August, Meh

 August was not a particularly notable month.  I guess we need these months to make the notable ones more notable.  My umbrella insurance policy was denied due to my wife hitting a parked car outside my condo (it's not what you'd think, but I won't go into details for her sake) last summer.  We will qualify when it falls off next year.  I was given a third party insurance offer which was about 3x more money until next year which I refused.  I will wait...

I did open a Roth account.  I guess I am going to use this as part of my tax harvest strategy, for now.  While you can't tax harvest inside a retirement account, you can harvest into one.  So I sold some low yielding losses and bought some higher yielding stock from different companies inside my Roth.  I guess the end goal (someday, a long time from now) would be to move everything into a Roth.  That way all my dividends will be tax free, no matter how much I make.  I suppose I can outline the VERY long path to doing this:

1. Tax harvest into Roth up to $6k per year ($7k when I hit 50, not that far away).  Repeat ad infinitum or until I run out of money.
2. When I retire, roll my 401k into a traditional IRA.
3. When the stock market crashes, roll from my traditional IRA to my Roth IRA up to the top of my current tax bracket.  This rollover will be taxable since you are turning pre-tax retirement money into post-tax retirement money.  I believe there is no limit to doing this, but I don't want to put myself into a higher tax bracket.  Repeat ad infinitum or until I run out of securities in my traditional IRA.
4. Earn all of my income tax free, regardless of tax bracket.

The only problem with this, will be selling my high capital gain stocks in my taxable brokerage account to move them to a Roth, like TGT, WPC, or MA.  I will pay so much in taxes just to move them over, it probably won't be worth it.  If I did decide to take the hit, it would be for my kids, which is another topic I need to research.  What happens to these accounts when my wife and I pass into the next life?  This is something for another day, as it is not at the top of my list, but I should explore it soon.

I did try to open a traditional IRA with my brokerage, and they said I cannot do it because I have a 401k account with my employer.  After a few choice words (cue Muttley's "Rassum Frassum") about my 401k, I decided to look forward to the day I would be free of the shackles of my 401k and be able to control my investments completely.

I was able to get a big gain in dividends this month.  My wife magically made a big sum of money appear and she invested in some high yields so she could get more money for herself each month.  I also maneuvered my 401k to increase my taxable dividends I receive from my company's stock that I can have in my 401k.  In short, we are now making $910 a month in dividends!

I did say I would share my proposed retirement budget this month.  It is by no means finished, but with current bills sans children here is what I can expect initially.  I used some numbers from real charges I have today, and some I derived from estimates for retired couples in my location:

	Annual
Housing	$9,809
Property Tax	$807
Maintenance (estimate)	$744
Repairs (estimate)	$744
Home Insurance	$424
HOA/Water/Sewage/Trash/ Landscaping	$4,008
Phone (wife cell)	$660
Electric	$1,560
Umbrella Insurance	$310
HOA (yes I have 2 HOA fees)	$552
Transportation	$7,851
Fuel (estimate)	$800
Car Insurance	$726
Car Maintenance (estimate)	$1,000
Car Repairs (estimate)	$450
Car taxes & fees	$360
AAA	$91
Travel	$4,424
Health Care	$6,719
Samaritan Health Share	$3,360
Deductibles & Meds - use HSA	$3,359
Groceries & Restaurants	$6,303
Misc	$2,282
Pets (?)	$322
Hobbies	$1,000
Entertainment	$600
Internet	$360

Total:  $33k a year, or $2750 a month.  That seems conservative, as I also tithe (I should do a blog on tithing vs. offering vs. usury vs. what qualifies for these at some point) so I will still be aiming for $40-50k a year combining my taxable with my 72(t) income.  I can effectively head up to 80k+ (the + being the automatic tax deduction, so closer to 100k) before going from the 12% tax bracket to the 22% tax bracket.  22% is really where I don't want to be when I retire.  The ultimate goal is to live essentially for free and pay no taxes, but I'm not Elon Musk, so realistically I will just aim for everything in my Roth IRA for no taxes, and eliminating as many bills as possible.  Looking forward to Friday's jobs report.

