In a recent press release, fund management company Marriott, which also specialises in income-producing investments, has two suggestions for retired investors:
Try to match the income drawn with the income produced.
“You should be aware of how much income your portfolio is generating and try to draw no more than the income produced, thus avoiding capital erosion. Investments that produce reliable and consistent income streams assist investors in matching income drawn with income produced. If you can avoid drawing more than what your investment produces, you can secure your future income - this is especially important in the early stages of retirement. If you draw more income than your investment is producing, it should be with the knowledge that you are eroding your capital,” Marriott says.
Choose investments that produce consistent income streams that grow over time
“You need to ensure you protect yourself against rising living costs. Investments that produce reliable income streams that grow over time, such as equities, are critical for a successful retirement. The right equities are those that have a reliable, growing, inflation-hedged income stream.
“While you may find it challenging initially to restrict your annuity income to the income produced in the current economic environment, this is preferable to running out of capital. Rather be conservative now than risk having to find another source of income, such as going back to work or having to reduce one’s standard of living, at some point in the future,” Marriott says.