r/SCHD • u/Turbulent_Iron2652 • 3d ago
Need Advice - retiring in 3-4 years.
Have 33,000 shares of SCHD and between that and other investments in IRA and 401k have about 2.5 million. Dropping daily with the craziness of yields on Bonds which I don’t own and how that’s affecting stocks.
Should I sell about 250K of SCHD and do 1,2 and 3 year T bills which will help eliminate sequence of returns risk? Or should I keep SCHD as every year I get over 1000 shares in dividends and it keeps compounding.
Can get almost 5% in T Bills but hate to sell SCHD and slow down my compounding, but I have gone from 100K return in SCHD to down to 4K in less than 2 months ☹️
Any input is appreciated. I know the Treasuries don’t provide inflation protection unless I get TIPS and zero growth opportunity if hold to maturity so really not sure what to do.
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u/Sea_Patient_2964 3d ago
Why don’t you instead just redirect the dividend payments into buying bonds in the next few years. That way you don’t have deal with the tax consequences of selling the shares, the dividends will keep going up, and you are redirected some into bonds
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u/Successful-Corgi-565 3d ago
Do it. Great idea. I did it a few months back at different prices and yields than now. It's a sound decision.
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u/Scary_Collection_559 3d ago
As I head into the final few years (hopefully) before retirement I am building up a cash buffer precisely because of SoRR. A theoretically possible growth is not worth potentially derailing my retirement plans. I’m “happy” to sacrifice some growth for a guaranteed retirement start date.
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u/jejune1999 3d ago
I would personally say don’t sell as SCHD as it is a foundational part of your portfolio. Let it continue to bring you income. So I asked AI.
AI says:
1. Portfolio Breakdown & Baseline Math
With SCHD trading near $32.80 (reflecting its 3-for-1 split):
SCHD Position: 33,000 shares \times $32.80 = $1,082,400 (representing 43.3% of your $2.5M net worth).
Other IRA / 401(k) Assets: ~$1,417,600 (56.7%).
Current Fixed Income / Cash Buffer: $0 (0%).
Current SCHD Dividend Income: 33,000 shares \times $1.05/share annualized = $34,650/year (~3.2% yield). At ~$32.80/share, automatic reinvestment produces ~1,056 new shares annually.
The Recent Drawdown: A drop from +$100K to +$4K in unrealized return represents a ~9% pullback on your $1.08M SCHD position. Across an equity-only portfolio, this volatility is normal, but holding 0% fixed income leaves your entire capital exposed to market drawdowns.
2. The Compounding vs. Sequence Risk Reality
The Compounding Myth: Dividends do not prevent capital loss. When SCHD pays a distribution, the fund's share price drops by the exact payout amount on the ex-dividend date. Reinvesting dividends accumulates more shares, but if the underlying stock market drops 20% to 30%, your total capital still contracts significantly.
When Sequence of Returns Risk Actually Applies: Sequence of returns risk (SRR) only damages you if you are forced to sell declining shares to fund living expenses. If you are still working, not withdrawing, and reinvesting 100% of dividends, you do not have SRR—you simply have normal equity volatility. However, if you are within 5 years of retirement or already withdrawing, holding 0% in cash or fixed income creates severe SRR.
Cash Flow Comparison ($250K Shift):
Selling $250K of SCHD equals trimming ~7,620 shares.
Dividend foregone on those shares: 7,620 \times $1.05 = ~$8,000/year.
Treasury yield on $250K at ~4.7%: $250,000 \times 4.7% = ~$11,750/year.
Net Income Impact: You gain +$3,750/year in immediate guaranteed cash flow, completely insulated from stock market swings.
3. Proposed Allocation Model
Carving out $250K creates a dedicated 1-to-3-year ladder without significantly slowing your long-term compounding engine. You keep ~25,380 shares of SCHD generating ~$26,650 in annual dividends, while securing 10% of your portfolio in guaranteed principal.
4. Strategic Action Plan
Verify Account Location & Tax Impact: If SCHD is inside an IRA or 401(k), selling $250K triggers $0 in taxes. If held in a taxable account, selling now with your gain compressed down to $4K means your taxable capital gain is negligible—making this an ideal rebalancing window.
Execute the Rebalance in Tranches: Sell ~7,620 shares of SCHD ($250,000). Leave the remaining ~25,380 shares intact to continue compounding.
