Retirement Guru: Balancing Spending Today and Growing for Tomorrow

If you follow my Facebook page — RetirementGuru, you will know that I am a dividend income investor. This means that I intend to retire and live off dividends. But living off dividends doesn’t mean I spend every dollar I receive as dividends. As inflation coupled with uncertainties over life and health spans, living off dividends also necessitates that I continue to build my retirement dividend nest egg.

As such, I will take a page off the Singapore’s government playbook. Similar to how the Net Investment Returns Contribution (NIRC) is used to fund today’s needs while growing the reserves for the future, I too will budget to spend no more than half of the dividends I receive every month. This discipline will ensure that my wife and I will have a growing income stream that provides long-term financial security.

As I firmly believe that 55 is the best age to “retire” and, if you are like me, you will have withdrawn the excess above your CPF Full Retirement Sum. You should then only use up to half of your dividend income to pay for retirement experiences — to many, this will be regular short vacations. Assuming you withdraw $100,000, and you achieve an annual return of 8%, this will give you a monthly dividend income of $667. If you spend half, and reinvest the remainer, you will have approximately $4,000 to spend a year or $333 per month.