Another Man's Transition to Income-Focused Investing

Guest: Justin Snider - Government contractor from California, US Air Force veteran, and former Series 7 licensed trader who recently transitioned to income-focused investing just 3.5 months ago. Follow his journey at @401k_income on Instagram.

The Discovery and Transition

Justin's journey into income-focused investing began with a simple text message from a coworker recommending Steve Selengut's "Retirement Money Secrets." Despite his background as a Series 7 licensed trader, he had never heard of Closed-End Funds (CEFs), which initially made him skeptical of yields in the 8-11% range. His first reaction was "this seems too good to be true - what's the catch?" After extensive research on YouTube and the internet, he decided to make the leap, though interestingly his wife was more eager to go big with the transition than he was initially.

Game-Changing Realizations

The most striking aspect of Justin's experience has been the mental shift from accumulation to income thinking. He now views his CEF investing as "the world's easiest side hustle," comparing it favorably to real estate investing without the hassles of tenants, maintenance, or chasing rent payments. At 52 years old, this strategy has given him unprecedented clarity about his retirement prospects, allowing him to see exactly how much income he'll have rather than hoping his accumulated assets will be worth enough when he needs them.

Perhaps most remarkably, the capital gains from his CEF trading within his 401(k) are now exceeding his actual paycheck contributions, creating what he calls a "third match" beyond his salary and company contributions. This phenomenon has only developed over his brief 3.5 months of implementing the strategy, suggesting significant potential for long-term growth.

The Freedom Factor

Justin emphasizes that the biggest benefit has been freedom from market anxiety. During recent market downturns, including the tariff-related dip, his CEF portfolio outperformed his traditional mutual fund holdings. He no longer worries about checking the market daily or timing his retirement around market conditions. Downturns have become opportunities for rebalancing rather than sources of stress, and he can envision going on vacation without checking his portfolio for weeks.

The legacy implications have also transformed his thinking. Rather than planning to "spend down to zero" in retirement, he now sees his portfolio as enduring wealth that will generate income for his children indefinitely. This shift from viewing retirement savings as something to be consumed to something that produces ongoing income has fundamentally changed his retirement planning approach.

Sharing the Success

Justin has become something of an evangelist for income-focused investing, sharing his results on Instagram because he's discovered that virtually no one he talks to has heard of CEFs. With fewer than 1,000 people estimated to be actively pursuing this strategy, he sees an opportunity to educate others about an approach that's been "disruptive to everything you've learned over the course of your life" about investing.

Resources: Steve Selengut's "Retirement Money Secrets," CEF Connect for research, and the Retirement Money Secrets community for ongoing education and support.

Transcript

Brandon Roberts (00:00)
You are listening to the Yield to Reason podcast, where we strive to help you build the most important part of your retirement strategy, because a retirement plan built with robust income sources is a retirement plan built for success. I am Brandon Roberts. This is episode number six. And today we're talking about embracing change with recent convert to income folks investing Justin Snyder. It's time to see what others are saying as we set off on a journey to help you build the retirement you deserve and the one you actually want.

Brandon Roberts (00:29)
So a few weeks ago, I interviewed Steve Selengut, who founded the Retirement Money Secrets community. And during our discussion, Steve mentioned there were several members of his community that he figured would like to discuss their experience transitioning to an income-focused portfolio. Today, we're sitting down with one of those individuals as part of a series where I discuss income-focused investing with everyday Americans. Our guest is Justin, a government contractor from California who took the leap to somewhat recently into income-focused investing. In fact, he's found it so enjoyable.

He likes to discuss his successes on Instagram. Interestingly, he does have a bit of a background in investing, having worked at a trading desk in a former life. He's also a thankless member of our armed forces, serving in the US Air Force, the best branch, at least according to my wife. Justin, thanks so much for joining us and welcome to the Yield to Reason podcast.