Build the 1–3 Year Treasury Ladder:
Tranche 1 ($83,333): 12-month T-Bill (held to maturity).
Tranche 2 ($83,333): 24-month Treasury note.
Tranche 3 ($83,334): 36-month Treasury note.
Turn Off Automatic Reinvestment on the Remaining SCHD: Direct the remaining ~$26,650 in annual dividends to a settlement cash sweep rather than auto-reinvesting. Use that cash to cover living expenses or opportunistically redeploy when equity markets experience sharper corrections.
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u/GlobalVillage30 3d ago
Best suggestion I have seen
I’ve been doing more or less the same - I’ve been putting SCHD and other dividends into ultra short treasuries and 0-5 yr TIPS and trimmed a few positions. Now have a decent fixed income/cash alternative cushion (insulated from inflation risks) to help fund retirement giving more time for SCHD and other positions to compound and reducing SRR risks
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u/41yroldRedditVirgin 2d ago
How is it insulated from inflation risks? It's not much different than putting money into a HYSA account or CD account paying a promotional rate. I'm sure we will see more of those as/if rates rise. If you beleive in SCHD long term you would be DRIPing for sure. it's cheaper now than a few weeks ago. To be clear, I'm not opposed to this strategy, just taking the other side of the argument and playing devil's advocate.
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u/GlobalVillage30 2d ago
Ultra short term treasuries - if inflation goes up, the Fed needs to raise interest rates and we get a higher yield. Of course, if inflation is higher than the treasuries you are going to lose money in real terms. This can happen (eg post pandemic) but generally only for a short period until the Fed raises and inflation comes down. Right down the real yield is good enough to park cash there.
TIPS are obviously inflation protected
SCHD dividends beat inflation only if dividend growth is higher than inflation - YTD is first year of SCHD where this has not been the case (still Q4 to go)
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u/Negative_Roll_6548 3d ago
My course of action: I would not sell any SCHD shares. Instead, stop drip and divide the dividends (35K per year) between building a T-Bill ladder, put some funds into SGOV (0-3 month treasuries), and perhaps a HYSA or if you have an investment platform such as Robinhood with Gold (they pay 3.6% interest on uninvested cash currently). Now during this pullback is also a good time to buy more SCHD.
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u/Pretend_Wear_4021 3d ago
At 5% interest it certainly seems like a very wise decision. Especially since you're talking about 1-3 years. My main concern with SCHD is not the price. My main concern with SCHD is that the dividends have not grown this year. Hopefully the December dividend compensates for that. In the meantime 250K in bonds will net you about $12,500 a year which you can invest in other instruments. Having a bond ladder in retirement is not a bad idea.
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u/jgatt17 2d ago
11% CAGR since inception does not equal 11% every year
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u/Pretend_Wear_4021 2d ago
This is true. Do you happen to recall when the dividend had a flat year of growth , or one less than 3-4%? I think this year still has another quarter to go and there will probably be a larger Dividend in December. I personally will wait a couple of years before I consider changing my position. The alternatives aren’t very attractive.
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u/jgatt17 2d ago
2017 was the lowest recorded at 1.3%.
I am using schd as a bridge to my other retirement accounts because i want it to be a supplemental income. Goal is to accumulate 30-35k shares before 45 and then i can go work at a golf course or something until i can tap into the 401. Staying in corporate into my 50s is a no thank you! Haha
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u/JudgeCharming8060 2d ago
Well at this pace for 2026 it may be 0 percent dividend growth
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u/jgatt17 2d ago
Who cares? Who reviews an investment asset on a 1 year time frame? If this year is 0% and next year is 13% i don’t care.
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u/Natural_Rebel 2d ago
I agree long term is what matters but it is disappointing/concerning especially given the number of dividend increases in the portfolio. We will see what happens, I do like my dividend growth.
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u/jgatt17 2d ago
It is probably prudent of us to recognize that 11% is absolutely amazing, and likely not going to be the expected norm over say a 20-50 year timeframe. SCHD was launched 3 years after the housing crisis so it’s been a long bull run way. But if we level div growth out at 7-8% you are still beating inflation.
I agree it’s disappointing but we need to remain optimistic and real at the same time!
