I think the problem is that you are frestiricting the model to bonds and growth funds. Those are not the only investmatnes available. You can replace bond with dividend funds to resolve the limitations of Bonds. Bonds have a low interest rate and as a result they don't keep up with inflation. And then with growth funds the the high returns they get are intermittent. The current retirment recommendations rely on intermittent growth to keep the fund viable through vretiremt. And then when growth is not available le you rely on the low interest of bonds to take up the slack.
With dividend you can get much higher return than you could with bonds. Reasonably reliable dividned yields of up to about 10%. Some of todays new high income ETFs simply didn't exist 10 to 30 years ago for various reasons. But the end result I you can get a reliable dividend at about 10% preferred stocks have been paying a reliable 6% yield for as long as I have been alive. With preffered ETF you can get 50K a year of income with 833K invested. 40 years ago congress passed a law creating Business Development Companes. They loan Monday to businesses. The law requires them to return most of their earnings to investors as dividned. They pay dividends of around 9% Which means 50K of income now only needs an investment of 550K. With the long term average yield of government bonds you generally need over 1.2 million or more to get 50K of income. With that much income or more a retire will not need to liquidate shares for income. During the lost decade (2000 to 2010) were there was essentially no growth BDCs and Preffered Stocks continues to pay dividneds.
Now if you have a growth fund and have an unexpected expense your dividend.income cannot handle you could sell just enough to cover the expense. The growth fund is now more of en emergency source of income. When times are good you could harvest the yearly growth and reinvest the money into more dividend income. effectively Adjusting for inflation. IF there is no growth to harvest wait. You still have the income comming in.
So the less reliable le growth is not only used as needed and low income bond replaced with higher yielding reliable dividend stocks. You're no longer need to liquidate stock to cover living expenses. You only liquidate growth funds funds when needed for emergencies or only when there is growth to harvest.
With dividend you can get much higher return than you could with bonds. Reasonably reliable dividned yields of up to about 10%. Some of todays new high income ETFs simply didn't exist 10 to 30 years ago for various reasons. But the end result I you can get a reliable dividend at about 10% preferred stocks have been paying a reliable 6% yield for as long as I have been alive. With preffered ETF you can get 50K a year of income with 833K invested. 40 years ago congress passed a law creating Business Development Companes. They loan Monday to businesses. The law requires them to return most of their earnings to investors as dividned. They pay dividends of around 9% Which means 50K of income now only needs an investment of 550K. With the long term average yield of government bonds you generally need over 1.2 million or more to get 50K of income. With that much income or more a retire will not need to liquidate shares for income. During the lost decade (2000 to 2010) were there was essentially no growth BDCs and Preffered Stocks continues to pay dividneds.
Now if you have a growth fund and have an unexpected expense your dividend.income cannot handle you could sell just enough to cover the expense. The growth fund is now more of en emergency source of income. When times are good you could harvest the yearly growth and reinvest the money into more dividend income. effectively Adjusting for inflation. IF there is no growth to harvest wait. You still have the income comming in.
So the less reliable le growth is not only used as needed and low income bond replaced with higher yielding reliable dividend stocks. You're no longer need to liquidate stock to cover living expenses. You only liquidate growth funds funds when needed for emergencies or only when there is growth to harvest.
Statistics: Posted by Steven F — Wed Mar 05, 2025 11:50 pm