead settled at 115% of expenses and reserve cash equivalent to 9 months of expenses to cover shortfalls until the portfolio income recovered to 100% of expenses.  From this I created my age 53 and age 60 goals and even at this rate I knew it would be challenging.

Fast forward three years later and I am now 53 years old and can report I successfully met my goal but by the skin of my teeth.

Getting here was not easy and 2020 was a big step back.  At the start of 2021 it looked like I was going to fall short and would need an additional $16K of capital to invest which I did not have.  But something magical happened in early part of 2021, dividend raises came in double what I was expecting and suddenly the gap was closed, my goal was in sight.

As quickly as I was excited of meeting my goal, I had the wind taken out of my sails.  First was PPL Corp (PPL) who sold their UK utilities and announced that future dividends would eventually be cut to reflect the lost cash flow from the UK sale.  Then AT&T (T) announced they were spinning off their Time Warner assets and they too would be cutting their dividend after the deal was announced.   If that wasn’t bad enough Newtek Business Services (NEWT) announced that they were going to change from being a business development company to a bank in 2022 and they too would reduce their dividend to be commensurate to other banks in the finance sector.  Even though these dividend cuts are going to occur after my goal I knew I had to discount them so I adjusted my goal with the assumption that all three will cut their dividend by 45%.   Suddenly I was back to square one.

When summer hit things changed once again.  Dividend raises continued to come in significantly above my forecast and 2 different companies restored their dividend policy with Armanino Foods of Distinction (AMNF) restoring their dividend to pre-pandemic levels and that was followed up by an even bigger restoration by EPR Properties (EPR) who restarted paying out their monthly dividend of which I had a significant position in and the two compensated for 90% of the PPL, T & NEWT loss.   I was back in the game baby!

After all that drama the final number came in and as of Thursday morning I just squeaked past the goal by hitting 100.12%.

I knew this would be down the wire and it sure was as my end of September and early October purchases were just enough to get me over the goal line.

Now that I achieved a goal I did not think would happen it made me rethink my age 60 goal and discovered if I can continue to grow my annual income by 12.5% annually I can now retire an entire year earlier at age 59.  This revised goal means I am now only 6 years away from declaring FI for me and my wife!  If current inflation continues the way it has it will be a challenge but hey what is a goal for if you cannot challenge yourself.

4 thoughts on “Did I Achieve My Goal?

  1. Thank you LWD,

    My journey is a bit longer than most as most of my career I had a small salary while raising a family. This was mostly my fault for not acquiring a degree until very late in my career. But I worked at a company that I really enjoyed going to everyday so it wasn’t a chore to slowly build up my wealth. It has only been the last 6 years that my salary has really taken off and now its coinciding with my expenses coming down as my kids become adults.

    Like

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