Fixed returns on investments are reaching historic lows. Many of our clients who are in the distribution phase of life want a portion of their assets in fixed type investments so the portfolio is not subject to the ups and downs of the market.   But with returns so low, how do you balance risk and reward with the need to create a livable income from the portfolio?

Paul Sullivan, reported in the New York Times on January 28th, “When Safe Bonds don’t Yield Enough to Retire On,” that some planners are now adopting a technique we have used at HORAN for a long time. The technique is to keep three to four years of required income in liquidity pools (short term fixed investments) for the benefit of clients leaving the balance of the money invested in funds that should create growth over time. 

Using this strategy helps to ensure short term needs will not have to create draws on equity assets during down markets. The gyrations of the stock market are particularly unsettling to those who are trying to make decisions about when to exit the market to create additional income. 
 
In addition, people stop trying to create a lifestyle on fixed returns that are close to zero. 
 
The  three to four years of income in short term fixed investments allow 36 to 48 months of regular monthly withdrawals that is underpinned by a diversified portfolio. This should provide growth allowing a longer time for one to make decisions as to when to add to the liquidity pool.  
 
If you plan to live a long life, you should look into this strategy to see if it can meet your needs.