Another Reason Why M1 Finance is a Great Platform for Dividend Growth Investors

08 Aug 2019 22:07
Tags m1_finance

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Back in January I did a write up on my experience opening an M1 Finance account and creating a pie based primarily on dividend growth. Flash forward 7 months later and I am still making steady deposits and continue to be impressed with the platform.

One feature I recently discovered and missed in my initial review is what I believe to be extremely useful for dividend growth investors and a feature not talked about in any other review of M1 Finance. Many of you are probably expecting a feature to help you improve your dividend growth investing but that is not what I am writing about today. Instead I’d like to discuss what to do at the end of your investing journey when you want to start living off your dividend stream and how M1 Finance can enable this.

The feature I discovered was “Scheduled Withdrawals” in the funding section. I am not sure why I didn’t see this before but when I entered the funding screen to do a one-time deposit I noticed that the calendar had a “Scheduled withdrawal” legend which of course made me curious so I clicked on the Withdraw feature to see what options are available.

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Sure enough in the withdrawal window was a “Set a schedule” toggle and after hitting it I had the option to schedule withdrawals weekly or monthly by date or monthly on a given week. This feature allows you to create a weekly or monthly paycheck… how frick’n awesome is that!

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When combined with the Cash Balance Control feature it opens a powerful feature of how and when dividends are withdrawn and/or reinvested.

For example:
3 months before I retire I see that I collect $12,000 in dividends every quarter but I only need $10,000 to cover expenses and would like to reinvest the $2,000 difference. To accomplish this I would simply set the Cash balance control to invest anything over $10,000 and let the dividends collect for one quarter.

I would then schedule a monthly withdrawal of $3,333 (or $833 weekly) to begin in the first month of the following quarter. In theory since I already have a $10K balance and I am withdrawing at a slower pace than I am receiving dividends then approximately $2,000 every 3 months will get reinvested back into the portfolio.

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In this example, once a schedule is setup you would only have to revisit once a year to increase everything to account for inflation which should be minimal between organic dividend growth and the extra $2,000 invested every quarter.

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