Income in retirement
Discussion
My mum retires soon, and as such are looking at ways to boost / increase her retirement income. She'll have some DB income which combined with the state pension will cover all her basic needs, but not living the life of riley (hopefully investment income will provide "the cream")
She does have a reasonable cash sum from which to earn extra income (I've explained over the 25yr+ retirement we hope for she shouldn't leave it in cash to be ravaged by inflation etc)
Property was one option but without wanting to coerce her I've explained the pitfalls of putting a lot of your income into a single asset, the time (or cost) needed to manage a property, maintenance costs etc (I rent one myself so know first hand).
With that in mind we've been mapping out options for an income generating S&S portfolio (held within an ISA).
I'm comfortable (and do) managing my own SIPP, but its tilted towards growth not income, and at the moment, not a significant pot to manage.
I would welcome people thoughts / critique on an income focused portfolio that consists of the following:
80/20 Equity / bond allocation, consisting:
16% - FTSE100 tracker - Av Yield 3.8%
16% - Vanguard High Yield global ETF - Av Yield 2.8%
16% - Global (Ex UK) tracker - Av Yield 1.6% (low yield but I'm aware of the pitfalls of ignoring total return over income)
16% - UK income focused investment Trust(s) - Av Yield 4%
16% - Global Investment Trust(s) -Av Yield 4%
20% - UK Government bonds - Av Yield 1.5%
Fund size would be north of £200k. Are we being un-realistic to attempt / expect to manage this DIY? Or should we be seeking an IFA?
Thoughts welcome.
She does have a reasonable cash sum from which to earn extra income (I've explained over the 25yr+ retirement we hope for she shouldn't leave it in cash to be ravaged by inflation etc)
Property was one option but without wanting to coerce her I've explained the pitfalls of putting a lot of your income into a single asset, the time (or cost) needed to manage a property, maintenance costs etc (I rent one myself so know first hand).
With that in mind we've been mapping out options for an income generating S&S portfolio (held within an ISA).
I'm comfortable (and do) managing my own SIPP, but its tilted towards growth not income, and at the moment, not a significant pot to manage.
I would welcome people thoughts / critique on an income focused portfolio that consists of the following:
80/20 Equity / bond allocation, consisting:
16% - FTSE100 tracker - Av Yield 3.8%
16% - Vanguard High Yield global ETF - Av Yield 2.8%
16% - Global (Ex UK) tracker - Av Yield 1.6% (low yield but I'm aware of the pitfalls of ignoring total return over income)
16% - UK income focused investment Trust(s) - Av Yield 4%
16% - Global Investment Trust(s) -Av Yield 4%
20% - UK Government bonds - Av Yield 1.5%
Fund size would be north of £200k. Are we being un-realistic to attempt / expect to manage this DIY? Or should we be seeking an IFA?
Thoughts welcome.
If your mother is near retirement age, I suspect an 80% equity allocation is too high given her investment horizon. That's presuming that she is liquidating the portfolio progressively (4% drawdown) rather than preserving the capital.
Rule of thumb was always 100 minus age in equities, so more like 35-40% for her.
Rule of thumb was always 100 minus age in equities, so more like 35-40% for her.
NickCQ said:
If your mother is near retirement age, I suspect an 80% equity allocation is too high given her investment horizon. That's presuming that she is liquidating the portfolio progressively (4% drawdown) rather than preserving the capital.
Rule of thumb was always 100 minus age in equities, so more like 35-40% for her.
Intent would be to live of the yield, drawing down in chunks should it be required later in retirement - 10+ years away.Rule of thumb was always 100 minus age in equities, so more like 35-40% for her.
(I accept this is possible backward given the higher spending profile in early retirement)
Terry Smith is quite an advocate for simply drawing a chunk from your holdings and growing them rather than investing purely for income.
His reasoning (and I'm massively paraphrasing) is that you end up buying bad companies if you simply chase dividends whilst if you invest in good companies they may choose not to issue a dividend because they can reinvest their profits more efficiently which allows the company to grow.
His reasoning (and I'm massively paraphrasing) is that you end up buying bad companies if you simply chase dividends whilst if you invest in good companies they may choose not to issue a dividend because they can reinvest their profits more efficiently which allows the company to grow.
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hstewie said:
hstewie said: Terry Smith is quite an advocate for simply drawing a chunk from your holdings and growing them rather than investing purely for income.
His reasoning (and I'm massively paraphrasing) is that you end up buying bad companies if you simply chase dividends whilst if you invest in good companies they may choose not to issue a dividend because they can reinvest their profits more efficiently which allows the company to grow.
Is it not less to do with "bad companies" but more to do with efficiency and so better growth long term? If you get dividends you have to pay tax on that, so if you re-invest the dividends in shares etc you reduce the amount of money to grow with time. In addition the company will be spending all the money that could be dividends on growth, which they should do more efficiently than giving you it back, then you pay a manager to invest it in a company to grow etc.His reasoning (and I'm massively paraphrasing) is that you end up buying bad companies if you simply chase dividends whilst if you invest in good companies they may choose not to issue a dividend because they can reinvest their profits more efficiently which allows the company to grow.
This basically https://citywire.co.uk/money/terry-smith-investing...
Random example but buying Vodafone because of the huge dividend whilst your capital is eroding.
Random example but buying Vodafone because of the huge dividend whilst your capital is eroding.
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