kempiejon wrote:DrFfybes wrote:Lootman wrote:But what about those who don't have a million? Do they push up the yield on the portfolio, hoping that they get away with the extra risk that involves? Or instead decide that it is OK to drawdown some capital each year from a more balanced portfolio.
Or by an annuity and let someone else take the risk
Indeed it does remove the risk and work of running investments. Hopefully many of us here would find an annuity a poor return. At 65 a level term might offer up to 5% annual income. Inflation adjusting and 3% is on offer. A FTSE100 index would yield around 3.5% income but you get to keep your stake and that could hopefully grow.
I know I don't know which works best but those with longevity in their genes or survivors of life shortening illness that can get enhanced rates might do well from annuities, probably those wanting to retire early not so much
This sounds like compartmentalisation. If you put cash on deposit, or buy a bond at par, then spend the interest you get to "keep your stake"*. But equities really don't work that way. If you buy a FTSE 100 ETF, not only will your "stake" fluctuate in value, but on average every dividend payment will result in an equivalent drop in value of your ETF position.
It is best to get away from this kind of thinking. That equity dividends are like bond or deposit interest.
* A bond bought at par will also mean your "stake" fluctuates in value and you can only be sure of getting it back at bond maturity.