Personal Wealth Management / Expert Commentary

What Are the Best Ways to Generate Income in Retirement? Ken Fisher Answers

In this video, Ken Fisher addresses retirement investors’ common desire to generate income from their portfolios and why folks may approach this incorrectly.




Title Screen Appears: What Exactly Are Homegrown Dividends?

A man appears on screen. A banner identifies him as Ken Fisher, Executive Chairman and Co-Chief Investment Officer of Fisher Investments.

The banner disappears and the camera remains focused on the man.

Ken Fisher: often people want to generate what they think of as yield from their investments and there's an age-old saying that people have had since before I was ever born--over years ago--that I'll spend my income but I won't spend or invade my principal.

Ken Fisher: Now in reality I understand why they would say that. If you do things correctly it's actually better to think in a different way. And that better way is to think about what's your total return over time how much of that total return including appreciation and dividend or interest income, however that comes to you, you're prepared to spend?

Ken Fisher: And then when you look at your portfolio—or your investments in total regardless of how you think of them--and you think of that total return, minimize the kinds of components that generate taxable effects for you like big dividend payers or big interest payers--hard to find a big interest payer these days.

Ken Fisher: Instead take that component that's a small piece of your total return and spend it out of your principal because whatever is actually already yours, unless you're incurring a capital gain to get it, has no tax effect at all and you get a tax savings. This is what I’ve always called a homegrown dividend.

Ken Fisher: The home grown dividend that you take from your principal and things not appreciated has no tax impact and therefore you come out tax ahead.

Ken Fisher: If you have for example instead of putting yourself into fat dividend-yielding stocks that may not have appreciation, you put yourself into things with higher total return and you take a little piece of that over time to generate the homegrown cash flow you need.

Ken Fisher: You really should think of it as cash flow not as principal or income. And in that regard I encourage you to try to pursue a policy of higher total return, lower taxable effect via homegrown dividends.

Ken Fisher: Thanks.

The screen wipes to display a set of financial disclosures from Fisher Investments.

“Investing in Securities involves a risk of loss. Past performance is never a guarantee of future returns. Investing in foreign stock markets involves additional risks, such as the risk of currency fluctuations. The foregoing constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice or a reflection of the performance of Fisher Investments or its clients. Nothing herein is intended to be a recommendation or a forecast of market conditions. Rather it is intended to illustrate a point. Current and future markets may differ significantly from those illustrated here. Not all past forecasts were, nor future forecasts may be, as accurate as those predicted herein.”


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