Joe from Nanoose Bay dropped by last week to update me on his retirement income plan and to let me know hes on track.
A year ago I wrote about Joe and his retirement income plan suitable for a 65 year old senior with a conservative investment focus. Joe has split his investments up five ways.
First, he took 20% and invested into one and five year GICs. The barbell approach as it is referred to, is to invest half into short term investments and half into long term investments. This takes advantage of averaging the interest rates.
The next 40% was invested into fixed income. This consisted of a portfolio of bonds and bond funds including government bonds, real return bonds, high yield bonds and preferred shares.
Joe liked the consistency of his fixed income portfolio and safety of GICs since he has about 60% overall invested into conservative and less choppy (volatile) investments.
The next 20% was into income trust funds. Funds that invest into income generating investments to give a monthly income. These consist of oil and gas, resource trusts, real estate and business trusts.
Joe likes that fact that the income is less taxing than interest income and the strong oil and gas price and rise in real estate has helped offset inflation.
The final 20% was also to produce income by investing into dividend income pooled funds. These are stock funds that invest in strong dividend paying companies. The dividend payout also gives Joe additional monthly income.
Each section of his portfolio is designed to payout income on a monthly or quarterly basis. Joe wants to retain most of his capital and occasionally dipping into principal to go on his expensive holidays. In five years, Joe wants to eventually decrease the 40% equity down to 20% and hopefully spend more on his travels.
He is comfortable with the diversification into five asset areas. That way he can see where his income will be generated from, the specific dollar amounts of cash flow coming in, and what he can typically expect from each asset class.
Now Joe can spend more time planning his next big trip accordingly.