My portfolio is of course paying much less than two years ago as far as stock dividends and Certificate of Deposit interest are concerned. Naturally I have cut expenses as much as I can without sacrificing lifestyle quality (too much :-) ). Also I have some job opportunities, the sort of jobs that can supplement my income and bring joy in retirement. The question on my mind for several months now is how and whether to balance the following:
(1) drawing down principal. I have a large cash reserve for the proverbial rainy day of seven or so years, a la what IIRC jIM has proposed several times here.
(2) waiting for a few bank stocks to 'bounce back.' They may not anytime soon. If they do bounce back, then I suppose their formerly relatively high dividend yield will precede the stock price returning. Which means there is no point to selling them, except to reduce my exposure to the higher risk bank sector.
(3) waiting for a few finance-based stocks, which slashed their dividends, to 'bounce back' in price, then selling them. E.g. HOG and some REITs. Their stock prices are making a better comeback than some banks. Their company earnings often justify the rise in stock prices, too. Will their dividend yield return as well? I am thinking maybe not as fast as their stock price. IR is a case in point. Its price has bounced back. If it were not in my IRA, I would be considering selling it, because its dividend has been slashed so much.
I am studying my beloved Robert Shiller S&P 500 data and see dividends after the 1929 yada collapse took on the order of 20 years to return to their 1930 level. If financial bubble theory and how economies crash and rebuild are logical phenomena (as opposed to numerology), I can see a couple of decades being necessary for my portfolio income to return to its 2007 or so level. This is so far away that I almost think it is not worth planning for too exactingly. After all, I will be receiving Social Security in 13 years, assuming SS does not go under. And it might.
My inclination is to shift my CDs coming due in the next year to non- financials with good fundamentals. Granted this is exactly what the Fed wants me to do. My income from my portfolio will be flat for some years as a result. This is because the CDs are currently paying upwards of 4.5%, whereas the stocks I am contemplating pay mostly south of this in dividend yield. It is not too troubling, because a lot of my costs seem under control, like grocery bills and gasoline. Milk has been under $2 a gallon for some weeks now, and ditto for many other food products. Of course, one really bad medical ailment and I could be in bankruptcy.
I would welcome others' ruminations on this, especially those living largely off a portfolio. It is a very strange time, with for example income rates so low for so long, and proving that financial history does not repeat per se.