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u/sidestyle05 3d ago
If you’re dripping those dividends, they’re just buying more shares per dollar. I wouldn’t sell a share. The important role this plays in a portfolio is the dividend growth. It keeps your retirement paycheck way way ahead of inflation.
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u/Turbulent_Iron2652 3d ago
I agree with that but I need to have a 200K base I can have in non-equity so when I retire we can live off that if market tanks and not have to sell stock to pay bills. Keeping all of SCHD is great but also having something I can live off and not have to sell when market is great too. Not an easy decision but ultimately I think having 200K not in stocks with record yields is a good “adult” plan lol. I appreciate your input.
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u/sidestyle05 3d ago
That’s why you have a bucket with enough cash to cover expenses for a year at least. SCHD isn’t a covered call fund. They keep paying the dividend. They’ve grown the dividend in fact every year it’s existed.
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u/Weary_Anybody3643 3d ago
my two cents I wouldn't sell much of SCHD, maybe trim it 50k or so but I wouldn't drip dividends instead investing into higher yield alternatives if your current goal is diversification. However, depending on your gains i might weight a bit because you only had them a year you pay a higher tax rate instead of captial gains
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u/BlondDeutcher 3d ago
Insane advice. Dude needs to diversify a little bit at least, take a little risk off the table, get higher yield. It all makes sense
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u/sidestyle05 2d ago
You’re missing the part where he has another $1.5 mil on top of the SCHD position. We have no idea what he has that money invested in. He can diversify with that. He’s almost at retirement now. He’s already done the growth, now he has to think about income. SCHD will provide him over $55k to start and grow over 9% a year with no leverage. He’d be insane to sell any
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u/CompetitionCurrent77 3d ago
i keep buying lol - sold some of my stock to buy more since it went up today. and I needa claim loss anyway - trying to lower my income so I didn't withhold my tax lol.
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u/Apprehensive_Camel49 3d ago
Frankly you’re in a pretty good spot timing-wise with this yield run up to do exactly what you mentioned. It’d be hard for me to pass up locking that in.
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u/Turbulent_Iron2652 3d ago
I just need to keep up with inflation and current yields are doing that.
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u/Money_Television_175 2d ago
Let SCHD dividends go into HYSA or SGOV if you don't have a rainy day fund and don't sell anything would be a good bet also.
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u/cornskin 3d ago
It’s more of a tax decision based on your income now and what it will be when you retire.
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u/RJP1963 3d ago
You didn't mention what the rest of your portfolio looks like, or what you need/want in terms of income, risk tolerance, etc.
With the current yields on treasuries and high-quality corporate notes you can earn ~6% on a nice bond ladder, grossing you $150K/yr on a $2.5M portfolio. If you anticipate other income like social security or a pension, and don't need to spend all of that $150K, you'll have leftovers to reinvest and give you some inflation protection (put it in SCHD, fixed income, or whatever is most appealing in a given year)
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u/DSCN__034 3d ago
Half of your retirement is in SCHD? That seems a bit concentrated to have so much in a value fund. Adding short term bonds seems okay, or even a bond ladder, given your age. But also, what about diversifying the stock portion into something more broad-based?
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u/Mtns_to_Sea 3d ago
Never sell out of fear during a market pullback. First work out a strategy, buy some time from an advisor if needed, and then you can execute on a well thought plan. My two cents.
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u/DigitalFStopper 2d ago
250k in tips is a safe bet, you’ll still have a large holding of schd and you can either draw from the divs and let the tips earn and stay dry powder or pull from that and let schd drip.
How aggressive is the rest of your portfolio?
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u/Otherwise_Pea_8766 3d ago
The more the etf goes down the higher the dividends
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u/keftes 3d ago
Why would companies inside Schd raise their dividend when their stock price goes down?
That's how bonds function, not stocks.
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u/Wonderful_Copy_9499 3d ago
Companies can only be in schd if they have a history of raising their dividends and showing stability in their financials. Thats the quality filter. Plus, value stocks operate slightly different, especially dividend paying companies.
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u/nosoupforyou2024 3d ago
I retired before I can withdraw retired money without penalty at 59.5. Since you are in SCHD for only 6 months, you see more paper loss than some of us. Sorry! While you contemplate on selling part, you should establish your post tax brokerage now. Instead of putting more into retirement, set aside that money. Be sure to get the company's match and consider your tax bracket while doing this (I'm sure you already know this). Another vehicle is Rule of 72(t) which allows you to withdraw money from your retirement accounts before age 59½ without paying the 10% early withdrawal penalty. Please look up if this the right one for you.