Dividend Increases & Special Payouts

• Old Republic (NYSE:ORI) declares $1.50/share special dividend.  ORI you SPOIL me.  With the special $1 dividend payout last January and now this!  One of the best dividend paying stocks I own!  Word on the street is a hedge fund pressured them into this because of all the home sales increasing the home insurance part of closing costs.  Either way, I'll take it!
• Main Street Capital (NYSE:MAIN) declares $0.21/share monthly dividend, 2.4% increase from prior dividend of $0.205.  They barely made their dividend streak with this increase.  Not a lot, but they are bringing it back slowly.  My wife was delighted, she owns a big chunk of our MAIN securities and has been waiting for an increase for a long time.
• August Purchases:

• Hormel (HRL) 15 
• Verizon (VZ) 65 
• McDonald's (MCD) 2 
• Xcel Energy (XEL) 3
• W.P. Carey (WPC) 10
• Omega Health Care (OHI) 19
• Chevron (CVX) 15
• QYLD (I'll explain this one next month) 7
• Main Street Capital (MAIN) 11

Umbrella Insurance Policy

No, I don't work for an insurance company, but I'm going to mention something to consider if you have

your home paid off and your taxable brokerage account is growing.  

One of the few advantages your 401k/IRA has over your taxable accounts (savings/checking/brokerage) is that it is protected against lawsuits.  That means someone could sue you for everything but can't touch those retirement accounts.  So what do you do if you have a decent amount put away and a home?  You could lose it tomorrow in this litigation-happy country.  Or, for a few hundred bucks a year, get an umbrella policy.  

I'm not a fan of insurance - I know all the insurance companies do is invest your money in dividend stocks, then pay you from the dividends they receive.  That's why I talked my wife out of a term life insurance policy and she put it into dividend stocks.  That's why I pay legal minimum liability insurance on used cars I pay cash for (and can replace if repairs cost too much).  That's why I get the lowest home insurance for my condo.  That's why my kids will keep their driver permits until they leave the house (then they can get a license and pay for their own insurance).

I'm not a cheapskate, really I'm not.  I just think that money can be used to buy my own "insurance" via dividends instead of lining someone else's pocket.  Heck, I invest in an insurance company for dividends, and they are the only ones who pay bonus dividends (Old Republic ORI).  This is why an umbrella insurance is perfect for someone who doesn't want to waste money on car/home/life insurance.  

Another option is to start a business/LLC and put everything under it, but then there's business insurance and other costs you would pay anyway.  So, not going that route, here's how this policy can protect your assets, for much less than what you would pay for full protection on your car/house/life:

• Someone gets hurt on your property (even people you invite over)
• You cause a fire that damages neighbor's homes (listen up condo people)
• You crash a boat or RV you rented on vacation
• Your teenage driver hits a pedestrian
• Your dog bites someone and you get sued
• You post a review on Yelp that is negative and you get sued for defamation

You might say "Hey, I have insurance that covers some of that stuff", but your insurance has limits.  This goes above and beyond those limits up to a million bucks.  Now, my net worth (minus retirement accounts) isn't near that much, but it will keep me from getting my wages garnished after I lose everything else.  And I get to SWAN (sleep well at night).

With inflation rising, evictions starting tomorrow, and crime pretty much all over the place these days, it is good to have SWAN insurance to go with my SWAN stocks.  I like to look at it as retirement insurance - protecting my income.

I have also been assembling my retirement budget, so I know the bare minimum I will need to survive.  The good news is, my dividend income is almost at that point.  Once I have the bills covered by my taxable account, I can then pursue other things with the money from my 72(t) disbursements (see last month's blog).  That should hold me for 10+ years, then social security will kick in at 62, and there will be a 3rd source of income.  I will attempt to share my budget next month.  "But what about inflation affecting your current budget."  Listen, folks, if inflation is going up by 6%, and I'm getting dividend increases greater than that, I think I can handle it.  Dividends make future budgeting so easy... see if you can pay for today, because then you sure as heck can pay for tomorrow.