Justin Snider (01:18)
Hey, Brandon, thanks for having me. Happy to be here.

Brandon Roberts (01:21)
So I want to start with the origin story. What turns you to the idea of income-focused investing?

Justin Snider (01:28)
Well, just a little bit of luck and chance, I guess. My good friend and coworker was on a road trip and he sent me a text message with a screenshot of Steve Seligut's book, Retirement Money Secrets. And so I had a little picture on my phone and he said, you need to check this out. And so shortly after I downloaded or I listened to the audio book and the rest is history. So I just listened to the audio book, actually listened to it twice.

And that turned me on to this style of investing.

Brandon Roberts (01:59)
So as you've gone down the road of adopting this strategy, transitions can be a little difficult for people in my experience, as I've told individuals who have consulted me about retirement, that they really should focus on income. There tends to be a little bit of hesitation, I think largely because change is hard. Did you feel the same way?

Justin Snider (02:22)
I absolutely did. CEFs was a completely new financial instrument for me. I knew nothing about it. Prior to the book, I'd never even heard the term. So obviously, like most, I'm aware of mutual funds. I'm aware of ETFs. I'm aware of bonds. Dabbled in Robin Hood Gold just to get that nice percentage APR.

Absolutely. I was a little nervous about transitioning. I talked to my wife about it. We discussed numbers, discussed timeframes, and we settled on a number and went ahead and dove in. But yeah, absolutely. It was a little concerning because I didn't know anything about it. And so obviously got on YouTube, got on the internet, tried to investigate as much as I could. And it seemed like a great approach.

Looking at Steve's numbers in the book, just really helped me understand that it's a good option to check out.

Brandon Roberts (03:16)
What would you say was your biggest hang up?

Justin Snider (03:20)
The biggest hang up was almost like, this too good to be true or what's the catch? Like these things are yielding, you know, eight, nine, 10, 11 % and higher. How is this possible? How does this work? again, what's the thing I don't know about that could potentially bite me?

Brandon Roberts (03:35)
sort of like I've been around all this time I've owned other investments I didn't really know about this it seems great how did I go so long without knowing

Justin Snider (03:39)
Yeah. Right. I was

a licensed series seven trader and I'd never heard of these things. Right. So that just struck me as funny. then, you know, joining the community and realizing, you know, there's less than a thousand people that are doing this potentially is just interesting too. Right. There's not a lot of folks that are investing in CEFs.

Anybody I've talked to has never heard of them. I haven't met one person that knows anything about it when I talk to folks. So it's completely new. And again, that's usually the first response is, is this too good to be true?

Brandon Roberts (04:15)
You mentioned discussing it with your wife. Did she have a certain amount of hesitancy? Was it similar to your concerns?

Justin Snider (04:22)
I

would say she wasn't as hesitant as I was. you know, when we talked about numbers and I would say, let's put, you know, I had, I have a taxable brokerage account. also have my 401k. We have an IRA as well. So when we're talking about how much to transition over, I was, uh,

looking to go maybe 30, 40, maybe even 20%. And she was pushing us to go a little higher and just go for it. I think she saw the results that looked good and said, well, what's the hesitation here? These are New York listed securities. The yields are good. I was on CEF Connect. I would show her a 10-year time frame of dividend payments. And so she was basically saying, well, what's the problem? Why not go big here?

Brandon Roberts (05:05)
We have similar spousal experiences because I'm constantly going, I don't know if we should take that leap and I got the misses over there going, do it, do it. So that's always, yeah, it helps. So since you've adopted this strategy, do you feel like your retirement in the sense of where you're going income attainment wise has come into sharper focus?

Justin Snider (05:07)
Hahaha!

Right.

Yeah, go for it. Yeah. It's a good, it's a good dynamic, right? And it helps it. We just kind of get in the middle.

