clifp
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Oct 27, 2006
- Messages
- 7,733
The often sensible Christine Benz from M* has two fine articles about the on-going debate of income vs total return investing for retirement.
Income vs.Total Return: Who Says You Need to Take Sides?
The second article probably summarizes one of my biggest reasons for liking the income approach.
Income vs.Total Return: Who Says You Need to Take Sides?
As a conformed incomist I have to say she has many good points in the article.Lately, I've seen signs of the same absolutism in the realm of another great investing debate: [As poltical debates] whether to manage a portfolio for income or total return. Even a hint of an endorsement for the total-return approach, as in this article, seems to set off the income absolutists.This is frustrating because when you take the time to examine the two approaches, it's clear that they're not polar opposites at all. By getting bogged down in semantics, I fear that some investors might miss the big picture.
The second article probably summarizes one of my biggest reasons for liking the income approach.
But there's an area in which incomeniks have it all over the totalniks, and that's in ease of implementation in retirement. By using an income-oriented approach, you can create the equivalent of a steady paycheck in retirement (or attempt to, anyway). But tapping your principal periodically, as you're required to do with a total-return approach, isn't just psychologically difficult. It's also a logistical headache. You have to figure out which accounts to tap for cash, which in turn affects where you're holding liquid assets, and you also have to figure out how to tap your accounts in the most tax-efficient manner possible. Given that, it's no wonder that so many retirees are attracted to investments that kick off current income.
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