The delta variant is on the rise, and it looks like the vax people are in danger as well (1% of those vaxed have caught it so far).  That coupled with misdiagnosed fall flus and colds will make this an interesting year.  Most businesses will refuse to close, and will prefer to have you sign a waiver and mask up.  I hope this blows over in 3 years when I retire....

Dividend Increases & Special Payouts

Essential Utilities (NYSE:WTRG) declares $0.2682/share quarterly dividend, 7% increase from prior dividend of $0.2507.  Drink more tap water, use more gas.  Please.

July Purchases:

• Verizon (VZ) - 10
• Main Street (MAIN) - 3
• Omega Healthcare (OHI) - 4
• Chevron (CVX) - 4
• ONEOK (OKE) - 7
• Wisconsin Energy (WEC) - 5

Retirement figured out! Target breaks my personal dividend increase record!

 Well, I was going to start a several part blog post about various retirement schemes for the FIRE set, and consider the pros and cons of all of them.  Instead, I found the perfect escape hatch for me in the process, so I will just post about that instead.  After all, it is my blog.  I cleared it with co-workers, discussion groups online, and of course my wife.  It is pretty simple, and although it isn't perfect, it is pretty darn close.  And it is very rare - because it involves 72(t) AND dividends, as opposed to one or the other.

And let the music commence:

This does not work for everyone, but it works for me, where my plan was to empty my 401k/Pension and buy dividend stocks in a taxable account.  Unfortunately, at 51, I can’t take out my money all at once without the mandatory 10% penalty and ending up in a higher tax bracket for a year (or 2 years if I bridge December/January withdrawals).

But what if I could buy all those dividend stocks after my rollover to a traditional IRA, then take out dividends every month (or weekly or annually, my choice) without penalty, and only paying income tax on those dividends, which will keep me in a specific tax bracket during the process?

What if I could keep my money in those stocks without having to sell them if the market is down, and let it grow with the market, while dividends grow as well?

Then what if I could change that amount of money during my trip to 59 ½ years old (alas, only one time allowed to change the amount disbursed from the IRA).

Let me introduce you to the SEPP 72(t).  The method the IRS allows you to remove from your 401k if you are 45, fired in the tech field, and are not economically viable to get another job, yet can’t claim disability.  You have to use it for 5 years, or until 59 ½, whichever is longer.  For me, it will be the longer.  Today, I will show you how I will use this method to my benefit.

 Please utilize it to fit your situation, or at least poke holes in it, because I haven’t found many at all (cons listed at the bottom).

Mad Fientist’s flowchart (https://www.madfientist.com/how-to-access-retirement-funds-early/), modified by me.  Click on it to expand size.

1.  I retire at 50 or 51.  Kids are out of the house, debt-free, big purchases paid for.

2.  I Roll over my 401k and pension into a traditional IRA with my broker.  My broker said they can help with initiating the rollover 2 months before retirement.

3.  I invest my IRA in the quality dividend stocks I know and love to earn 4% yield on average (I may adjust up to 5-6% depending on the environment and my annual needs).

4.  I leave some cash in the IRA for the next 3 months of equal disbursements (most dividend stocks are quarterly, so the ball really needs to start rolling after 3 months).  There is room to play with this part, but I don't want to exceed expected dividends on my disbursements expected.

5.  I file for a 72(t) (file early to get equal disbursements each month) using this amortization table to determine how much I *must* take out each year: https://www.bankrate.com/retirement/calculators/72-t-distribution-calculator/  I suggest a tax advisor setting this up, as if you take out too much or too little, you will get the early penalty.  Keep in mind the “Reasonable Interest Rate” is 120% of the Fed’s mid-term rate.  Right now the rate is low, so in 3-4 years, it will hopefully bounce up for more money per year.  Fed’s midterm rates can be kept track of here:  https://www.pbgc.gov/prac/interest/historical-applicable-mid-term-rates  You get to choose from the previous 2 months which rate you want to use (optimally the higher of the two – and even better if you wait for a good one).

6.  The amount I withdraw each month, is equal to or less than the amount of dividends I receive that month.  That way I don’t need to sell my holdings in a down market, like most people need to do.  Since some months may pay more than others, you will need to have that cash on hand in your IRA I talked about in step 4.  As long as dividends exceed your disbursements, and they eventually
will, this shouldn't be a problem.

