I retired in 2019 after achieving a certain level of financial independence. However, my wife still works part-time and I bring in additional income through various activities. As I’ve discussed before, my wife and I want to have our cash flow, or passive income, from investments exceed our annual expenses before my wife stops working and we declare long-term financial independence. Our goal is to obtain annual passive income in excess of $100,000 before the kids go to college. We hope to achieve this goal by 2028.
Each quarter, we will discuss our investment portfolio and update everyone on our passive income performance for the quarter. The four major buckets of investments that we hold that generate passive income are as follows:
Advisor-Managed Portfolio
During my last several years of work I placed some of our money with a financial advisor. I find it beneficial to work with an advisor for several reasons. My advisor-managed portfolio includes private placements in mortgage securities, bond funds, real estate funds, real asset funds, and other alternative investments. It includes traditional (taxable) and tax-advantaged (e.g., our IRA portfolios) accounts. The goal is to have a portfolio with lower volatility compared to the S&P 500 that generates passive income in the forms of dividends. My goal is for this advisor-managed portfolio to generate $60,000 in dividend income in 2020 after deducting management fees.
Dividend Portfolio
This is a relatively new portfolio I started in late 2019 after quitting my job and deciding to take greater responsibility for some of my investments. I’ve written on why I want to have dividend stocks as part of my investment portfolio. I want the portfolio to ultimately consist of 20-25 quality dividend stocks, 1-2 dividend stock ETFs, with a target dividend yield of 4%. My goal is to generate $3,000 in dividend income in 2020.
Rental Property
I own a single family home in Southern California that has seen decent appreciation but not meaningful cash flow. After reducing the interest rate on the outstanding loan, I expect this property to generate $2,000 in cash flow in 2020.
Treasuries/CD/Savings Accounts
I occasionally place my unallocated cash into these low yielding securities until I decide to deploy a larger amount of cash into a specific investment. These do generate some passive income. I estimate passive income of approximately $500 in 2020.
I have some other investments that are not intended to generate consistent passive income and I will provide updates on those investments to the extent they impact our passive income results/strategies.
Here’s our financial independence performance tracker for 2020 that I will update quarterly:
My first financial independence update in 2020 will be sometime in April 2020 and I will provide greater detail on the underlying investments during my quarterly updates.
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