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Rising costs of living and shrinking savings force millions of Americans to consider retiring overseas. Last year, data from the Social Security Administration showed that about 450,000 people received benefits outside the U.S. as of the end of 2021, significantly up from 307,000 in 2008.
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Retired in the Philippines For a ‘Fraction’ of U.S. Costs
Earlier this month, an American dividend investor shared his retirement story on /Dividends, a community of over 618,000 income investors on Reddit. The investor, 41, said he retired in the Philippines four years ago “for a fraction” of the costs he was paying back home.
“We own our property. I lost 40 lbs. Our health is great. My wife gardens, we have 10 dogs, we have a rice field – 3 plantings a year. I work around the property tending the fruit-bearing trees. We travel in-country a lot. Life is good. Freedom to choose.”
Earning Monthly Dividend Income After Selling House Back Home
The investor, who said he was married to a 39-year-old Filipino woman, sold his house in the U.S. for about $175,000 and invested in two closed-ended funds. According to the data provided, he was earning about $2,700 a month in dividends from these two funds. He also had a leveraged ETF in his portfolio, which he said was mostly for “capital gains.”
Life in the Philippines – Own Land, Starlink, Driver, Cook and Caretaker
Redditors initially grilled the investor on his choice of risky ETFs and the sustainability of his retirement plan. However, he sounded self-assured and spoke about the quality of life in the Philippines.
“We own over 10,000 sqm of land, gated. We use Starlink. We own two (2) vehicles. We have a staff of three (3) people – live-in driver, cook and caregiver. I’ve been through a bear market already. If living this way is dumb, then here I am. We can compare annually if you want.”
He also told investors that his retirement model wasn’t for everyone and that he was aware of the risks.
“I understand my situation is different and there is a lot to be said about closed-end funds and what is right and what is not. This setup has worked for me and may not work for you. I have no plans to change it.”
‘Freedom To Do As We Please’
The investor shared some more insights into his decision to retire overseas during the discussion:
“We now have the freedom to do as we please. My wife does lots of gardening, our child has present parents instead of overworked ones. We may not have everything the USA offers, but what we gave up is small in comparison to what we have gained.”
Let’s take a look at the ETFs in the investor’s portfolio.
Aberdeen Global Income Fund
Abrdn Global Income Fund Inc (FCO) generates income by investing in fixed-income securities. The fund’s portfolio includes government and corporate bonds and debt instruments from various countries. FCO pays a dividend yield of about 14% and is paid monthly. Over the past year, the fund has been down about 4.8%.
The American investor who retired in the Philippines said he owned 19,739 shares of FCO and earned roughly $1,381 per month from this investment.
“FCO has been paying the same monthly dividend for over 20 years,” he said when asked about the rationale behind investing in this fund.
According to the latest quarterly report on the fund’s website, it returned 0.72% on a net asset value (NAV) basis for the three months ending July 31, underperforming the 4.26% return of its blended benchmark.
PIMCO Dynamic Income Fund
PIMCO Dynamic Income Fund (NYSE:PDI) is a high-yield fixed-income fund that invests in debt securities, including mortgage-backed securities and bonds from developed and emerging markets. PDI yields about 16% and pays monthly dividends.
The 41-year-old retired American investor living in the Philippines said he owned 6,015 shares of PDI and collected about $1,326 a month in dividends from this investment.
PIMCO Dynamic Fund usually invests about 25% of its total assets in privately issued mortgage-related securities and 40% of its total assets in securities of issuers linked to emerging market countries.
In its latest quarterly commentary, the fund’s management said PDI performed well due to its exposure to corporate credit, emerging markets debt and residential mortgage credit. The fund’s asset classes returned 4.93% in the third quarter because risk assets rallied after the Federal Reserve’s 50-bps rate cut.
The American investor who retired in the Philippines said he had about 1,818 shares of ProShares UltraPro QQQ (NASDAQ:TQQQ), which, according to him, were valued at $130,000 at the time of his post. So far this year, TQQQ is up 60%.
“I am using TQQQ for capital gains and the others for a living. I reinvest a portion of my dividends each month,” he said.
The investor received a lot of flak for his TQQQ investment, as Redditors questioned the logic of investing in a risky fund during retirement. QQQ is a leveraged ETF that corresponds to 3x the daily performance of the Nasdaq-100 Index, making it volatile and risky.
Here is how the investor explained his investments:
“You have no idea how many of my previous coworkers made similar comments. Yet they still work and I do not. The dividend income is not designed to increase in value much. It is for the dividends. FCO has been paying the same monthly dividend for over 20 years. You can build a budget off that. I have heard the arguments that 3x leveraged stocks are only used for day trading tools. Check the stats on ROI vs. SPY or something similar. I sell calls against TQQQ. It works and has for years.”
While Realty Income is undoubtedly a solid choice for investors seeking consistent monthly dividend income, it’s important to remember that publicly traded stocks are subject to market volatility. For those looking to diversify their income streams and potentially reduce exposure to market fluctuations, real estate investing through platforms like Arrived is worth considering.
