Converting a Portfolio to a Stream of Income

Investors who build up a portfolio of stocks and bonds are faced with a problem as they enter into retirement: how do you turn investments into income?

The old solution was to live off the interest/dividends and never sell anything. This ensured that the portfolio would outlast the investor. Back in the 1970's and 1980's the dividend yield on the S&P 500 combined with bond yields was completely sufficient to provide loads of income. Can you believe the S&P 500 paid a dividend of over 5% in 1980? The current yield is about 1.8%. It's a lot harder to live on 1.8% of your investments than 5%. The ten-year US Treasury bond yielded 10% at that time.

The yield method is still a possibility with some modifications, but there are other options that will also be explored in this blog. My hope is to show that there are a variety of methods to get reliable income, but every approach has risks that must be recognized.