Large dividend ETF using covered calls

 The NASDAQ 100 Covered Call ETF (QYLD) offers a very attractive yield by holding the NASDAQ 100 index and writing covered calls on that holding. (Also known as a buy-write strategy) The ETF yields about 11.5%, which can fluctuate based on the volatility of the index. The ETF monthly sells at-the-money call options and uses that to pay a monthly dividend. The fund has paid monthly dividends for 7 years. The fund generally doesn’t seem to generate much capital gains and the fund has a 0.6% management fee. In March 2020 the dividend dipped about 20% to $0.18 from about $0.23, but was within the normal range of dividend variability.

4% Rule for Retirement

 This article by Vanguard suggests a dynamic 4% that fluctuates with the market instead of a consistent amount starting from 4% of the beginning net worth. This seems possible if most expenses aren’t fixed, but would probably be pretty undesirable. The recommendation to invest internationally instead of only in the US seems like a much easier adjustment.

Retirement Planner

 Vanguard offers a "Retirement Nest Egg Calculator" for projecting the effects over time of portfolio weighting and spending rate. The calculator found here projects into the future how a portfolio will perform using monte carlo simulation from historical data. It can estimate up to 50 years in the future for someone wanting to retire early in their 40s. You specify your portfolio mix of stocks, bonds, and cash, and your yearly expenses, and it will estimate the likelihood of running out of money by the termination date. It also shows how the portfolio will grow over time. The portfolio returns are based on diversified returns from index funds. One thing to keep in mind when estimating yearly expenses is to include income tax on top of the spending rate if pulling cash out of a 401k or IRA.

This tool is a great way to show the power of compounding for the projected net worth. The projected net worth shows exponential growth in later years as wealth compounds. The further you go out the numbers begin to reach astronomical values.