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Source of income: from dividends vs sale of principal or security
Some people have this notion that withdrawing dividends from savings   is somehow okay but withdrawing principal is not.  Note, this notion. Would someone please explain the "mistake" on P214 and why it's a   mistake? Because there may be times where withdrawing principal may be a good idea as one could sell off something that has gained enough that in re-balancing the portfolio there are capital gains that could be used for withdrawing in retirement. How and why does the sale of financial instrument equate to the   receipt of dividends?  In either case, one has cash equivalents that could be withdrawn. If you take the dividends in cash or sell a security to raise cash, you have cash. Thus, it doesn't matter what origin it has. If I sell a financial instrument that later   appreciates in value, then this profit opportunity is lost. In the   case of a dividend, I'd still possess the financial security and   benefit from the stock's appreciation? One could argue that the in the case of a dividend, by not buying more of the instrument you are missing out on a profit opportunity as well. Thus, are you out to make the maximum profit overall or do you have reason for taking the cash instead of increasing your holding?