7.  Keep an eye on midterm rates once starting the SEPP cycle.  As your IRA weight and dividends increase over time, you get one opportunity to change the amount, so you can upgrade once during your 72(t) “lockdown”.  Adjust accordingly to stay in the tax bracket you want (https://taxfoundation.org/publications/federal-tax-rates-and-tax-brackets/).  You can always use HSA until 65 to hide money, and of course, charitable contributions, which can be tricky with the standard deduction already eliminating your taxable income.  Please consult a tax expert for your specific situation.

8.  I continue to live off these SEPP disbursements and my taxable dividend account with my brokerage combined income until 59 ½.  At that point I have other options.  At 72 I have to start taking money out… even if I don’t need to.  

Pros:

• I avoid the 10% withdrawal penalty.  You can do this plan without the SEPP so you have no limitations, and just pay the penalty when you need money, it’s not a big deal sometimes, and I may consider it, so that way I can take out more as my dividends increase, it will depend how much money I need and how much is in my IRA at age 51.

• I never deplete my IRA holdings as long as I receive more dividends than I need to pay out per the IRS.  My IRA is untouched until 65, it grows, and dividends increase, which makes it grow more as I reinvest.

• My money is safe from lawsuits in an IRA.  This means I don’t have to run a business with ROBS, start an LLC, etc.  I might want to get an umbrella insurance policy for my non-IRA holdings and house.  Best rule is not to flaunt your wealth, as you become a target.  ROBS or an LLC are good if you want to write off your house and expenses (like Musk does).

• I avoid market volatility (as dividends do).  Since most people sell their securities to fund a 72(t), I am living off the dividends of my securities, and not at the whim of the value of my securities.

Cons:    

• The amount is FIXED, and except in the case of hardship, that is ALL I can take out.  However I think I figured out a way to work the system with my health share to get money out for medical purposes from my IRA/HSA.
• Excess dividends (due to inevitable increases) I can’t pull out, but I can reinvest them in my IRA, which gives me more when I hit 59 1/2.
• Jumping to the next tax bracket (in case the brackets change), a nice problem to have if you have a lot in your 401k/SERP to allow for a large SEPP disbursement, but depending on your situation, you might be able to use your one time change to actually *lower* your disbursements.  Externally I could just liquidate a few underperforming dividend generating shares, or donate a lot to charity.

This works anytime you leave your company: retirement, fired, quit, etc.  While I am not yet ready to live with a lower income (kids need to leave the nest first), it is nice to know this is available to help pay the bills between jobs as layoffs can happen.  You might be able to do it right now... there's a lot of people out there with larger 401ks than me.

 The step my wife and I are working on now is being mentally ready for retirement.  This means strengthening relationships (family and friends), planning for lifestyle changes, possible health scenarios, not tying personal worth to a job, etc.  I suggest anyone retiring to prepare for the psychology as well!  There’s books, read ‘em!

Please comment if you see a hole in my plan.

And now back to my regularly scheduled blog :)

Inflation is increasing.  My personal portfolio is on a Bull streak, smashing the previous record of 7 months of increases.  That isn't good.  That means stock prices keep going up, and yields are going down.  So I am taking a breather this month, and for the foreseeable future, from buying too much.  I will continue to increase my Verizon holdings to match the others for diversity, then bring up some of the laggards.  Meanwhile, I will work on the condo for the last remodel and some outdoor furniture, and pay down debts incurred from this.  With my 72(t) plan, I'm feeling a lot better about my retirement income, and surprisingly, my 401k (which I still dislike, and the company that manages it).

The Great Reopening is in full swing, and the market has it already built in.  Target, now a major player in the consumer discretionary sector, increased their dividend by 32.4%!!  That beats Abbott from before.  Truly a beautiful sight!  Imagine getting a raise like that from work without a promo or job change.  No, I can't imagine it either.

My annual dividend income is officially in the lowest U.S. income tax bracket.

Dividend Increases & Special Payouts

Uh, yeah..

• Target (NYSE:TGT) declares $0.90/share quarterly dividend, 32.4% increase from prior dividend of $0.68. A new record!

