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Should You Favour Dividend ETFs In Retirement

Published Tue, 25 Jun 2019 05:03:22 -0400 on Seeking Alpha

The short answer is yes—but just because you need cash flow from your portfolio doesn’t mean you need to load up on dividend-paying stocks.
Q. Is it possible to use the Couch Potato strategy to build a dividend-paying portfolio? I'd like to increase my annual dividends now that I'm close to retirement and was wondering if there's a way I can structure my ETF portfolio without having to sell units and rebalance whenever I need extra cash for spending. - Jan
A. One of the many challenges in retirement is adjusting to your new investing goals. For decades you've been adding money to your portfolio and watching its value increase over time. You no doubt held bonds and dividend-paying stocks along the way, but it probably wasn't your main objective to earn income from them. Now that you've begun making regular withdrawals, you may feel compelled to move away from a focus on growth: Now you want to target income-oriented investments instead.
But retirement doesn't require you to fundamentally change your investment strategy. Just because you need cash flow from your portfolio doesn't mean you need to load up on dividend-paying stocks. In fact, I would recommend against that strategy for a few reasons.
Jan, you mention you want to avoid selling ETF units whenever you need extra spending money. Many investors share this preference: Receiving $10,000 in dividends feels like getting a pay cheque while selling $10,000 worth of investments feels like you're "digging into your... Read more