Posted by When you get close to retirement or are in early retirement, you should be trying to generate as much passive income as possible. In 2025 my investment portfolio increased by 8.65% and generated $3445 in monthly dividend income. During the year I was able to avoid taking any distributions from my retirement account. This means I that I only used dividends from my taxable spending account. The total income from that account was $12,620. I withdrew $11,860 to pay my credit card balance and mortgage. My total expenses for the year came to $15,509. The bulk of the $3649 shortfall was covered by my state property tax refund.
If you only look at my retirement account, it looks like I had a good year. But if you look at the balance of my other accounts, there was very little growth. That is because I had to spend almost all of the dividends. It doesn’t leave any room for extras. I have had to look for ways to generate more dividends to try and keep up with inflation. Since interest rates have been dropping, I have been moving out of money market funds and into longer term bond funds. For a few years I was reinvesting dividends into a high-income tax-free municipal fund. I stopped when I noticed a steady decline in the share price. The fund generates $170 per month or $2040 per year. I have owned the fund for about 10 years, and the value has steadily declined by over $5000 in that time.
At this point, I have little faith that the share price will recover. The way I look at it, is that it gave me $20,400 tax free dollars and a future tax write off of $5000. The only way to generate high dividend income is to invest in riskier funds. My taxable account is still showing a gain despite having some investments that show a negative gain over time. The tradeoff is that you get a higher dividend. The perfect fund is one that grows in value and gives you a nice monthly dividend. Those are hard to find. I’m hoping that the Federal Reserve will not lower interest rates too much in the coming year. But, with Trump appointing a new chairman, odds are that money market funds will be paying much less by the end of 2026.