June Purchases:

FAST     3

VZ         15

ABT        9

That's all folks

AT&T is out, Verizon is in, Rule of 72

 

What Happened? 

AT&T announced a restructuring plan.  It announced a merger with its TimeWarner assets with Discovery to create a new streaming company.  Sounds good, right?  AT&T sheds TimeWarner, and a merger, what could go wrong?  The stock went up 4%.  Then people read the fine print:  

"Attractive dividend – resized to account for the distribution of WarnerMedia to AT&T shareholders. After close and subject to AT&T Board approval, AT&T expects an annual dividend payout ratio of 40% to 43% on anticipated free cash flow¹ of $20 billion plus."

Doing the math on the new payout ratio, you get FCF payout from $15B to $8B.  I did not sell on the news right away.  I wanted to make sure this was correct.  Basically, you will get a piece of the new TimeWarner spinoff, and AT&T stock with a 4% yield as opposed to the current 6% yield.  Now if you are looking for value and capital gains, it is not so bad of a deal.  If you can handle a 2-3% cut to your income, then keep it.  However, this goes against my golden DGI rule:

"If a dividend is cut, sell."

I don't want a piece of a company that doesn't pay a dividend (TimeWarnerDisco spinoff), I don't want to own a media company (I owned AT&T before it bought TimeWarner), and I want the best in the communications market.  Now I didn't own AT&T because of its growth, but I did own it for its high dividend yield and free cash flow.  However the market is saturated, and there are better players out there, like Verizon.

Verizon isn't looking to become a media giant, and my son has owned them for a few years to his profit.  I am not a big fan of this sector as it is, because it is saturated, but I might as well hold something a little more stable and safe. 

I did sign up for after hours trading, and seeing the direction it was going the next day as the institutions  were continuing to rotate out, I made my biggest sell-off ever.  What was the damage?

Well, since the stock was essentially flat, I was in the red for $800 after the first day drop.  However, I had collected $900 in dividends over the past 4 years I owned it.  I netted $100, which is pretty pathetic for a 4 year investment.  However, I can tax harvest (my first this year) for -800 on my taxes (-3k is the limit every year), which helps reduce my taxes, and still walk away with a net profit, which is the fun of tax loopholes.

Do you own it?  Should you sell?  It depends on your situation.  If you show a profit (however minor), and benefit from tax harvesting, why not?  The $11k I received from selling I dropped into OHI, OKE, and a small amount into Verizon.  This increased my monthly dividends by $1, so I actually made out, but those two former stocks are the riskiest in my low-risk portfolio.  So we will see how things progress.

Meanwhile, I learned about the Rule of 72.  Just a fun little metric to look at.  I always try to figure out how long it takes for a dividend stock to pay for itself.  Typically a 5% yield that never changes should pay itself off in 20 years.  However, stocks go up, and yields increase.  So it should theoretically be less than 20 years.  

This is typically covered in my Equity Cost column in my holdings spreadsheet (see holdings in the menu).  I take what I paid for it, minus the gains in the stock since then, minus the dividends received.  Once this number goes negative, the stock has paid for itself.

Rule of 72 is better, because you take into account the stock market growth rate (and this numerator changes from 69-75 depending on yield).  I am going to try and fine-tune it a bit more, since it initially applies to interest rates, but it can be converted to handle stocks.  However, it can be far from accurate.  See below.

I have been doing this for 4-5 years.  I already have 3 stocks that have paid for themselves.  My lowest yielder, MasterCard, which has increased in capital gains value at an insane rate, paid for itself first.  Rule of 72 calculates it wouldn't pay for itself until 73 years from now!  My other two, QCOM and TGT had such huge growth in short amounts of time, they also met their equity cost in less than 16 and 18 years, respectively.  

So, it might need some fine-tuning, but it is a good metric for the slower stocks, to give me an idea on when they should pay for themselves, and I should always aim for less than 20 years.  Now this also makes me wonder if I should cash out fast growers like Target (tripled value) to my initial investment, and reinvest the excess into something higher than my yield on cost (YOC), is another matter.  I'll expound more on this next month...

