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Managing The Retirement Income Portfolio: Planning

Steve Selengut June 20, 2018

https://www.linkedin.com/pulse/managing-retirement-income-portfolio-planning-steve-selengut/

The retirement income portfolio (nearly all investment portfolios become retirement portfolios eventually) is the financial hero that appears on the scene just in time to fill the income gap between what you need for retirement and the guaranteed payments you will receive from Uncle and/or past employers.

How potent the force of the super hero, however, does not depend on the size of the market value number; from a retirement perspective, it’s the income produced inside the costume that shields us from financial villains. Which of these heroes do you want in your wallet?

  • A million dollar VTINX portfolio that produces about $19,200 per year in spending money.
  •  A million dollar, well diversified, income CEF portfolio that generates more than $70,000 annually… even with the same equity allocation as the Vanguard fund (just under 30%).
  • A million dollar portfolio of GOOG, NFLX, and FB that produces no spending money at all.

I’ve heard said that a 4% draw from a retirement income portfolio is about normal, but what if that’s not enough to fill your “income gap” and/or more than the amount produced by the portfolio. If both of these “what ifs” prove true… well, it’s not a pretty picture.

And it becomes uglier rather quickly when you look inside your actual 401k, IRA, TIAA CREF, ROTH, etc. portfolio and realize that it is not producing even close to 4% in actual spendable income. Total return, yes. Realized spendable income, ‘fraid not.

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