Absolutely. So I'm 52. I still have some time to work. And I was thinking about that, right? So I've done pretty well in the market since I've been investing. We've had a good run over the past 18 years since 2008, for example. And so I really was like a deer in a headlights.

situation where it's like, we've maintained, we've grown all this capital, we're getting closer to retirement. All the books, all the magazines say start transitioning your split into safer investments.

I've seen the curve on my 401k where it all just goes to zero by the time you get to 99 years old. Do you withdraw 4 % per year? So I was starting to have those discussions and think about that situation and try to understand what retirement truly looks like from my retirement savings as well as my other streams of income from the military and whatnot.

Now that I've transitioned to this approach, I feel like I have greater clarity on, hey, I'm going to actually have at least this much income coming in. And to look at it from that approach of this is an income stream, it's an additional source of capital that's actually coming in as opposed to a paper profit that could go up or down, or I have no idea what it's going to be like. We all hope and fingers crossed that

that everything's gonna just keep marching up, but we all know that that isn't always the case, especially as you get closer to the time when you need to actually pull that money out or sell those securities. So it's really nice to be in a situation where I don't have to sell those securities. can depend on that dividend income monthly.

Brandon Roberts (07:21)
I've actually one of my common phrases I bring up to people who talk about accumulation like I've got X amount of dollars I'm on this track I use retirement calculator it tells me I'll have this much money by the time I retire one of my sort of challenges to that thinking has always been the plan to sell your shares for income later really only works if your shares continue to appreciate and value and while that is hopefully

where we're going with this, if we're passively indexed investing. We don't know that it will always work that way, probably, but we don't know that it'll work that way when you need it to work that way. And that can be a sticky situation for a number of people.

Justin Snider (08:02)
Right. Yeah, the timing

is so critical and you have, you truly have no idea and you can run these calculations all day long and it just doesn't matter because it could go completely the opposite. And what's interesting when you run, I'm sure like most folks who are dabbling in CEFs and income focused retirement situations,

Brandon Roberts (08:15)
That's very true.

Justin Snider (08:23)
you can start kind of extrapolating what that might look like. So I've got a little bit of runway left before retirement and it can go pretty well and that income stream is going to absolutely grow over the next eight years for us.

Brandon Roberts (08:37)
Do you ever look at the income as it's developing right now and compare it to your wage earning activities?

Justin Snider (08:42)
I do that's interestingly enough, because once you start transitioning your mindset and you think of this almost as a side hustle, like this isn't, it is an investment, but it's actually generating income. So when you think of it as, okay, this is.

this is a side hustle or this is a small job that's providing income, you do start comparing it to your other income sources and how that can impact your retirement planning. So maybe I can go part-time sooner or maybe my retirement planning or my target date is different based on this new income source that I didn't have three and a half months ago.

Brandon Roberts (09:22)
The world's easiest side hustle.

Justin Snider (09:24)
Yeah,

almost. And it's fun. That's the thing. Everybody that I've spoken to or talked to on the RMS income community, people enjoy doing this. It's not scary and painful like the other types of investing, right? You're watching your mutual funds decrease by 10, 15, 20%. That's not fun. This is great. You're receiving your yields. You're making some trades. You're reallocating your...

cashflow. So it's an interesting thing and folks are enjoying it, is fun to watch.

Brandon Roberts (10:01)
It's a very, very thinly veiled secret that I have a certain dislike for real estate investing in large part because I think it's just too damn hard. Like it's too much work. to me, I look at going out and buying other income producing assets like closed end funds and think, all right, I could take that money and put it here and just start collecting income, or I could take that money and put it over here.

Justin Snider (10:09)
Yeah. Yeah. And expensive.

Brandon Roberts (10:29)
Plus more, they'd have to borrow to all this other stuff and find tenants and maintenance and... No thanks. It's a lot easier as a side hustle to just be passively income-focused. So...

Justin Snider (10:33)
Yeah. Right.

Right. Absolutely.

