Status update of my income account investments vs. regular investments

Some folks have been asking how my income account has been doing overall, especially in comparison to the market. If you remember, I wrote about setting this up back in May of 2017. Using the concepts outlined in Ben Stein’s book “Yes you can be a successful income investor”, I created an account specifically designed to throw off dividends, in an attempt to see if one could create a retirement with this sort of setup. The hope was that the account would throw off sufficient income, and still grow to match inflation.

So how has it done for the last several years? Because it’s an inherited IRA, I have to take money out of it every year, based on my age at the time my father passed away. I will factor that in. I’ll compare the performance to my overall investments in one of my IRAs (which contains a mix of 52.5% stocks, 17.5% REITs, and 30% bonds).

Year Strech IRA Dec Strech IRA Yield Strech IRA Growth % Vanguard Dec Vanguard Yield Vanguard Growth % US inflation rate
2016 $129,811 3.42% 0.00% $262,985 2.20% 0.00% 2.10%
2017 $139,119 3.37% 3.80% $298,748 2.42% 11.18% 2.10%
2018 $136,583 3.62% -5.44% $234,647 3.22% -24.68% 1.90%
2019 $146,994 3.75% 3.87% $273,917 2.33% 14.41% TBD

Overall, the stretch IRA’s allocation of 25% dividend stocks, 25% REITs and 50% bonds have thrown off an average of 3.58% dividends annually, and has grown from Dec 2016 to July 2019 at a rate of 2.50% (pretty much keeping up with the US’s low inflation rate).

The Vanguard account has had a dividend yield of around 2.66% (not too shabby), but due to the bad 2017, it has grown at a negative -3.81% for the same time period. However, its growth over the last ten years has probably put the dividend account to shame. If you look at the spreadsheet above, the Vanguard account beat the stuffing out of the Dividend account in 2017 (and appears to be doing it in 2019)

The question comes down to are you willing to have some “low points” like 2018, to get the higher growth periods, or do you want more stability, where it doesn’t crash as much (compare 2018’s -5.44% drop in the dividend account versus the -24.68% in the Vanguard account!). I’d like to think that you could get by with the dividend account once you hit FI and want to follow the 4% rule, but like most folks, I’m very concerned about inflation. The Weimar republic is a brutal lesson, and the US continues to spend way more than it takes in.

For folks who want to know, here is a quick rundown of my dividend account:

Chevron Corp CVX  $               124.44 50.0
Cisco CSCO  $                  54.73 150.0
Healthcare Realty Trust HR  $                  31.32 250.0
Hospitality Properties Trust HPT  $                  25.00 300.0
Ishares Preferred PFF  $                  36.85 455.0
Realty Income Corp O  $                  68.97 100.0
UMH Properties Inc UMH  $                  12.41 600.0
Verizon VZ  $                  57.13 100.0
Vanguard Total Bond Index VBTLX  $                  10.93 2984.6
Vanguard Int-term Bond index VBILX  $                  11.70 2802.4

Hopefully, this is useful to folks. I’ll continue to monitor in the years ahead and provide regular updates.

Have a great summer!

Mr. 39 Months

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