For those who like this approach, what's your plan in retirement? Say you have $1 mm in VOO, in today's prices you would hold 1626 shares.
Let's say you need $4000\mo from your investment account to fund your living expenses on top of your ss income. You would need to sell 6.5 shares monthly or 78 shares yearly to meet this requirement.
If voo grows at 14%, your growth will outpace your sells (228 new vs 78 sold) which is sustainable. But if the market drops like in the 2008 gfc, let's say your shares drop to $400 each, you'll need to sell 120 shares to meet your income needs. In this scenario your 1626 shares drop to 1506 shares. And each year until recovery your share count will drop. A 5 year recovery could mean a loss of 600 shares dropping to 1000 total, a 40% decline in your nest egg.
Alternatively, would you consider investing in something like spyi instead? In today's prices you would hold 19,230 shares with $1mm. That would generate around $10,000\month in income. If the market tanked as in the above scenario, and say your investment income dropped by half, you would still have $5000\month investment income, without having to sell anything while still invested in a sp500 fund... Just like VOO. And if spyi continues in recovery to pay 12% while the sp500 grows at 14%, there should be no nav erosion either.
Thoughts?
Edit: correction to sp500 growth should probably be closer to 11% since inception rather than 14% (over the last 15 years).