ETF Living off ETFs

That sucks.

 

Recognising this comment is brutal, with the number of differing views given, have you now decided where the $6m or so is coming from to buy VGS in order to provide that after-tax income?

You aim is great and I applaud it but tempering your expectations a little could also be a worthwhile exercise.

 

VGS is international shares, especially US shares, which means dividend yields are low. Any income strategy involving VGS would have to involve periodic selling to harvest cash.

Huge goals are great, but you still need the steps to get there.

 

I think a lot of us miscalculate how much we need to generate just $100K pa recurring. When all is said done, I reckon you need $2.5-$3m unencumbered and fully invested (in says LICs/direct stocks, ETFs) and about $500K min in spare cash in offsets etc.

Most won't get there or if they do, they'll be > 55-60 yrs old given the need to wait out at least 3 cycles.

 

And the risks of a one in "X" year market correction will be a factor. NO market is capital stable and immune to correction. A correction to market prices also impacts yield. Note that the 2020 fall below reflects a major re-correction in April and May 2020 after initial falls of around 30%. The market has yet to indicate a stable correction.

The following table lists the annual return of the ASX 300 over the last ten years as of 30 April 2020 (Wikipedia).

Year Annual Return
2010 31.67%
2011 0.66%
2012 −8.44%
2013 15.78%
2014 5.2%
2015 6.67%
2016 −9.39%
2017 13.16%
2018 1.26%
2019 5.95%
2020 −13.34%

This is the same dilemna that persons on fixed income face. eg Pensioners. Their share portfolio value, dividends and interest have declined.

 

Australia then.

 

How much are you expecting to have left on your deathbed though? If you have 3million in equities plus 500k in cash, there's 35 years of living expenses right off the bat, and thats assuming zero investment returns. I think the journey to financial independence can be significantly shortened if you include a component of capital draw down.

 

Inflation and periodic market crashes increase the risk.

 

Yeah I know and you have a point. It is nerve racking consuming capital though unless you have a shedload of it.

 

have I missed something?

Why would you be eroding capital if you have $3M in equities? Even in property you should be able to live off rents, even at 4% $120k

 

The implication is that if one was willing to partly and progressively draw down on capital, then you coukd possibly do it with less than $3m.

 

My elderly mum is living purely off dividends with capital of about $750k and income just under $50k.

 

Does she draw down on the capital?

 

Or it was setup years ago so and gross yield has risen.

 

Doesn't draw capital although it came from cashing in a long term IP so some GST was due which we fortunately could cover from early capital gains on the portfolio.
Set up a couple of years ago so some there has been some yield gains although the income was pretty much the same year one.

Overall a combination of higher yield EFT such as IHD, GEAR, WAM
Also some good direct holdings such as FMG DDR GMA and a few REIT which have good yield albeit unfranked.

 

I want to retire to do absolutely nothing, simply wake up whenever I want, drink coffee and watch youtube all day, my dream is probably your nightmare haha

 

It’s good for a while....

 

I could do it forever I reckon, On many occasions i take 2months annual leave all at once and just stay at home and do nothing.

 

Sadly, I agree with you.

 

I’ve just done it. 12 months. Looking for something a bit more stimulating now.