How To Retire On $300,000 (And Bag 12% Gains Every Year)

| September 7, 2018 | 2 Comments

Today I’m going to show you how to get a livable income stream from a $300,000 nest egg—while growing your savings at the same time.

Sounds impossible, right?


What’s more, we’re going to pull it off using just 6 funds. When we’re done, we’ll end up with a simple, diversified portfolio that throws off a nice, steady 7.9% dividend yield—more than 4 times the S&P 500 average!

And if you’re worried that this outsized yield could come at the cost of a weak total return, don’t be, because these funds have delivered 12% per year over the past decade.

Before I get into these 6 funds, let me show you what numbers like these can mean for you: if we start with an upfront investment of $305,000 in this portfolio and leave it alone for 10 years, we can expect our capital to explode to nearly $1 million in a decade.

History tells the tale: if you had invested $305,000 in these funds 10 years ago, you would have done just that.

Now I’m not saying history is going to repeat exactly here, but remember that we’re talking total returns, and much of that gain came in the form of dividends.

And we can expect those hefty payouts to continue. As I said off the top, this portfolio has a 7.9% yield, meaning our $305,000 initial investment is going to give us $24,000 in annual income—that’s $2,000 per month!

Granted, many Americans make more than that in a year, so you may not be able to completely replace your income with this cash stream. But some folks could. In some parts of the country, average incomes do go down to $24,000, and with rents for one-bedroom apartments falling below $600 in some cities (like Wichita, Cleveland, Tucson, El Paso and Albuquerque), it is possible to live entirely on this income stream.

But even if you can’t live on $2,000 a month, this portfolio could hand you a nice, reliable supplementary income stream, leaving you much less reliant on the 9-to-5 grind.

So how does the portfolio work?

Connecting the Pieces

The 6 funds I’m talking about come from 5 management firms with impressive track records: PIMCO, John Hancock, Nuveen, Guggenheim and Macquarie.


Together, they hand you exposure to over a thousand firms through stocks and bonds. On top of that, the Nuveen NASDAQ 100 Dynamic Overwrite Fund uses an insurance strategy that helps protect you from a bear market by selling call options on its equity portfolio. (My colleague Brett Owens explained how this works—and why it cuts your risk—in an article you can read here.)

And of course, by throwing $305,000 into this group of 6 funds, we can earn a monthly income a smidgen over $2,000 on this portfolio:

Surely with such high yields, you’re going to sacrifice capital gains, right? In many cases, this is a tradeoff investors need to make, but these funds have performed tremendously, with annualized gains of 12% over the last decade:

Income and Growth in 6 Buys

Those gains are what allowed your $305,000 to balloon to almost $1 million if you chose to keep these funds and save the cash they yielded in dividends.

With numbers like these, you might be asking yourself why hardly anyone is talking about these funds.

The answer: these 6 funds are known as closed-end funds, which are an obscure corner of the market (I explain exactly how CEFs work in a quick primer you can read here.)

Why are these funds so obscure? Because their massively popular cousins, passive exchange-traded funds, have stolen the spotlight, even though many ETFs yield less than 3% (and many yield less than 2%). That’s not going to cut it if you’re yearning for an income stream that puts you on the road to financial freedom.

Then there’s the other cousin of CEFs, mutual funds, which have kept their stranglehold on the American financial industry thanks to regulation. Since 401ks can’t invest in anything other than mutual funds, many Americans have little choice but to invest in these funds when it comes to retirement planning.

But savvier investors who use IRAs and brokerage accounts can choose the 6 CEFs above, and others like them, and get a stronger cash stream.

And there are plenty of other CEFs to pick from. There are about 500 on the market now, and dozens of them are beating their benchmarks.

As a result, more people are learning that CEFs are a great tool for building a reliable income stream while also helping their portfolios grow. If you haven’t checked them out yet, now is the time to do so.


Like These Plays: The 8 Best 8% Dividends with Big Upside to Buy Today

The biggest investment managers and Wall Street brokers say you can’t have both the income and safety of bonds and the upside of stocks. You either have to pay hefty fees or be “lucky” enough for the privilege to be invited to invest with them.

They’re wrong. They don’t realize that the nine bond funds in our Contrarian Income Report portfolio have delivered average annualized returns of 23.9% (including dividends)!

Our three top picks today are poised to continue the tradition. These funds are a cornerstone of our 8% “no withdrawal” retirement strategy, which lets retirees rely entirely on dividend income and leave their principal 100% intact.

Well that’s not exactly right. Their principal is more than 100% intact thanks to price gains! Which means principal is actually 110% intact after year 1, and so on.

To do this, we seek out closed-end funds that:

  • Pay 8% or better…
  • Have well-funded distributions…
  • Trade at meaningful discounts to their NAV…
  • And know how to make their shareholders money.

If you’re an investor who strives to live off dividends alone, while slowly but safely increasing the value of your nest egg, these are the ideal holdings for you. Click here and we’ll explain more about our no withdrawal approach – along with details on our three favorite closed-end funds for 8%+ yields.


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Category: Lists of Dividend Stocks

About the Author ()

Michael Foster is the Senior Analyst at Contrarian Outlook.

Comments (2)

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  1. Great article, I really like this investment strategy.

  2. Terry Haines says:

    Very good information.

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