Here's how to create a paycheck for retirement:
. Total return investing’s objective is to maximize total returns by choosing investments beyond ones focused solely on interest and dividends, which may not always provide the best growth potential.
This approach has several advantages. First, over the long term a total return portfolio should outperform a portfolio heavily weighted toward income generation. Second, it still benefits from bond interest and stock dividends, without tilting the portfolio in favor of one or the other. You might also consider adding in more buckets. In a three-bucket approach, bucket one holds cash for the near term. Bucket number two holds fixed income investments tied to retirement needs for the medium term, say three to seven years out. And bucket number three holds long-term investments, like a total-return portfolio.
While these funds can simplify your retirement paycheck strategy, they have drawbacks. First, moving investments to a managed payout fund in a taxable account might generate significant tax liability. Second, these funds are not tax efficient as they invest in fixed income securities, making them unsuitable outside of retirement accounts.
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