Yeah. You don't have all the hangups of the other factors that influence the income that's coming in from rental. Right. Right. The water heater is not going to explode.

Brandon Roberts (10:48)
You don't have to chase anybody around, tell them today's rent due day, anything. Yes, Yes,

exactly. Exactly. The real estate investors are going to hate me, but that's okay. So you've had a, what should I say? The development of an evangelism sort of aspect to all of this. You're on Instagram showing people the successes that you've had with this. What started that?

Justin Snider (11:10)
Well, it's kind of funny. So when I was trading way back in the late 90s I I had just a small little blog and I would do the same thing So I'd post the profits I'd post some charts with buy and sell decisions I discussed the mistakes I made or the great days I had or and so just just to generate conversation and just share information so that That never really went anywhere, but I did have a bunch of folks that that enjoyed looking at that and commenting

So when I started this, CEF investing, income investing, I decided, hey, why don't I just do the same thing on Instagram just for fun, maybe put out a few charts, put out a few buys and sells, discuss the dividends that are coming in and just try to generate some discussion and share the wealth essentially and see if there's folks out there that are interested. Everything on Instagram and a lot of the social media is all the standard stuff that you and I've been taught over our lives about investing.

and there isn't a lot out there discussing what we're doing with CEF. I, know, the more the merrier, get the word out, have some fun with it, put some music on the posts and just see what happens. So that's the real goal. Of course I have an affiliate link on there to get to the CEF community or the RMS community. So just trying to drive folks over there so we can just continue to educate each other and share the wealth.

Brandon Roberts (12:28)
We should mention at 401k underscore income is the way to find you on Instagram for people who are interested in following along and the many, many successes and perhaps sometimes whoopsies, we all make them, but that's okay.

Justin Snider (12:38)
Yes.

yeah,

I had one the other day, absolutely.

Brandon Roberts (12:45)
If you had stumbled upon this like ten years ago, do you think you would have jumped in?

Justin Snider (12:50)
That's a, that's a great question. I've been thinking about that a lot, especially because I'm talking to my children about this, right? So they're all in their twenties. they're sucking away 10, 10 plus percent. So to answer your question, I think the answer is yes. I can't say that I would have jumped into the level that I'm in now because I still have this.

Or I probably would have still had this notion of I'm going to make so much in the market, right? I've seen some wonderful gains and it's just going to keep on trucking. So I want to take advantage of that market value growth in my traditional positions, whether that's mutual funds or individual stocks. as a lot of us have seen, a lot of us have had a pretty good run. And so I think 10 years ago,

I would have absolutely been open to dabbling in the CEF world, but it probably would have been to a bit lesser extent than I am now because I would have been 42 back then. I would have said to myself, I've got 20 years, so I'm gonna capture this huge market growth. Now, if I could mentor myself back then 10 years ago, I probably would say, well, don't you put a little more in and...

see what happens after a year and then maybe reallocate after you've seen the growth.

Brandon Roberts (14:10)
It's hard to get people to truly embrace the idea of income because they're often stuck in this mindset of I can accumulate and compound accumulation because of the age that I'm at. I've spent a lot of time trying to show people that you can compound income as well. And so if you start this strategy earlier,

you can build a much more substantial income later in life. And the data doesn't really support that you'd be able to accumulate value and necessarily buy up the same income later on. So by virtue of starting earlier, you have this growth of an income pool, I'll call it, and that could put you in a place that is way different than just looking at

account balance and wondering where does this put me. But the... Yeah.

Justin Snider (15:08)
Right. It's, it's a hard habit to break it.

Again, we've, we've all come up in this world where that is what we're taught. All the magazines, all the social media, all the books, all the websites, everything we've learned over the years has been just buy and hold and, just hope that it goes up and hope that you bought the right thing. And, and then at some point you have to pull the trigger and sell it.

