unbiased wrote: ↑Sat Sep 12, 2020 2:30 pm
TN_Boy wrote: ↑Sat Sep 12, 2020 2:03 pm
We can differ whether that is part of what the OP is asking. It would be nice if the OP would come back and clarify.
I think you want me to clarify what I mean by "income only?" Basically, a portfolio that puts capital preservation first and foremost -- and throws off enough income/dividends/interest to fund retirement expenditures and keep up with inflation. This would be different from a "total return" approach that relies on capital appreciation, rebalancing, and/or selling of shares to fund expenses. I really don't think this can be achieved with a bond-only approach, unless in volatile CEFs. But I'm open to any approach and that's why I'm asking the experience of those who seem to be making it work.
Yes, thanks for the clarification.
There is almost no chance that a fixed-income oriented portfolio could do what you want.
But let us go up a level. Step 1 is figuring out how much money you need to get from your portfolio (the closer to retirement, the easier it is to estimate this value).
Once you know expenses and your SS income, you can figure, hey, I need $X from the portfolio each year to supplement SS.
Before retirement, you can do things like save more. You can live more frugally both before and after retirement. You can delay taking SS, so it pays more each year. And so forth. These are all things that either make your portfolio bigger (more savings) or reduce the amount you need to withdraw from it.
Okay, however we get there, unbiased knows at retirement $X is needed per year from investments. However, you also want to ensure that the portfolio supports your retirement AND doesn't go down in value either!
So you've put two requirements on the portfolio, and it should not surprise you that this means you need a bigger retirement portfolio to achieve both goals. Probably, a lot bigger.
Why are you focused on keeping the portfolio value from decreasing? Sure, that would be great, but why is that a key goal? I don't want to run mine down anywhere near zero, but if it gets a lot smaller before the spouse and I kick the bucket, well, after we are gone that fact will not bother us. Are you concerned about leaving a legacy?
Putting aside the goal of complete portfolio preservation, several people are making the argument that a total return approach to withdrawals allows you to safely withdraw more than an income focused approach. A total return approach is better, by the way, even if you did want to preserve the portfolio.
Here's an important point. People have posted, sure, I live off income alone. Those people are not withdrawing much from the portfolio -- more like 2%.