Our site runs on donations to keep it running for free. Please consider donating if you enjoy your experience here!

What is YOUR Number?

My question – what is your number–meaning do you have a target for returns in your portfolio>

I write all the time about my ‘target’–I like to see 7%. Of course in the age of inflation that would seem to be inadequate, but inflation won’t be here forever, at least at the higher level we saw in the last couple of years so 7% will remain adequate for me–for now.

As everyone knows I have a balanced portfolio of the very safe 5%ish levels and the higher risk 7.75% to 9% issues. With the higher inflation we have been somewhat blessed with CDs and Treasuries at levels that make investment there worthwhile and it is really easy to just lay back and collect 5%–and that is fine. Everyone is different-everyone of us has a different plan and level of comfort with that plan.

I suspect that targets for folks drawing income from their portfolios are different from those that are not using that income–right now we (my wife and I) are not drawing any money from IRAs or any investment account. Whether we ever draw money is yet to be determined. We continue to work at jobs, have 2 General Mills pensions and 2 social security checks–with the exception of ‘one offs’ (i.e. new roofs, new vehicles etc) these would seem to be adequate, but who has a perfectly clear crystal ball?

What are your targets?

59 thoughts on “What is YOUR Number?”

  1. 60%/40% port.
    40% FI portion:
    IG 5 year ladder typically agencies, corporates and CDs this is about 5% CY
    I have a mixture of Preferreds, REITs, MLPs, Agency MBS which drive the total CY up to the 6.75% mark.

    60% is various equities w some global, commodites and bitcoin.
    Mostly equities
    Equities are mostly long but I typically have 1 or 2 shorts on.
    I also always keep some short option spreads on.

  2. I’ll add a little to my previous comment where I stated 7% like many others. What REALLY helps is to be totally debt free, healthy, and to have the majority of my portfolio in a Roth. Just the dividends from the Roth easily supplements our SS checks. Still converting the IRA to the Roth. As I said before life is good. Thanks to Tim and all the posters here!

    1. Dj…Congrats i agree with all except I did do a cash out mortgage at 30 year fixed for 3.000% in early 2021. I have a 2800 sq ft house and my P&I is just 1180/month. My house would rent for 2500 so I could not rent a decent house for that. Meanwhile, on the cash out money I invested, I am getting close to 1500/month! So my debt is a cash flow positive business decision. I could pay it off at any point but, why would I?

      I have been unable to convert to Roth anything in a favorable way because I have 6200/month in pension/SS so my tax bracket starts too high. That’s a bummer but my taxable accounts and existing Roth should cover me till I hit RMD in 9 years. I may even do a little freelance work to make enough to contribute max to a Roth every year.

      Like you, life is good!

  3. I have 2 main goals. The first is to live off interest/dividends without touching principal. I live comfortably frugal and was able to do this when CD rates were 2.25% and safe preferreds were 4%. My second goal is to keep as much as possible fairly liquid for the inevitable sale that will happen when investment bubbles burst. When covid sunk the market, I was able to pick up some good deals on energy stocks and BDCs.

    I used to be a trader, so it’s embarassing to admit I have some real stinkers that I held onto for too long. The reason is I was too married to goal #1 of maintaining a certain income level. When rates started to rise I didn’t have enough of a watch list to trade up.

    Having said all that my target is 7-8%. But I’m only invested about 25%. The rest I’m happy to leave in short term treauries or MMs earning 5%, ready to deploy on short notice.

    1. I agree with the save some liquidity for bargains like BDCs. I had owned ARCC, TSLX and MAIN. I let the two latter get called away last month sell covered calls. Also, 70% of my ARCC just got called and m9st of the rest i sold Sep 21s against them. I’ll happily look to repurchase at lower levels.

  4. Hi Tim,
    I retired last October from full time work, remained with the company as a trainer/consultant, averaging about 15-20 hours a week, a bit more when we are manning for a rocket/missile launch(4 this month). Also my wife and I are drawing full SS, with a small fixed monthly annuity check from a pension. We both are required to take the RMD from our IRA accounts, we spend about half of the RMD and save the other half. Right now my mix is 63% IG bonds ( mostly Agencies) and CD’s, 30% preferred stock and BB’s, about 6% CEF/ETF funds. just 1% cash. My IRA account earns 6.8% and my wife’s IRA earns a bit less at 6.6%.
    My company’s contract ends in December and I will be fully retired then. I will roll my 401K into my IRA and should be able to duplicate my current part time earnings.

  5. I don’t have a fixed % as a target. My main goal is to generate sufficient income that I never have to be looking at my holdings asking “ what do I need to sell to pay my bills this month ?.” As long as my passive income and our ss checks exceed our living expenses, I’m content. Been retired for 20 years with a bigger investment base now than when I started. Don’t want to bore anyone with the details, but for me it’s all about generating sufficient excess passive income to pay current bills and investing the rest so the passive income stream keeps increasing.