And so yeah, if I could go back in time, knowing what I know now and watching the returns I've had, and again, I've only been doing this for three and a half months, but the proof's in the pudding, like just looking at the...

income growth that I've seen in my accounts, the working capital increases, the overall yield that I'm receiving, watching myself reinvest. Another point I wanted to bring up, which I was talking to my coworker about, is that the capital gains that I'm making in my 401k account that I am reinvesting to increase yield are actually outpacing my paycheck contributions. So in essence, the capital gains that I'm making are a third match.

Right? Because I've got my contributions, got my company contributions, and now I have these capital gains that I'm also putting in that are more than my contributions, as I mentioned. So it's just amazing, and this is just after a couple months. So I can't imagine what this is going to look like after a few years.

Brandon Roberts (16:33)
So that's a fascinating fact that it's only been a few months and here you are looking at what you've produced income wise already in that short period thinking this is something, there's something to this, this is beneficial.

Justin Snider (16:37)
Right.

Absolutely, and even with the downturn we had just a few weeks back, right? We had the huge tariff dip and with that, my portfolio performed just fine, right? I did have a dip. I was able to take advantage of that dip. I was able to capitalize on some.

moves up the weeks after the dip and then those were all reinvested and increasing my overall yield. mean, the game plan works. And there's no catch.

Brandon Roberts (17:14)
So having said that, do you ever worry, and I realize the timeline's pretty short here, but do you ever worry now that you've started to down this road that it may not actually work out like you think?

Justin Snider (17:18)
Thank

No, I really don't have any worries at this point. Again, anyone can do the research and the primary consideration is that those yields and those dividends hold.

The selections that we utilize have long track records of paying those dividends out and that's the bottom line. Again, I am not focused on market value. I'm focused on that income that they produce, focused on reinvesting that income and then adding additional income from the trading profits.

If all of that is moving along, I have no concerns. I think the only concern that anyone might have is, okay, well, if everything just goes insolvent and everything just goes to zero, then I'm going to lose it all. Okay, well, guess what? You're going to lose it all on your mutual funds too. So, and the downturn that happened a few months back, I did just some quick analysis and my positions perform much better than the overall market. And I can...

I am not fully invested in CEFs, so actually my mutual funds went down, right, and my CEFs held stronger than my mutual fund position. So the proof's there. No major concerns. I'm still learning, I'm still watching, I'm still figuring it out. But from everything that I've seen, I'm super happy with the decision to start investing this way.

Brandon Roberts (18:46)
It's

fascinating point you just made about the last several months, well, last couple of months, especially the tariff months, and what has happened broader market-wise and what you've experienced take place inside closed end funds. And this is something that I've actually been watching for a number of years, actually, because I've been able to look at how certain more accumulation-indexed focused portfolios have performed relative to people who are much more income-focused.

And what I have been seeing in all of that is certainly the case that the really, really good moments, I'm not even talking about good years, I'm just talking about the good months, we certainly see rallies in those index portfolios that are great. ⁓ We sometimes don't always give enough credit to the bad times, because we like to overlook those. But when I look at the income-focused portfolios, they...

Justin Snider (19:28)
Sure.

Brandon Roberts (19:39)
are doing very well, not as well in the really good good moments, but when we get more volatility, they're not nearly as impacted. And I remember, I remember looking at one in particular recently, well I say recently, but this was probably 18-ish months ago, and thinking, this portfolio is producing at least

Justin Snider (19:50)
Absolutely, right. That's I've seen as well.

Brandon Roberts (20:05)
a couple thousand dollars a month in income. And actually several thousand dollars. And the volatility that it's facing as the market has been bumping all around hasn't been much at all. And so this is actually a portfolio for somebody who is retired. And so while some people who are much more market exposed are dealing with the roller coaster of

volatility and having to deal with the emotion and the strategy that's involved and what do I do when my shares aren't worth what I thought they were going to be worth at the time that I wanted to sell them. This thing, okay, it's not lighting the world on fire in terms of growth necessarily, but it's doing just fine and it's cranking out a whole bunch of income. And that is the thing that this style strategy really brings to the table in spades.

