What is Retirement Income Investing?

Bruce Miller

Income Investing

“Buy low and sell high” is most likely the first investing advice most of us heard when we were young. Unfortunately, investing is not that simple.

To build a successful investment portfolio, we must know what to buy and sell, when to buy and sell, how to buy and sell, how to minimize risk and that is just the beginning. I will address these topics in this series of articles on www.retirementwatch.com or www.stockinvestor.com and, if you want answers to any of these questions, keep reading.

The earliest exposure to any kind of investing advice for most of us was from those around us or through the media. We were informed that investing is all about buying something for a given price and selling it at some latter time for more than what we paid for it, which sounds like a pretty simple concept.

However, the difficult part is figuring out what exactly is a “good investment” that will fulfill this ultra-simple paradigm. We currently have access to thousands of voices in the financial advisory industry.

All of those voices are clamoring to tell us that they are the right sources who have the secret system or the unique insights to guarantee our investing success. The number of available investment products that have been created to foster financially security seems limitless. But, how do we know that these are the best ways to invest for your retirement?

As we grow older and perhaps a little wiser about investment alternatives and the motives of those promoting them, we continue to hold closely the fundamental paradigm that wealth, and the ability to live comfortably on it, comes from the growth of the investments we hold.

A new outlook

Our investment outlook has become sophisticated enough and we realize now that growth is really the sum of the increase in the price of a given investment, plus the reinvestment of all dividends from those investments. This is something that we call ‘Total Return.”

We also understand now the concept of “investment risk.” Experience taught us that everything in the world of investing comes at a price and there is no such thing as a free lunch. This is the almost universal paradigm of how we invest during our years of financial growth and accumulation.

Then something happens and our situation changes drastically. The paychecks stop. Our lifestyle suddenly changes course and we must look at our savings accumulation differently. Overnight, we must turn our retirement savings behavior upside-down. We are no longer streaming savings dollars into our investment portfolio with every paycheck, but we begin to reverse that flow and start drawing funds out of these accounts. In the language of financial planning, we become “decumulators”, which is to say, we begin the process of spending more than we earn.

What if I told you that you do not have to make that drastic change? What if I told you that, with proper planning and only minimal adjustments to your investment, you can continue to receive that steady stream of income that you have been accustomed to for most of your adult life?

We have access an immense selection of retirement investment advice in the form of books, magazines, radio, television shows, websites, podcasts, instructional videos, blogs, discussion forums, etc. We are bombarded with tens of millions of words spoken and written daily that advise us to buy this or sell that, hold this or add that, “harvest” this or “double-up” on that. What I find almost nonexistent is any mention of the true investment objective of those heading into retirement – reliable retirement income.

A new strategy

The financial media seems to believe that the universal goal of all retirees is to pick winners every time and to die with as much money as possible to fulfill the motto that “He who dies with the most, wins”. This is a process that feeds off our savings momentum late in our working careers, as this is the period when we are most attentive to this subject and the period in our lives when we have the greatest wealth.

A true income approach to retirement investing will not concern itself with the growth of any income security. This approach does not consider that time-honored yardstick of accumulation investing “total return,” as the dividends, interest and other forms of distributions from investments held for income are consumed, not reinvested.

All of those measures of investment portfolio success that we have learned and held sacred over our accumulation years, such as compound annual growth rate (CAGR), portfolio beta, risk-adjusted rates of return, asset allocation optimization, asset correlations, rebalancing and alpha, are no longer of concern. These might be great conservation topics at your next party, but they are purely academic.

The only concern of the retiree who elects the pure income approach to providing retirement income is income. All that matters are the amount of income, the reliability of income, the growth of income and the ability to manage income. Everything else is background noise.

What is next?

In my upcoming articles in this series, I will outline everything you need to know to transform your current capital growth investment portfolio into a portfolio designed to provide you with reliable retirement income. With a secure and steady income inflow, you will be able to focus on traveling to all the places you always dreamed of visiting, writing that book you have been drafting in your spare time for the last three decades, finally learning to play the piano or just slowing down and relaxing in your backyard with good food and great conversation with family and friends.

However, to be able to enjoy your retirement worry-free, you must start transforming your investment portfolio now. As I outlined in my introductory article to this series, I understand that my strategic approach to retirement investing is not for everyone. However, for those interested in an alternative path, I will describe the basic advantages and disadvantages of my approach to reliable retirement income investing and let you decide which to choose.

Bruce Miller



Bruce Miller is a certified financial planner (CFP) who also is the author of Retirement Investing for INCOME ONLY: How to invest for reliable income in Retirement ONLY from Dividends and IRA Quick Reference Guide.


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