The Dispatch

Investing Q&A Series

Q: How can we invest for my 70-year-old client asking for 7% after-tax monthly income, which can come in part from principal so long as she doesn’t run out of money?

A: Whether or not the investor in this scenario depletes the assets depends, of course, on how long she lives. In most cases, aiming for a 7% after-tax monthly income for a 70-year-old client requires a balanced approach that targets both yield and modest growth while carefully managing withdrawals to support longevity. A core or balanced income model that combines dividend-paying stocks, high-quality bonds, and other income-generating assets could be appropriate. To sustain the 7% income target, the portfolio would ideally generate an after-tax yield close to or above 4-5%, allowing for a modest principal drawdown that doesn’t overly diminish capital.

For example, American Funds Income Models or Blackrock Multi-Asset Income Models offer diversified exposures to dividend stocks and bonds, designed to balance income with capital preservation. American Century Avantis Models also present options that incorporate income generation with a disciplined approach to risk. With careful monitoring and potential adjustments based on market conditions, these model groups could provide the reliable monthly income the client seeks, aiming to protect against significant capital depletion and aligning with long-term income needs.

• American Funds Income
• Blackrock Multi- Asset Income
• American Century Avantis

Have investing questions, or even questions AND answers? Submit them to insights@freedomadvisors.com.