  6. Thank you Tim and to all…appreciate this conversation. A return of 5.5-6% floats my boat. I’ve migrated from the preferred and baby bond world to 70% no call bonds rating north of BBB with varying durations with callabel bonds…CDs…Treasuries tossed in. I’m in the higher for longer camp and enjoy sifting thru the offerings. For fun…I very recently picked up ProShares Ultra Shorts SDS and QID to scratch the once was a trader itch.

  7. Tim ; i 2 IRA accounts ;and I hold 50% in the MMF but with the remaining 50% ; I try to get 8% or better safely ; here’s how ; JBBB ; an ETF holding BBB rated CLOs ; Large relatively safe Bank preferred ; ZIONL ; SNVpD and
    I like the notes of BDCs – due to the limits on leverage ; here are 2 ;
    CSWXZ and NMFCZ ; i’m well into RMD land ; but I don’t need the $ and it goes to the Endowment Fund at my Alma Mater.

  8. I’m very happy to not lose money. Still working and save a large portion of my earnings after taxes. Income from investments just adds to net worth. I don’t worry about inflation as my annual spend is relatively low compared to assets. Thrilled to have 5% CDs and money markets, although we know those rates could fall at some point, but hopefully we’re done with the ZIRP nonsense.

  9. Thanks for all the replies. My ‘target’ is to not look like an idiot when I do our annual review with my wife. We are both retired and well funded due to equal parts luck and labor. Currently in the mid 5% area with what I think are safe returns.

  10. I shoot for 7.5%. Not retired yet. For the income sleeve of my portfolio, a mix of term preferreds (EICC, EICB, XFLT-A), short-duration BBs (SBBA, SCCC, RWAYZ) reset preferreds (EBGEF, SPNT-B, WCC-A, RITM-D, SNV-E), CEFs (BDJ, AIO, BCAT), live floaters (CUBI-F, ALL-B), busted convertibles (RLJ-A), bonds (BBDC, 2029), and high-yield stocks (TRP, ENB) are all examples of my income holdings. DYODD

  11. No fixed number just whatever I can get. and it changes with the times I demand a higher dividend now than I did a couple years ago.

  12. Most of the comments go well beyond a target, so I’ll go along.
    I retired at the start of ’14, no pension, but SS is pretty nice- saving a decent part of it since I have to take an RMD. I’m not spending from my taxable, ROTH or trad IRA (except RMD).
    I am ~ 42% Treas ETFs, CDs, and a little cash – paying over 5%. The rest is spread over mostly BBs, preferreds of various types, a few CEFs and BDCs, yielding an average ~ 9.2% For the trailing 12 mo, am up 9.9%
    I guess I don’t have a ‘target’, but tend to buy issues 7-9% in fixed, resets, or floaters, with some higher % in CEFs & BDCs. I have noticed that I have a lot that could be called in the next 6-12 months, hopefully not too many will.
    The only big unknown is possible costs before the reaper catches-up with me. Plan… go fast if lucky.

  13. We track at 8-10% across our entire portfolio, but we’re heavy into common stocks so we get a negative year about every 15 years. Retirement is coming so I’m shifting some toward fixed income to cover the bills and avoid having my wife worried about the daily ups and downs.

  14. Tim, to answer your question, I have no specific target number for total return

    I do have a target I set 5 years ago when I retired of at least $100K in interest / dividend income annually on the active portion of funds I manage (I would say I manage about 60% of our funds and the other 40% I have left invested in mutual funds in retirement accounts from our last employers). Happy to say given the increase in rates and performance of my investments, I have adjusted my income / dividend target upwards to at least $135K annually on the funds I manage .

    My goal has been to be able to generate enough passive income to eventually live off of without touching the principal – which I have achieved. My wife and I are both retired now (she did work 3 years past when I retired). Neither of us have started drawing SS nor have we withdrawn funds from retirement accounts instead using money market / CD funds I had set aside when I retired to cover us for at least 5 years without having to worry about market fluctuations

    As an income investor, it always made more sense to me to think about my target based on an income level rather than a % return

  15. I am retired but base my return on the risk/return level. Much of my portfolio is in baby bonds which in general are micro-cap on going concerns. As a class in fixed income they are ‘very risky’ even with strong balance sheets. Currently my return is a little over 7.5%….I have very short duration and have stacked the bonds to turnover 20% or more per year and a large cash position to minimize catastrophic event. None the less, 2008 sunk baby bonds like the titanic and fortunately they came back strong. But there will always be defaults and bankruptcies that are unforeseen…so far I have been on the good side of luck…

  16. Thanks, Tim, for keeping us focused on the right issues.
    I have two targets – I’m retired and my career 401(k) is invested by Merrill Lynch. I invest everything else.
    Target #1: Match Merrill Lynch. It is closer to the convention stock/bond mix and is trouncing me.
    Target #2: 7% safely.
    60% in CD’s/Bills/BB’s < 2030 maturity; 40% largely in prefs with some common stocks and longer maturity prefs.
    Coming up short on Target #2 as well, but comfortable it can resist my ever-predicted coming storm.