Justin Snider (20:54)
Right, we are so well diversified across so many sectors and types of investments that I feel there's a cushion. And even yesterday, for example, the market was down. I had a number of positions that were up that I took profits in.

And then again, I'm not concerned about a Dow down 300, Dow down 600, because I know those dividends are still going to pay. And I still know, I know there will be opportunities to.

find profitable positions. And as you mentioned, there's safety in these types of investments and the fear factor is so much less. And I know a lot of people in the community talk about going on vacation or doing things in retirement and they won't even look at their portfolio for weeks. And they're fine with that because they know those dividends are gonna come in throughout the month, at the end of the month.

And you know what? Oh, whoops, I missed a few good days and I didn't capitalize on any of the trading profits. So what? It's okay. And there's freedom in that, right? We're not tied to checking the Dow every day and worried that our 401k is gonna take a, or IRA is gonna take a 20 % hit. I mean, we've seen it. I mean, we saw it in 22. We saw it in COVID.

Brandon Roberts (22:05)
So do you.

Yep, yeah. So do you now look at your portfolio and think about what its income capacity represents from a legacy perspective, like whomever you're planning to leave money behind to. Do you see there being a much greater value in it now than there was back when it was just accumulation focused?

Justin Snider (22:30)
Absolutely, absolutely that light bulb went off for me as soon as I realized I didn't have to sell to Realize the income

This is now a pot of money that's going to endure and I'll be able to pass it on to my kids and it's not gonna I'm not gonna spend it down to zero and the cool thing is it's gonna grow and then it's gonna grow for them as well and Hopefully as as we transition some of their portfolios over their own portfolios over and get them started They're gonna be experts at it. So by the time they inherit this chunk of cash, they're gonna be pros So it's exciting and it's really cool to think about him, you know

It's absolutely a nice bit of cash to leave to them.

Brandon Roberts (23:11)
And at the very least, if, because your approach to this is a little more hands-on. And if they receive the money and they never quite hone the skill to the same degree, at the very least, there's all kinds of income being thrown off this thing to, to inherit as an asset that just becomes additional income that they, they now have. And that's dollars they don't have to worry about making each month to live their life.

Justin Snider (23:35)
Absolutely, it's an

additional stream income for the rest of their lives. Yep, it's super awesome.

Brandon Roberts (23:43)
Well, we're running down to basically the time that we have for this, but if you were to try to summarize what focusing or shifting into income-focused investing has done in just a couple of words, what would it be?

Justin Snider (24:04)
Freedom. Yeah, it's a whole different approach and it frees you up to truly not worry about the market value of your retirement investments that you've saved over your working life.

So it frees you from worry and it's exciting, right? Because it's gonna grow, it's a steady stream of income and it's disruptive to everything you've learned over the course of your life. So it's an exciting new approach for sure.

Brandon Roberts (24:37)
I very much agree that there is a fantastic freedom aspect to income-focused investing in the sense that you start to look at what it can do to provide for you and come to that realization that this means I have figured out how to live independently of going out and trying to raise money through wage activity every day.

Once you get to a sufficient place of, can generate income now, you start to stop worrying about what if there's the layoff, the market downturn, the bad economy. None of that necessarily matters when you have a solid income stream being produced by assets. And you tend to find out as you do this sort of thing, it doesn't take as much money as you'd think to generate substantial income.

Justin Snider (25:29)
Absolutely. The downturns become an opportunity and it's not such a concern anymore. It's just part of the market cycle and you just play it as appropriate.

Brandon Roberts (25:36)
Very, very true.

Very true. Well, I'm afraid that's the time we had allocated for today, but have no fears, I'll be back next week with more tips and tricks to help you build a rock solid retirement income. Until then, please remember, real wealth doesn't just add up, it writes checks.