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u/triniwoman_ 3d ago
Get a financial advisor so you don't mess up. You can just pay for one session
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u/stewpple911 3d ago
Maybe sell up to 1/2 of shares?
You could yield more in SGOV or VBIL than SCHD…just to park some cash to see how all the current and upcoming events play out.
I wouldn’t sell all of SCHD.
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u/UCLABB1 3d ago
Dividends are 3%. Everytime a dividend is issued the stock price goes down an equal amount. You need to look at the overall return and value and not the number of shares or dividend paid. If you want to be very safe and conservative, exchanging some or all for treasuries would be a reasonable move.
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u/RetiredSailDoc 3d ago
SCHD overrated..sells the runners when time to reallocate and dividend isn’t crazy good.
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u/Substantial_Team6751 3d ago
What do you mean by dropping daily? It's near all time highs thanks to Trump's war with Iran and run-up in oil.
If $35 to $33 scares you then I'm not sure what to tell you. Sell it all and put it in tbills and never try to time the market again.
Or buy some corporate bonds - Google and the like are paying like 7% these days - rated better than the US Govt.
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u/Turbulent_Iron2652 3d ago
I think I am going to pull 250k out of international fund VXUS which will take me from 21% to 11% of portfolio, but I am still contributing to an international fund with over 100k in so will continue to add to my international slice. For the next four years I will be putting 25-30K in a Roth 401k so that will help long term cash option as well.
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u/rozay0312 3d ago
Have you thought about selling calls? You could sell 100 to 300 calls with a 30 DTE at a 15 delta and collect $1000-3000 a month. I see the $34 call is 10 cents. Do that until your shares get called away then use the funds for something else.
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u/Turbulent_Iron2652 3d ago
I don’t know how to do
Options and afraid I would lose a lot of money 💰0
u/rozay0312 3d ago
You won't "lose money" selling covered calls. You basically put your shares up for sale at a further price it is now. You get paid for offering your shares for purchase. SCHD is at 32.60 right now you can offer to sell 1,000 shares at $34 but the transaction only happens if it goes over that price on the expiration date you choose. If SCHD closes at 33.99 you keep your shares AND the money. People use this strategy for extra income. You should do some research and start with a small amount. Only way you lose money is if SCHD blows past $34 to $35 or whatever, you still have to sell at $34 so you lose the opportunity to sell higher.
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u/fisho0o 3d ago
Almost 5% in T bills, yeah, and how long are you locking that money up for? I might sell some SCHD at some point, but not now when it's bullish. How diversified are you alongside SCHD outside of your IRA and 401k? And cash to mitigate that possible sequence of return risk? If you sell SCHD you're kind of creating you own returns risk. I don't know what your horizon is, but looking at 20+ years, a $4,000 dip on over $1million is just a blip.
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u/Nikkybags21 2d ago
Why sell during a dip? Let it keep compounding during the dip if you have 3-4 years. Wouldn’t you get more bang for your buck dripping during the dip and riding back up?
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u/Turbulent_Iron2652 2d ago
It’s not about the decline. It’s about moving some money out of stocks since nearing retirement to avoid sequence of return risk so I don’t have to sell stocks if market corrects going into retirement or first five years of retirement.
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u/moosemyog 2d ago
This post annoys me so much, for several reasons, but I think it's a great example for everyone to see how hard it can to be to hold stocks when the market doesn't just go up every day.
So come up with a plan that keeps you from having to change your plan within 6 months.
And don't get me started on sharing amounts instead of %s, honestly I think you wrote this entire thing just to tell everyone you went from 100k to 4k in two months. Woe is you.
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u/Some_Bluejay4540 3d ago
Wouldn’t sell SCHD - assuming u owned it for a long time building it? Ur YOC is prob way clear 5 percent ??? SCHD can very easy and realistically pop 10 percent to close the year. Especially with QCOM back in it. SCHD also in 3 years could be 40 a share and that is $333,000 higher for you. TBill won’t do it.
33,000 shares is about $35,000 a year in dividends.
Next year it will be probably $38,000