The idea of spending principal seems remarkably icky to me. Something about it doesn't sit right to me - but then, finances are all a game to me, and I get fun from min-maxing and playing games the way I want to play them. Others will have their own rules. The great thing about life is we all get to set our own rules.
With the preference for buybacks over dividends, the delineation between principal and income has become somewhat blurred anyway.
What is “principal?
In finance, generally speaking it's the original amount of money that is borrowed, lent, or—for our purposes—invested; before any interest, gains, or losses are considered.
But retired folk I know have their own interpretation of principal:
Is it the shares of stock funds and units of bond funds you started with when you retired?
Is it the dollar amount of your invested portfolio at the time of retirement?
Is it the INFLATED dollar amount of your investment portfolio…?
Is it the dollar amount you had at the beginning of the year?
Changes that occur in your “Principal” is a story you tell yourself.
You can have identical financial outcomes from spending dividends OR spending the proceeds of shares of stock you sell that appreciated due to buybacks. But in the first case you didn’t “touch principal” whereas in the second—maybe you did since you sold shares?
I think it’s helpful to think about principal as an amount of money, not shares/units of stocks/bonds.
It is also helpful to think of dividends as a sum of money you are forced to treat as taxable gains in the year distributed, and of buybacks as an increase in the value of your stock, that you can sell to realize gains whenever you choose to, or to keep unsold.
Ultimately, I would ALWAYS want buybacks and NEVER dividends. I don’t need companies telling me when to take gains…I’m fine accepting the responsibility.