Dividend Increases & Special Payouts

None!  Target is expected to have a massive increase in August, we will see...

May Purchases: (not much!)

T	-322
OHI	150
OKE	50
VZ	35
QCOM	4
ABT	2
CVX	3

More Fun with Dick & Jane, Oh Hello OHI, Biden's Plans for Dividends

 Well the experiment with my Fidelity "Roth" 401k was a bust.  Because it is a 401k, and not an IRA, it is beholden to the withdrawal rules.  Therefore I quickly changed to a pre-tax 401k, still holding at 5% of my income to be matched by my employer.  After doing the math, and checking on an article by the "Mad Fientist" It still makes sense to take advantage of matching.  Even though I still think I could make more with my $100, the math shows that after early withdrawal penalties and taxes, my matched $100 would come out at $135.  This is assuming the ETFs that Fidelity uses do not increase or decrease over the next 3-4 years.  The key here is if you are married, you don't want to make more than 80k a year in retirement, otherwise you jump from 12% in taxes to 22%!  So I choose pre-tax now, withdraw enough after I retire each year to take me to 80k, then invest it.  It may take me awhile, I have quite a chunk in there (I wish it were otherwise).  For now, the pre-tax works.

Well, it is happening.  I am running out of good companies with good yields, and I am overbought on the companies that do.  However, after studying Justin Law's list of Dividend Contenders, Champions, and Aristocrats, I did find one... Omega Healthcare (OHI).  It is a REIT, and it caters to nursing homes, retirement homes, and senior living.  Some things about this REIT that caught my eye:

• They are funded mostly by Medicare and Medicaid (80-90%).  While this can be affected by politics, it won't the next 4+ years with Biden at the helm. 
• It survived the Pandemic.  Surprisingly, this management team not only survived, but recovered, and also took advantage to buy up other senior housing REIT units.  Impressive!  Also, Uncle Sam didn't stop payment during the pandemic either.  Seniors were affected the most, so this speak a lot to their management being on top of things.
• It has 16 years of increased dividends, so on its way to being an Aristocrat someday.
• Sports a 7%+ yield.
• It helps me spread out my weights.  I was overbought on some stocks, now I can buy more of them.  The only drawback is that REITs are now king in my portfolio, not consumer staples.  I will work on that, but right now consumer staples are highly priced due to success during the pandemic (yes, they are still cool).

I bought 2 lots this week.  Yep, my first time buying in "lots" (a bundle of 100 shares).  No waiting to be grouped with another lot as my purchases usually go, they were bought almost immediately.  They have their earnings next week, so we will see if I made a good call.  Now I have 29 stocks.  Only one to go, right Creed?

Biden announced a proposed increase in capital gains tax.  At first glance, I would say "so what, doesn't affect me.  I'm keeping my stocks forever.  Plus, I'm not even that rich."  Yeah, but what will the big money do?  They have nowhere else to put their cash, so they might just cash out their capital gains now, and put it into dividend stocks.  And what will that do???  Decrease yields.  When will the Dems learn that when you increase taxes on the big guys, it just hurts the little guy.  Like when they increase taxes on corporations, it only decreases headcount, increases automation, and leftover costs get passed right on to the consumer.  Biden Hood "Robbing the rich to give to the poor" does not work.  For now I will be watching carefully, and investing in higher yields assuming they will dry up.  If Biden was smart, he would raise returns in municipal bonds so the wall street bros will go there instead of dividend stocks.  Let's cross our fingers.

On the plus side, I hit another benchmark, now making 800+ a month on dividends ($825 actually).  That comes to $191 a week, $27 a day.  Over a dollar an hour!  Catching up to you Buffett!  :P  Close to making 10k a year... I should hit that in the next 1-2 months.

Dividend Increases & Special Payouts

• Procter & Gamble (NYSE:PG) declares $0.8698/share quarterly dividend, 10% increase from prior dividend of $0.7907 Fantastic increase from a consumer staple stock!  PG is kicking butt and taking names, but with increased production and transportation costs, and the reopening of the economy, this may be the peak for awhile.