    1. When it comes to the stock market the last few years have really confused me when it comes to the over all performance. The steady grind up with only small blips of panic that soon get bought up makes me think fundamentals, the price you pay for earnings, etc.. are getting somewhat tossed out the window. You have to be invested in certain key companies to enjoy the run up fully. It feels unnatural. It is difficult for any investment to compete with it right up until it does when everyone wants off the boat at the same time. Not sure. I am invested but it sure feels odd. People paying more and more for future earnings that may or may not come.

      1. fc, In addition to your note yesterday regarding slim pickings among pfds, completely agree here re equities. The relentless rise has gotten uncomfortable in it’s similarity to past episodes.

        A canary here might be found in COST, trading somewhere near Pluto with an astounding PE of 55.

        No target return rate though locked cap gains/sold 80% of pfd holdings (if I wouldn’t buy it, I’m usually inclined to sell ‘em) since Nov and holding across the board 20% hedge against equities.

        With two exceptions, holding nothing rated less than BBB+ and scheduled return on current value is 7.56% including highly dilutive IBonds and treasuries. Best to all.

  17. Rather than supply a number–too embarrassed to admit by how far I have fallen short. I will though admit that since September 1, 2021 my results have been one extended minus, and that’s without even factoring in inflation. But at 81 I should have enough to arrive at the end in somewhat comfortable circumstances. Cheers.

  18. I could write a F—ing Novel on this topic Tim but don’t want to start a big controversy. Let me just say this–being a retiree it makes one realize how Inflation can really kill you over the years. A “retiree” has no boss to go to and say “Hey Mr. Boss Man this inflation is killing us and I need a $5 per hour pay raise”. Now, having said all that I have done a few things in my portfolio over the last few years to atleast try and keep up with this crazy inflation. 1. I have bought just a few “Quality Growth Stocks”. 2. I have bought large amounts of 3 different pipeline companies of which 2 of them issue a K-1. I love them because you get a ton of “depreciation” every year and that really helps a ton regarding taxes. 3. People here always talk about taking a starter position or a half position. I look at things differently I guess. If I find a truly “decent company” that comes out with a “decent coupon” I don’t hesitate to take a double or even double and a half position. It has served me well over the decades. Just my 2 cents worth.

    1. Chuck ; i love the MLP pipeline companies ; and the ones who do processing and storage ; EPD i’ve held since 2008 ; but many of mine have been taken over by C corps ; like Magellan and Nustar ; and now I hold OKE and SUN
      ;ENB is another core holding ;Canadian corp

  19. I don’t have a target. I would like to get >42.6%/year, but somehow this has never happened… Realistically, I am happy if I don’t lose money after inflation, and as inflation varies, I do not have a fixed target %. Any year with profits 1 or 2% above inflation, I am happy. The problem is that even one single bad year with losses, leaves me below water if I do the numbers over the years.
    So slowly I have reduced my playing the casino and increasingly stick to treasuries and i-bonds.

    A very interesting question for III is: what HAS BEEN your average return in the last 5 and 10 years (or more if you are old enough)? This is difficult to know unless you keep detail records and requires too much honesty. But replies I have received from reliable investors that do their own investing decisions indicate that most do NOT even beat inflation. What about III members? What about e.g. your model portfolios?

    1. I’m a former investment consultant…. I’ve been tracking my monthly performance (CAGR and TWR) for some time. In addition, I write myself an annual letter to reflect/reaffirm my goals, discuss performance, what I got right and wrong, and what my plans are for the next year. I find it helps keep me focused.

  20. Tim, Thanks for the candor. May the sun continue to shine on Jolly Green Giant land. With one small pension which is now dependent on an annuity placed with an Insurance company by a former employer and my wife drawing from her IRA at about 3.9% a year and with 2 SS I hope not to touch another 3 accounts and let them grow until required to start withdrawals by big brother. I am not looking at a specific percentage return on the one account. I want to just cover her withdrawals which so far are 70% of the income leaving 30% to re-invest. This one account is up about 3.4% for the 1st 6 months of this year and almost 18% up for one year.
    I suspect my mix of holdings are similar to your Laundry list and subject to wider swings in value with market conditions. The asset values are going to show capitol losses during these times, but only if I sell. The plan is that overall the income will not be affected.
    As I stated over the weekend, everyone has different goals and requirements. I admire for example Westie’s goal of capitol preservation and an average 6% return. I wish my goals could be as conservative and we could live comfortably on that.
    I look for examples in my life and I have seen my grandparents who lived through the Great depression and thought they had saved enough to enjoy retirement only to find out expenses and their spending were greater than their income leading to a reduction in quality of living. My parents on the other hand had only 2 SS and my dad’s several pensions that with savings were able to build a new house in retirement and buy a new car every couple years and afford ever increasing medical costs.
    I’m hoping to be just somewhere in between.

