I am going to keep track of the real time outcome of three different strategies. The real time frame of this exercise began in July 2017. I will try to calculate as close to precision as I can, based on what will really happen during the 8 years between July 2017 and June 2025.
For the SCORECARD. I will use Vanguard's Dividend Appreciation Index Fund Admiral Shares (VDADX) as my investment choice for all three retirees. Vanguard defines this fund:
"This low-cost index fund seeks to track a benchmark that provides exposure to U.S. companies that have a history of increasing dividends. The fund focuses on high-quality companies that have both the ability and the commitment to grow their dividends over time.
One of the fund's risks is the possibility that returns from dividend-paying stocks will trail returns from the overall stock market during any given period. Another risk is the volatility that comes with the fund’s full exposure to the stock market. An investor with a well-balanced, long-term portfolio who seeks some income and exposure to dividend-focused companies may wish to consider this fund."
The expense ratio (as of 2019) is .08. It's below most of the funds in this category and the fund's performance is in the ballpark of the Benchmark of the S&P 500.
For the SCORECARD, to keep the primary three strategies simplified, I've invented three retirees. They are: Willie Waiter, Irma Investit, and Sam Spendit.
Willie's strategy is to draw down his IRA to cover living expenses and will wait until he will receive maximum monthly benefit from Social Security, at age 70 1/2.
Irma Investit has a hybrid approach of sorts. She claimed at the earliest possible time (on her 62nd birthday) and will deposit the entire benefit check into her brokerage account. She does not work, so she cannot add to any type of IRA with this money. She will withdraw enough from her existing savings to end up with the net same amount as if she had spent the benefit check.
Finally, Sam Spendit will use his benefit check to help cover living expenses, but will set up a special allocation within his IRA to track against Willie and Irma for overall position. All three of these retirees have identical amounts of $200,000 in their Vanguard Dividend Appreciation Fund allocation in their IRA accounts on their 62nd birthday. They also have identical work records and therefore received the same information regarding their options. That is, when they reached age 62, their benefit was going to be $1971 per month if they filed for benefits at age 62, $2643 if starting at Full Retirement Age (for them, born in 1955, 66.2 years), and $3516 if waiting until age 70 to begin receiving benefits.
This blog is a month by month evaluation of how these strategies are working out.