Variation on the Bucket Strategy

Bostonerimus1

Your approach is very different from a traditional bucket strategy as it isn't concentrating on growth in what you are considering the long term 3rd bucket. The size of your portfolio relative to your income needs means that you can probably get away with such a conservative approach, but it would not be a good approach for anyone who needed a higher income percentage. Avoiding too much risk can itself be risky as over the long term a low growth portfolio can be eaten away by inflation and bond markets have their own risks as we all experienced when interest rates spiked under Liz Truss.

FIREDreamer

With a £1.5 million portfolio and £42,000 needed (£50,000 gross) per annum I would go 100% global equities to be honest - perhaps 33.33% VWRL, 33.33% FTWG and 33.33% HMWO to spread provider risk.

Bostonerimus1

FIREDreamer said:

With a £1.5 million portfolio and £42,000 needed (£50,000 gross) per annum I would go 100% global equities to be honest - perhaps 33.33% VWRL, 33.33% FTWG and 33.33% HMWO to spread provider risk.

I agree, my approach to generating the income would be to use the dividends from an equity portfolio, I might add an annuity if I was feeling conservative. With SP's to also consider I think the OP is being overly cautious, but a portfolio is personal and being able to sleep at night is important. I'd be a lot more animated in my comments if the OP needed more income.

IamWood

FIREDreamer said:

With a £1.5 million portfolio and £42,000 needed (£50,000 gross) per annum I would go 100% global equities to be honest - perhaps 33.33% VWRL, 33.33% FTWG and 33.33% HMWO to spread provider risk.

For simplicity, it's similar to what I did with mine (global index excluding UK), but my pension is only around £1 million. I have rental income to mitigate when the market is against me.

FIREDreamer

IamWood said:

FIREDreamer said:

With a £1.5 million portfolio and £42,000 needed (£50,000 gross) per annum I would go 100% global equities to be honest - perhaps 33.33% VWRL, 33.33% FTWG and 33.33% HMWO to spread provider risk.

For simplicity, it's similar to what I did with mine (global index excluding UK), but my pension is only around £1 million. I have rental income to mitigate when the market is against me.

@IamWood
 
“ … only around £1 million”

😂😂😂😂😂

FIREDreamer

Bostonerimus1 said:

FIREDreamer said:

With a £1.5 million portfolio and £42,000 needed (£50,000 gross) per annum I would go 100% global equities to be honest - perhaps 33.33% VWRL, 33.33% FTWG and 33.33% HMWO to spread provider risk.

I agree, my approach to generating the income would be to use the dividends from an equity portfolio, I might add an annuity if I was feeling conservative. With SP's to also consider I think the OP is being overly cautious, but a portfolio is personal and being able to sleep at night is important. I'd be a lot more animated in my comments if the OP needed more income.

Perhaps use VHYL and HDLG to boost the dividend up a bit.

Hence 20% in each of VWRL, FTWG, HMWO, VHYL and HDLG - dividend yield about 2% overall.

Bostonerimus1

The OP has a lot of leeway so a wide range of asset allocations and withdrawal strategies will work to provide sufficient income. If they add a requirement to leave a certain level of legacy then the options might narrow.

Bostonerimus1

IamWood said:

FIREDreamer said:

With a £1.5 million portfolio and £42,000 needed (£50,000 gross) per annum I would go 100% global equities to be honest - perhaps 33.33% VWRL, 33.33% FTWG and 33.33% HMWO to spread provider risk.

For simplicity, it's similar to what I did with mine (global index excluding UK), but my pension is only around £1 million. I have rental income to mitigate when the market is against me.

Rental income is great, but it locks up a lot of capital and for income it is most useful without a mortgage; so adding a rental property to a retirement income portfolio is best done long before retirement.

FIREDreamer

Bostonerimus1 said:

IamWood said:

FIREDreamer said:

With a £1.5 million portfolio and £42,000 needed (£50,000 gross) per annum I would go 100% global equities to be honest - perhaps 33.33% VWRL, 33.33% FTWG and 33.33% HMWO to spread provider risk.

For simplicity, it's similar to what I did with mine (global index excluding UK), but my pension is only around £1 million. I have rental income to mitigate when the market is against me.

Rental income is great, but it locks up a lot of capital and for income it is most useful without a mortgage; so adding a rental property to a retirement income portfolio is best done long before retirement.

Not something I would fancy in retirement, having seen “Nightmare Tenants, Slum Landlords” on channel 5. What if you get a tenant from hell?

Bostonerimus1

FIREDreamer said:

Bostonerimus1 said:

IamWood said:

FIREDreamer said:

With a £1.5 million portfolio and £42,000 needed (£50,000 gross) per annum I would go 100% global equities to be honest - perhaps 33.33% VWRL, 33.33% FTWG and 33.33% HMWO to spread provider risk.

For simplicity, it's similar to what I did with mine (global index excluding UK), but my pension is only around £1 million. I have rental income to mitigate when the market is against me.

Rental income is great, but it locks up a lot of capital and for income it is most useful without a mortgage; so adding a rental property to a retirement income portfolio is best done long before retirement.

Not something I would fancy in retirement, having seen “Nightmare Tenants, Slum Landlords” on channel 5. What if you get a tenant from hell?

All fair concerns and I would not be keen to be a new landlord going into retirement. I have a rental property that I bought in 1997 and it's now mortgage free and I have a very good tenant and I try to be a good landlord. As I live above the rental flat I have an incentive to keep things well maintained and I have a good relationship with my tenant. I live in Massachusetts where there are strict laws on the standards of rented accommodation and me and my tenant have a rental agreement which lays out rights and obligations and allows either party to break the lease with 90 days notice. If I ever got a bad tenant then it's pretty easy to get a Court eviction notice once the tenancy is over and the Sherriff then does the eviction. So if you keep things simple and gain some experience in being a landlord, then a rental income can be a nice supplement to pensions etc.