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Strategies & Market Trends : Young and Older Folk Portfolio
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chowder
Tam3262
To: chowder who wrote (7786)8/9/2024 4:53:17 PM
From: SeeksQuality2 Recommendations  Read Replies (1) of 22060
 
Playing with the numbers, I think Chowder's initial suggestion of a 7.05% yield (like the OFP) can be made to work?

The $162k income isn't really enough given the income range. In fact it almost certainly would end up being insufficient, EXCEPT that there is likely to be some continuing income for at least a couple more years, with Social Security potentially kicking in after that, for a total of ~$190k of ongoing income. Set aside the "bridge" or not, it doesn't really change how the numbers work out. Before I wasn't thinking about this clearly.

The risk of aiming for a lower yield point is that you might also need to sell off some assets, and that is a bad habit to get into with an income strategy like this. The benefit is that the lower yield point -- identical to the OFP -- ought to be significantly less risky. Half a percentage point may not seem like a lot, but if you are balancing 3.5% yields and 10% yields on the two halves of the portfolio, it is the difference between 40% in SCHD (or something similar) and 45% in SCHD. Extra breathing room for future adjustments.

I keep reminding me that this is a short-term portfolio until the additional assets are available and the need (as a percentage of assets) is reduced. That simple fact makes inflation less of a concern (since inflation really only gets ugly when you look at time periods of 10+ years) and makes slow attrition less of an issue (since falling 1% or 2% behind per year isn't that big a deal over shorter time periods). Both inflation and principal erosion are a killer when planning for a 30-year retirement.
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