• Southern CO (NYSE:SO) declares $0.66/share quarterly dividend, 3.1% increase from prior dividend of $0.64. I expect this to be better going forward, now that their nuclear plant is finished.  C'mon hot summers!
• Johnson & Johnson (NYSE:JNJ) declares $1.06/share quarterly dividend, 5% increase from prior dividend of $1.01.  Despite Covid setbacks, JNJ takes a licking and keeps on ticking!
• Chevron (NYSE:CVX) declares $1.34/share quarterly dividend, 3.9% increase from prior dividend of $1.29.  I expect Chevron & AT&T to benefit from the "Rich Rotation".  I see better raises in the future.

April Purchases:

Fun with Dick (Roth) and Jane (401k)

I was going to lament how much I miss the Trump stock market (bad news tweet = buying opportunity, good news tweet=back to normal), but last night I had a flash of brilliance. 

 I have more disposable income now than I have ever had in my life, but still not enough to retire. So I was looking to see other ways to increase income. My employer recently started matching 401k contributions, and last year they did an introductory 2:1 match for a year, which I participated in for a pre-tax account, but this year when it converted to 1:1 I stopped contributions altogether. Now I know many of you are saying "But it's free money! Why would you do something stupid like that!" Well, it *is* free money, but I make more money using my after tax money on dividend growth stocks (and in the long run) than I do from a managed pre-tax 401k (ETF-only no dividend) institution, that's why. Remember, I'm not the genetically healthiest person around, I don't plan to live forever like my 401k and social security accounts think I will. Then I started wondering - can I get my employer to match, then just take the money out? No I can't, unless I claim hardship, which I have nothing to back that claim up with if I'm making enough from dividends. Then I saw something interesting: My employer also matches Roth contributions:

Uhm, wow. Because, this:

See where I'm going here? But then you ask, "What happens to the money your employer matched (and any gains on both contributions) when you take that money out?"

So, to summarize: I give my 401k instituion 5% of my paycheck to deposit into a Roth 401k, my employer matches that 5%, then I remove that contribution whenever (say, 2 weeks later), invest in my dividend stocks, my 401k instution takes that matching amount (and any gains) and puts it into a traditional 401k account (since it is pre-tax) and I let it sit until I retire and take that matching amount out (sooner with penalties, later without). Simple, right? No, of course not, not when it comes to institutions. I have been struggling with the institution my employer uses since day 1. When I leave my employer, I can't wait to roll that money into my own IRA, or even better a ROBS . 

 So I called my institution, and of course I was sent up the chain with my "complicated" question. After stating this was recorded, and restating my name (ever feel like you are being set up for a court hearing?), I received an explanation which made no sense. "So let me get this straight, I allocate $5k to my Roth 401k, my employer matches $5k, and I can only take out $600, $100 of which will be taxed as though it was earned." What??? I laughed inside as this guy started to go into his pitch of getting me invested for much more, to which I reply I'll likely be dying before I'm 65, so what's the point? He never missed a beat, and kept going with his spiel without an ounce of empathy. 

 Finally, I did get him to show me where the plan information is, and all I could find out about what he was talking about was this: 

"You are always 100% vested in your contributions and any rollovers made to your 401(k) Savings Plan account. You are also 100% vested in any 401(k) match contributed by (Employer)." 

and 

"Excess contributions of Roth contributions are distributed tax-free, but earnings are taxable. If you made both Roth and pre-tax contributions to the 401(k) Savings Plan in excess of the IRS Annual Contribution Limit during the calendar year, excess contributions will be taken from the pre-tax source first followed by the Roth source. Please note: return of Roth and/or pre-tax contributions could result in the forfeiture of associated matching." 

Which makes sense if it only works with excess contributions (Roth limitations). So, after all this inconclusive information, I went ahead and decided to match 5% of my income into a Roth 401k. I really have nothing to lose, if I can't touch it until I'm 65, then I guess I'll be getting it then (or my kids will). Or I'll just take it out with a 10% penalty, but doubled money (the only reason I might stay in it).  

