Here’s How To Set Up A Retirement Income Portfolio

A solid retirement income portfolio provides both a stable source of income plus potential for growth based on the user’s risk profile and time horizon. All this to say, it’s custom-made.

While most retirement income funds focus on either a conservative shift toward bonds, wealthier Americans rather keep their wealth active. Through either a focused dividend-based portfolio or one structured to capture market gains, my family opts to do both.

This requires that we balance out our equity allocation with sequence risks. If our main goal is to retire early, it will cut into our highest earning years. For an additional challenge, we plan to leave $5 million worth of wealth for the next generations. To accomplish this, we will have to be both aggressive and tactical.

No matter how you look at it, the best thing to do is start. The truest advantage is time, this will allow you to finish SMART+ER than the average consumer.

There are Advantages and Disadvantages to Retirement Income Investing

Advantages

• A retirement investment portfolio creates a stable basis for your future. Over 60 percent of Americans are retiring broke. That’s not a recipe for happiness. To supplement your Social Security benefits which are on average less than $1,500 per month, you will need a better strategy going forward.
  • Less than $20,000 is not enough to sustain millennials who learn to live off of $70,000.
• Through diversification, you can protect yourself from extreme market volatility. As you shift in age, you can opt to move more money into dividend-paying stocks.
  • If markets drop 20%, it will have to go up 25% to just break even. For a lot of aging Americans, these drops are catastrophic. Especially if you don’t have the time to wait for a recovery.
• Through the economies of scale, you can also learn to harvest market gains to purchase distressed companies ala the 20 percent market drop from February through March 2020. The strategy here is to be in a position to capture future wins.
  • The best part is that most market downturns are oven flanked by a recovery. In this case April to December 2020 with a growth rate of 80% in some cases.
• Finally, there is also a degree of Tax Efficiency and Flexibility during the distribution phase. Turns out the bottom three quintiles pay 0% or 0.3% in federal taxes. In most cases, you can expect to pay no more than $5,000 in Federal Taxes. However, it’s all based on your withdrawal for any given year.

Disadvantages

• Retirement Income investing is closely tied to conservative investing. Think 30 percent equities to 80 percent bonds. In essence, conservative investing prioritizes preserving the purchasing power of one’s capital with the least amount of risk.
• Some use leverage, which typically includes low-risk securities such as Treasuries and other high-quality bonds, money markets, and cash equivalents. Many end up not growing through a recovery. It’s way more likely that people sell low and run to safety, only to miss out on the subsequent recovery tied. Only to run back in when the media says this or that stock is blowing up, thus buying High. It’s a whole lot of problems.

With all that said. Let’s check out how to build a Retirement Income Portfolio below. I’ll be updating this list periodically since there are plenty more. But I have to vet them first. Bonus for all the readers, if you want to get a near-accurate view of the TNFG Investment Portfolio with all the holdings, click because it’s blue. It will send you to the google sheets view.

People ask and I always deliver on transparency.

Now to Build a Retirement Income Generator

Pick 1 of these Portfolio Pre-made M1 Templates*

Name	Portfolio Breakdown	Annual Expense Ratio	5-Year Average Annualized Return	Dividend Yield
Domestic Dividend	$VIG (85%), $DON (12%) and $DES (3%)	0.11%	**62.42%	2.093%
Global Dividend	$VIG (59%), $IDV (17%), $DEM (13%), $DON (9%) and $DES (2%)	0.24%	39.96%	3.503%
Long Term Bonds	$TLT (34%), $MLN (33%) and $VCLT (33%)	0.14%	5.25%	3.252%
Medium Term Bonds	$VGT (34%), $ITM (33%) and $VCIT (33%)	0.11%	9.93%	2.388%
Short Term Bonds	$SHY (34%), $SHM (33%) and $SPSB (33%)	0.03%	6.84%	2.42%

Or, Pick 1 – Conservative to Aggressive Plans* Based on Retirement Year

Name	# of Holdings	Portfolio Breakdown (Top 3)	Annual Expense Ratio	5-Year Average Annualized Return	Dividend Yield
2025 Conservative	19	$BIV (21%), $TIP (13%), and $BLV (11%)	0.08%	25.59%	2.738%
2030 Moderate	19	$VEA (14%), $BIV (13%), and $BLV (9%)	0.07%	30.80%	2.47%
2040 Aggressive	19	$VEA (25%), $VTV (11%), and $VUG (10%)	0.06%	37.79%	2.253%
2050 Aggressive	16	$VEA (27%), $VTV (12%), and $VWO (11%)	0.06%	37.33%	2.267%
2060 Aggressive	16	$VEA (28%), $VWO (11%), and $VOO (10%)	0.06%	34.35%	2.283%

And if you are feeling bolder, you can choose to keep it easy with High-Dividend ETFs

ETF Ticker Symbol	Name	Annual Expense Ratio	5-Year Average Annualized Return	Price Per Share as of 4.13.23	Dividend Yield
$FDVV	Fidelity High Dividend	0.29%	10.29%	$38.79	3.76%
$JEPI	*JPMorgan Equity Premium Income	0.35%	—	$54.88	11.41%
$VYM	Vanguard High Dividend Yield	0.06%	8.64%	$107.12	3.10%
$FIDI	Fidelity International High Dividend	0.39%	0.58%	$19.59	5.44%
$VYMI	Vanguard International High Dividend Yield	0.22%	3.14%	$64.18	4.45%
$SPYD	SPDR Portfolio S&P 500 High Dividend	0.07%	6.25%	$38.26	4.49%

Why do some people choose the dividend style? Let’s say you have a $1M investment portfolio, multiplied by the dividend yield of $FDVV of 3.76%, that’s $37,600. Adding this to your social security of nearly $30,000 that’s a nice $60,000 (net of taxes) per year. Even a couple with $250,000 in $JEPI can yield an extra $28,525 without touching the principle.

Basically every bit counts.

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