Rich And Retired? It Is ALL About Capital Preservation, Folks!

by: Regarded Solutions


In the rather exclusive world of the very wealthy, there is no need to take risks.

If you live within your "well-off means," retirement could be wonderful.

For the rest of your money, invest in dividend paying blue chip stocks.

There were several Seeking Alpha articles this week that actually were fun to read. This article was about an individual who has plenty of liquid assets ($15,000,000) and has decided to retire, and wants to know how he can take $200,000 per year for the rest of his life and never run short, starting from age 53. The author suggests that dividend stocks are not the answer.

This article rebuts the other one by suggesting that the same individual should have plenty of dividend paying stocks and not to listen to the other guy.

Naturally, I have the correct answer: Ignore them both!

Okay, obviously I am attempting humor here, and actually both of the articles were fun to read as well as being well written. That being said, I have been thinking about this scenario and decided that I actually do have another way to go: Do very little of anything.

Of course I will show you what I mean in a minute, but first let's get serious. How many folks do you know have $15,000,000 in cash, no matter what age. I am not talking about the folks on TV or common names we all know and strive to become (heaven forbid). I am talking about the average, everyday regular person, or couple, who strive to accumulate enough money to have a more secure financial future.

It can't be many, because the numbers are quite small.

How Many Super Wealthy Folks Are There?

Sometimes I get the feeling that everyone thinks that the "other guy" has so much more money, that it is useless to even try to save for retirement, and nobody even wants to help!

Well perhaps the "other guy" is thinking the same about you? The facts actually speak for themselves, however.

According to this report in Forbes, who actually used math to figure this stuff out just a few years ago, this is what they came up with:

1. There are 225,000 Americans worth $10 million or more.

2. There are 51,000 Americans worth $30 million or more.

3. There are 25,500 Americans worth $50 million or more.

4. There are 9,900 Americans worth $100 million or more.

5. There are 3,850 Americans worth $200 million or more.

6. There are 1,100 Americans worth $500 million or more.

7. There are 640 Americans worth $750 million or more.

For argument's sake, folks who have $15,000,000 here in the US number around 200,000, or less than .60% of the population. We are not talking about huge masses of people so to even dwell on this is probably good for some weekend reading and day-dreaming. The truth of the matter is that most of us fall into the $50k-500k arena of wealth, with a solid portion of around 20% having over $500k of the ones who have $50-$500k.

Having liquid assets of $1,000,000 places folks in the top 5% of everyone in the USA. The likelihood of anyone who has $15,000,000, and does not know what to do with it is quite slim I would imagine. Of course, there are my readers who "obviously" have more than that, so for YOU I will offer my own opinion on how I would invest the money.

$15m At Age 53, Want To Retire On $250k Per Year, Here Is My Plan

Find a big safety deposit box, stuff the money in there, since I have already paid taxes on it, and take out the money as I need it, and add 3% more each year for inflation.

Folks, with this kind of money, I can basically do absolutely nothing and my money will last for over 30 years. Don't believe me? Okay, well I did the math:

As you can see, I am being a bit more liberal for myself by wanting $250k per year (plus inflation) rather than "only" $200K per year. I want an extra cruise or two.

Oh Yeah? Well What Happens After Age 82, Huh??

Okay, so you think you "got me"? Think again. Take another look at that chart and notice that after 30 years I will have about $3.1 million, after withdrawing $11.9 million. Well, before I begin stuffing my safety deposit box at age 53, I will take 1/2 the money (about $1.5 million) and invest it, for "fun", in the mega cap, blue chip, dividend paying stocks that we already are familiar with in our new "Buy The Dip Portfolio", and re-invest all of the dividends right back into the stocks.

The BTDP consists of the following stocks: AT&T (NYSE:T), Exxon Mobil (NYSE:XOM), Johnson & Johnson (NYSE:JNJ), Coca-Cola (NYSE:KO), Procter & Gamble (NYSE:PG), General Electric (NYSE:GE), McDonald's (NYSE:MCD), Chevron (NYSE:CVX), Apple (NASDAQ:AAPL), General Motors (NYSE:GM), and Ford (NYSE:F).

I leave the $1.5 million untouched for 30 years and the income produced over time will probably be more than the amount I have taken out at age 82! Either that or I will have more than enough to pay people to take care of me.

There are folks who want nothing to do with stocks though, so if I were one of them, I would plunk the $1.5 million right into our brand spanking new "ETF Only Portfolio":

Vanguard High Dividend Yield Index Fund (VYM), SPDR S&P Dividend ETF (SDY), WisdomTree LargeCap Dividend Fund (DLN), Vanguard Dividend Appreciation ETF (VIG), and Schwab U.S. Dividend Equity ETF (SCHD).

Then hopefully I won't ever need to turn on CNBC again!

Oh, and there is one more option folks. I can take $1,000,000 and buy a tax deferred "Longevity Annuity". Yep, insurance companies sell these products, and actually for those of us that are among the ones who have $15 million plus, it might not be such an awful idea!

According to the chart on this page, if I buy an annuity for $1,000,000 (10 times more than the chart shows) at age 55, I will have a cool $871,000 coming in every year after I am age 83!

If I were a woman, I would get less because I would live longer.

But Wait, What About The Other $1.6 Million Left Over

Ahhh, well I suppose I would want to take care of my kids, my grandkids, and their kids! I have an idea....why not put the money into the BTDP or ETFOP and let it keep growing for generations to come!

Gee, I won't even need to buy a life insurance policy!

The Bottom Line

I had a lot of fun putting this article together, but as I was typing I realized that since I am not part of the original 200,000 folks with that kind of money, I had to satisfy myself knowing that I have hopefully helped SOMEONE!

Disclaimer: The opinions of the author are not recommendations to either buy or sell any security. Please do your own research prior to making any investment decision.

Disclosure: I am long AAPL, CVX, F, GE, GM, JNJ, KO, MCD, T, XOM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.