  21. Interesting question. I don’t really have an annual return goal. Never really even thought about it. First thing that comes to mind is not to lose money in any given yr. The income side of the house generates ~6.18% (4 accounts, 2 trad IRAs and 2 Roth IRAs each for mrs pig pile and I), so that I guess would be my answer. That number will head lower here in the next several yrs as I move a bunch to low coupon TIPS. The growth side is responsible for everything I have though, so I will never not have that element working in the shadows (the Microsoft’s, the Apple’s etc). I never trade from there and distros are non-existent.

  22. Do you really beat inflation with a set % return?

    If you invested $1 million at 7%, you would get $70,000 in income each year. If you had to spend all of that $70,000 to survive, you would be in trouble because that is a fixed number. Don’t you also need a way to grow the amount of income you are earning?

    Obviously, if you are in the saving mode and reinvesting the $70,000 then you will get an increase in the dollar value of the income return on your investments. But in retirement mode, the equation is not the same.

    1. Inflation risk is why I favor rate-reset and floating rate securities. I trust the Fed to raise rates when inflation gets hot. Balance these with some hedged stock index funds.

  23. My target is 7% also, but have been a little over 8% the last couple of years. Since I was self employed for 30+ years no pensions, but I did place money every year in an SEP and invest in equities. Withdraw funds every month to supplement SS, but no where near what the portfolio earns. Invest the surplus. Life is good so far!

  24. Tim, I’m at a 6% total return target from a 65% equity-income and a 35% fixed-income allocation.

  25. Thanx Tim you always share which is a model for analysts, bloggers for sure. I am at 8% but happy w 7 blended now, have adjusted my required return, only because I don’t see that I will need the income or money I have even at 90 using a ‘7’. I am using 3-4% for inflation expectations too. And I have pulled back risk considerably, although I am making modest bets like you into higher income producing securities.

    When I beat 8% I would up my charitable contributions the following January for a chunk of the overage. All good years except 2018 when late in the year we had the late in the year taper tantrum and I did 4.8% that year. YTD on track for 10.2% at this time so we’ll see and that is w a heavy dose of cash mostly SGOV. SS goes to investing now, no pension, rollovers into RothIRA have juiced that and will continue to deplete before RMDs on the remaining 401k funds in the TradIRA.
    As far as spending, a home caregiver, we use Mom’s money for mostly everything so my funds continue to grow 10yrs into my retirement at 55. We live modestly no debt low taxes, pretty much homebodies. Should she pass while my household income would be less losing Mom’s SS and pension (spousal from Dad’s work). Her assets pass to me assuming not depleted for Skilled Care at some point. If I pass everything goes to her and thus she’d be well cared w funds to pay Assisted/SNF. Hopefully we have planned best we can for our situation, guess we’ll see! Bea

  26. It’s all relative to the prevailing interest rates at the time for individual issues. Today, I’m looking for 8% in my non-taxable account and 6.5% qualified in my taxable. If I find it with what I feel is acceptable risk, I buy some.

    Background: 51, married, 3 kids, working 10 more years. Portfolio is roughly 50% equity, 20% credit/fixed, 10% hedge funds, 20% infrastructure/reits. I was introduced to the idea of fecudity (https://www.jeffreyco.com/docs/james-p-garland/Banff_Speech_for_website_v6%20copy.pdf) and it resonated. My goal is to generate 150k per year in passive income from my portfolio. If I can do that, then I can live off that and leave the chickens to continue laying eggs for my kids.

  27. I don’t really have a target…my acct is set at 6.2%…everything above that is gravy….Yesterday does weigh alittle bit on me….my wife makes 20k and I make $600….sometimes that isn’t the easist to see….but, I chose the income route…the way it is….

    1. Tim,
      I have been retired for over 15 years now. I truly appreciate all your thoughts and effort that you continue to devote to this site. THANK YOU !!
      I also appreciate and enjoy all the commentary from all others.
      My overall goal is to spend less than the dividends/interest/gains that my portfolio yields. So far, it’s working. My target is anything over 6.25 %.

Leave a Reply

Your email address will not be published. Required fields are marked *