But, right after it goes in, I will see if I can remove my contribution and see what happens. If the employee match stays, then I'll keep adding and removing, magically making free money for when I'm 65 appear, and keeping my after-tax income. If the match doesn't stay, or they won't give me my money back, then I will simply turn off the feature, and continue as normal, waiting for this boring market to bubble and crash so I can add more dividends. There's a good chance this might happen in September, when the stay of execution for people not paying mortgages and rents will come due...

Dividend Increases & Special Payouts

• Qualcomm Incorporated (NASDAQ:QCOM) has approved a 5% increase in the Company's quarterly cash dividend.  The quarterly cash dividend will increase from $0.65 to $0.68 per share and will be effective for quarterly dividends payable after March 25, 2021.  This one has been really growing in value, too.  I picked a winner.
• Realty Income (NYSE:O) declares $0.235/share monthly dividend, 0.2% increase from prior dividend of $0.2345.  Just a hair, but I'll take whatever I can from REITs after the lockdowns.

March Purchases:

Rotations

The stock market is kind of a crystal ball. It prices itself based on what the majority of investors and traders *think* is going to happen. Now that vaccinations are up and cases are down, money is leaving tech/entertainment (and others) and rotating into energy/travel (and others). I haven't noticed too much rotation out of consumer staples... yet. While I don't expect any shocking changes to this path (the establishment is back in power), if any happen I'll try to buy up what I can while blood is in the streets. 

 I think much of this "reading of the future" is also the expectation of a democratic congress passing another bailout bill, and a possible positive jobs market report-which should be only natural as everyone goes back to work. 

 The housing market is starting to bother me a bit. We are definitely seeing a bubble, and rentals/leases are going to have to have a day of reckoning soon. I'm glad I bought my latest house when I did, as it has gone up 20% in only two years, but I don't know if I can expect it to maintain that much longer, or even continue to increase. Not that it matters, I don't plan on selling - I expect this to be my last home before the old folks home!

Big homes require more upkeep than I'm willing to expend energy or money on. But I digress... 

 I have hit another benchmark, attaining over $700 a month in dividends ($711). The benchmarks are still slow, but happening sooner. I still remember hitting $600 a month. Meanwhile I am finishing up getting my home ready for retirement in under 4 years, while putting everything else in dividend stocks. Bills that I can pay ahead are paid to the end of the year, which helps, and no debt whatsoever. I have found that having a nice chunk of cash on hand to "borrow" from myself is quite helpful. Not only can I get large ticket items last minute, but I can also take advantage of a crash when it happens. I'm not quite sure what the magic number is to have on hand, but I think having enough for a quick small car purchase is best (low 5 digits). 

Government checks have been amazing for the market, and for my personal retirement prep. I am not a fan of them, as inflation is a shadow looming over the USA, and only a fool would stick it in a savings account or mattress. The best way to keep up with, and ahead of inflation are dividend stocks, as they are usually raising their dividends on par with, or ahead of inflation. At the same time the effect on the dollar is reflected in share prices. So make your money work for you... Don't sit on it, don't buy a depreciating asset with it (like a car - Uber instead). 

 So my advice is this: If you *need* something (food/home/transportation) get it. Then, if you have debt, pay it off! If you need a vacation, make it cheap (RoI)! Next, invest it. Appreciating asset, small business (things are about to open up), growth stock, or best of all, a dividend stock. And if you are so rich and retired, then gamble on crypto, meme stocks, or Vegas, but I wouldn't do those, even if I was rich and retired. There's so many ways you can give back instead. 

Dividend Increases & Special Payouts

• Xcel Energy (NASDAQ:XEL) declares $0.4575/share quarterly dividend, 6.4% increase from prior dividend of $0.4300. Boom!
• Home Depot (NYSE:HD) declares $1.65/share quarterly dividend, 10% increase from prior dividend of $1.50. Boom!x2
• Old Republic (NYSE:ORI) declares $0.22/share quarterly dividend, 4.8% increase from prior dividend of $0.21. Nice!
• Watsco (NYSE:WSO) will raise its dividend by 10% to $7.80/share!

February Purchases:

HD 13

OKE 6 

WTRG 15

XEL 10

ABBV 3 

MCD 2 

WEC 5 

APD 3 

IP 55

JNJ 4 

HRL 6